USDA SEES HUGE HARVEST FALLING SHORT OF '94 RECORD FLOODS, HEAT REDUCE YIELDS

USDA SEES HUGE HARVEST FALLING SHORT OF '94 RECORD FLOODS, HEAT REDUCE YIELDS

Despite the floods, despite the heat, another massive harvest is about to begin. Although 12 percent to 20 percent less than last year's record crop, this year's harvest of corn and soybeans will be huge, according to the U.S. Department of Agriculture.

The USDA's most recent estimate is that the 1995 corn harvest will reach 8.12 billion bushels. That's still about 20 percent below last year's 10.1 billion bushels. Just last month, however, the USDA was figuring that only about 7.79 billion bushels would survive the extreme weather of this summer.The USDA predicts that the 1995 soybean crop will reach 2.25 billion bushels. That will make it the second-largest crop in the past 10 years, although about 12 percent below last year's crop.

There are some, however, who doubt the USDA predictions.

"It's way too early to tell how good the crop will be," said Dale Ludwig, executive director of the Missouri Soybean Association. "Our whole crop is already about three weeks behind schedule."

Heavy rains and floods throughout the Midwest in the late spring and early summer left corn and soybean fields underwater. In recent weeks, the weather has reversed. Now the Midwest is going through an extended heat wave.

According to Mr. Ludwig, the heat has helped to dry the fields, allowing the crop to catch up.

On the demand side, things definitely look better than they did a month ago. The USDA now expects 2.2 billion bushels of corn to be exported from the 1995 harvest - 6.7 percent higher than July estimates. Just last week, China contracted for 22 million bushels, and Egypt signed on for 5.1 million bushels.

The predictions of higher exports have pushed up prices. Corn, which sold for about $2.70 a bushel for December delivery last week on the Chicago Board of Trade, closed Tuesday at $2.84 1/2. Soybean prices also are rising, reaching $6.08 1/4 a bushel for November delivery, up from about $5.98 last week.

With export demand high, and with the chronic shortages of barges and railcars to move the crop, you can bet that shippers will continue to pay high rates.

"I expect them to go up," said Frederic Schrodt, vice president of transportation and logistics for Farmland Industries, based in Kansas City, Mo.

And it's not like the rates are low now - in fact, barge rates have been setting record levels all summer even though summer is usually the slow time for barge traffic.

Barge rates are based on percentages of benchmark tariffs set in 1976. Then all tariffs were posted with the federal government, but now the free market prevails. Nevertheless, the carriers and shippers still use these benchmark tariffs.

Rates vary by commodity and by distance traveled. Through most of the late 1980s and early 1990s, rates tended to stay close to 125 percent of the benchmark tariff.

But contracting a barge now for use in September or October will cost you 250 percent of the benchmark tariff.

For example, the average cost during the past 10 years to ship grain during August was about 125 percent. That translates to a price from Chicago to New Orleans of about $7.22 a ton. This year, it will cost about $14.45.

Barge rates for grain from the Minneapolis area were at about 200 percent of tariff in May. By July, the rates had moved to 300 percent. In August, rates have hovered at around 375 percent of tariff - or about 133 percent higher in dollar terms than the average rate for shipping in August.

The big winners - you would think - are barge operators. However, not everyone is doing so well.

"When you're down, they kick you," said Daniel T. Egan, operations manager for Egan Marine Corp. in Lemont, Ill. Mr. Egan's company has the misfortune of being based on the Illinois River while barge rates are soaring. It's a bad place to be, because the Illinois River is closed.

"We're sending things by truck and by rail, and we're doing a lot of local stuff," he said.

The U.S. Army Corps of Engineers closed the river in July for major rehabilitation of four locks. At least in theory, the river will reopen to commercial traffic by Sept. 9 - just in time for the harvest.

"From what I hear, they'll probably open it close to that date," Mr. Egan said.

Ocean rates through the Saint Lawrence Seaway are also skyrocketing. ''Freight rates are already roughly double what they were this time last year," said David G. Sanders, acting administrator of the Saint Lawrence Seaway Development Corp. "And they'll probably go higher."

Rates to Europe are already in excess of $30 a metric ton, compared with $14 a ton the prior year, he said.

A metric ton is equal to 39.4 bushels of corn.