Printable Page Corn News   Return to Menu - Page 1 2 3 4 5 6
Market Matters Blog           05/18 12:28
ATA Reports Trucking Revenues Grow in Spite of Shortage 
Railroads, Shippers Weigh in on Making Weekly Reports Permanent
U.S. River Levels Improving
New Daily Price Limits Effective May 1
Better Weather, Lower Grain and Oil Prices, More Power Help Railroads Improve 
Grain Shipping Season Begins in Duluth-Superior
Port of Portland Loses More Business
Sorghum S&D Shake-Up
Will China Import More Corn? 
Truck Driver Shortage

ATA Reports Trucking Revenues Grow in Spite of Shortage 

   OMAHA (DTN) -- Every day, U.S. trucking companies are forced to refuse 
hundreds of loads due to a short of drivers, and the problem is likely to get 
significantly worse over the next decade, according to a recent University of 
Tennessee report.

   "Some estimate the shortage today is about 40,000-50,000 and growing 
rapidly," a recent report by the Supply Chain Management Faculty at the 
University of Tennessee stated. "Another estimate has the shortage increasing 
to over 300,000 drivers before it peaks in 10 years, and that could be 
catastrophic. Such a shortfall would amount to a 20% gap between demand and 
supply. One estimate is that only 25,000 new drivers are being added annually, 
not nearly enough to keep up." 

   The study reported that there are trucking companies having to refuse 
hundreds of loads every day due to the lack of drivers, resulting in a major 
revenue loss.

   Reasons for the shortage are plentiful, according to the April 2015 study. 
Driver wages did not rise as fast as wage rates in general over the 2000-2013 

   "The current $40,000-45,000 pay rate lags behind overall wage inflation in 
the economy. On an inflation-adjusted basis, one estimate shows that drivers 
make 6%-8% less in real terms than they did 25 years ago, in 1990. Thirty years 
ago, the average truck driver earned four times the wage of a food service 
worker," the University of Tennessee report stated. "Today the $41,000 average 
wage is only 1.8 times higher. During much of this time, the margins of 
trucking companies were constantly squeezed, making significant wage increases 
impossible. In addition, HOS (hours of service) rules limit the amount of hours 
a driver can work, which in turn depresses their income since truck drivers are 
often paid per mile driven."

   Another cause of the driver shortage is rules have become stricter for new 
drivers. Those wanting to obtain a commercial driver's license (CDL) must be 21 
years old. 

   Also, the Federal Motor Carrier Safety Administration (FMCSA) safety 
compliance and enforcement program (CSA) has likely reduced the driver pool by 
5%-7%, according to the study. CSA affects motor carriers, including 
owner-operators, by "identifying those with safety problems to prioritize them 
for interventions such as warning letters and investigations. CSA affects 
drivers because their safety performance and compliance impact their safety 
records and, while working for a carrier, will impact their carrier's safety 
record." The CSA also requires a prescreening of drivers before they can be 
licensed to learn of work history, driving record and any legal problems. 
Overdrive Magazine said, "CSA's inequities and irregularities remain a topic of 
large concern all around the industry."


   Despite the shortage of drivers, the trucking industry generated $700.4 
billion in 2014, making it the first year in history the industry topped $700 
billion in total revenue, the American Trucking Association (ATA) stated in a 
press release May 11, according to the latest edition of American Trucking 
Trends. The $700.4 billion in revenue accounted for 80.3% of all freight 
transportation spending. 

   "Last year, we saw freight volumes grow significantly," said ATA Chief 
Economist Bob Costello. "Increases in freight combined with continued tight 
capacity helped drive revenues, and coupled with lower fuel prices, we saw 
motor carriers go on a buying spree for new trucks as they replaced older 

   In the press release, ATA said that in 2014, trucks moved 9.96 billion tons, 
or 68.8%, of all domestic freight. While trucking employed more than 7 million 
people, including 3.4 million drivers, driver shortages have been growing since 
the beginning of 2015. 

   "(American Trucking) Trends is a valuable resource for showing just how 
critical, how essential, our industry is," said ATA President and CEO Bill 
Graves. "It is one thing to say trucking is our economy's lifeblood, but it is 
quite another to show it. And (American Trucking) Trends shows it clearly: 
Trucking is, and will continue to be, the dominant way to move goods in this 

   Over 60% of the grain marketed in the United States is moved by truck, 
according to USDA. Each quarter, USDA releases a Grain Truck and Ocean Rate 
Advisory report based on responses from elevators located in nine states that 
produce the most corn, wheat and soybeans. The report shows truck rate 
information for a local haul of 25 miles, as well as longer hauls of 100 and 
200 miles and diesel fuel costs, both key components for elevators in pricing 
grain. The ongoing system of data collection establishes a foundation for 
identifying longer-term trends and shifts in the market that will be valuable 
in addressing marketing, policy and risk-management issues related to this 
critical mode of grain transportation. 

   See the entire 2014 fourth quarter report at 

   Mary Kennedy can be reached at   

   Follow Mary Kennedy on Twitter @MaryCKenn

Railroads, Shippers Weigh in on Making Weekly Reports Permanent

   OMAHA (DTN) -- Debate over how transparent railroad companies should be 
about their service performance continues as the Surface Transportation Board 
weighs whether to make weekly reports by Class I carriers a permanent 

   After a hearing in Fargo, North Dakota, on Sept. 4, 2014, where the board 
heard from shippers of grain, coal, ethanol and other commodities, the STB 
decided it was necessary to begin receiving data from the Class I rail carriers 
on their weekly service performance. In addition, the board in a decision 
issued on Dec. 30, 2014, directed the Association of American Railroads (AAR) 
to provide more information on progress in the Chicago Gateway. The AAR began 
providing reports on Jan. 14, 2015.

   Also on Dec. 30, 2014, the STB issued a notice of proposed rulemaking, in 
which it proposed to make the weekly reports submitted by the Class I carriers 
a permanent requirement and make some modifications to the service metrics. 
Opening comments in that proceeding were received on March 2, 2015, and reply 
comments were due on April 29, 2015. Once all comments were received, the board 
stated they will then consider adopting final rules. 

   The weekly filings have allowed the board and rail stakeholders to monitor 
performance and have allowed the board to begin to develop baseline performance 
data. "Based on the board's experience with the reporting to date, the board is 
now moving forward with a rulemaking to determine whether to establish new 
regulations for permanent reporting by the members of the Class I railroad 
industry, and the Chicago Transportation Coordination Office (CTCO) through its 
Class I members," the STB said.

   On April 29, the Alliance for Rail Competition (ARC), a group consisting of 
16 various grain boards and commissions, submitted their reply comments urging 
the board to reject the railroads' arguments. "We also urge the board to 
implement its proposed rules, and to expand them by requiring reasonable 
reporting of service data the railroads already gather as to shipments 
involving less than 50 cars. Serious service problems continue to adversely 
affect many shippers represented by ARC, et al., including many shippers whose 
businesses depend on rail shipments of 49 carloads or less. These problems are 
particularly acute in the Upper Great Plains states, despite small improvements 
in service quality here and there." Here is the link to the entire comment by 
the ARC members:

   The United States Department of Transportation (DOT) and the Federal 
Railroad Administration (FRA) said they appreciated the board's efforts to 
identify and address the challenges facing those who operate and depend upon 
the rail network. "A healthy and safe railroad system is critical not only to 
those who ship and receive goods, but to our nation as a whole." They stated 
that they generally support the board's proposal to require weekly reporting of 
rail performance data, but provided some additional thoughts for the board to 
consider in reaching its decision. Here is link to their comments on April 29:


   The AAR told the STB they acknowledged the service issues caused by 
"unforeseen shifts in demand for rail service and a historically difficult 
2013-2014 winter season" that led the board to propose rules requiring Class I 
railroads to report operational data. However the AAR cautioned the board to 
distinguish between metrics that have been useful in monitoring the specific 
service disruptions that have occurred and metrics designed to monitor the 
overall fluidity of railroad operations that may be useful on an on-going 
basis. The AAR recommended that the board not make "permanent by regulation the 
reporting of metrics at a granular, commodity-specific level that may not be 
germane to a specific future service disruption while presenting a misleading 
view of rail service in normal times."

   In their comments on April 29, The BNSF pointed out it has made significant 
progress in the first quarter of 2015 toward restoring velocity and meeting 
customers' expectations. "This is reflected in the reports and other tailored 
network performance information we regularly provide to our customers, as well 
as the interim reporting we have been providing to the board."

   The BNSF told the board it has recognized there were several renewed 
requests from associations seeking more specialized reporting of service data, 
including corridor-specific and additional commodity-specific metrics. "The 
associations seek extensive additional reporting, ranging from expanded 
commodity-specific measures covering oilseeds, oilseed meal, fertilizer, and 
vegetable oil (a NGFA request) to average dwell times at each individual 
interchange for all empty coal unit trains (a Western Coal Traffic League 
request). Requiring BNSF to provide additional cuts of data for individual 
commodities or for specific geographic sub-levels on a regular basis would be 
burdensome and counterproductive to BNSF's efforts to maintain optimal flow 
across the entire network, consuming critical resources without significant 
commensurate benefit." Here is a link to the comments by the BNSF to the STB:

   Since the service issues in 2014 affected more than just grain shippers, 
coal and electric companies weighed in as well. "The railroads and the AAR 
generally urge the board not to adopt any reporting standards at this time or 
to severely limit any reporting if the board insists on moving forward," they 
said. "Alternatively, the railroads propose unnecessary delaying tactics, such 
as meetings with the board where the railroads can privately detail what data 
they might be willing to regularly report." The coal shippers and National 
Rural Electric Cooperative Association told the board they support the proposal 
which, "should ensure that accurate, timely, and complete data reporting 
remains available to shippers and the board alike, and they repeat their 
initial request that the board consider certain refinements to the proposal, as 
well as additional reporting categories."

   The STB has not provided a date as to when the final decision on when the 
Dec. 30, 2014, proposed rule will be issued.

   Mary Kennedy can be reached at 

   Follow Mary Kennedy on Twitter @MaryCKenn 

U.S. River Levels Improving

   OMAHA (DTN) -- Water levels on the nation's major rivers are slowly 
beginning to fall, resulting in better conditions for barge traffic, according 
to reports. 

   On Monday, May 3, the Ohio River at Cairo was at 35.3 feet, which is down 
from the level of 42.4 feet on April 28 (flood stage is 40 feet). It is 
expected to drop below 32 feet by midweek. The drop in high water has allowed 
barges to return to normal traffic speeds and has allowed empties to reach 
grain terminals that had been stalled from loading out grain. 

   DTN Senior Ag Meteorologist Bryce Anderson said that the trend will be drier 
for the Ohio Valley during most of the week of May 4-8. "We will see rains of 
around 1.5 inches return over Mother's Day weekend, but then a drier pattern 
returns during the week of May 11-15. So, counting the drier trend that we have 
seen in the southeastern Midwest this week, we'll have a total of around 10 
days with little if any rainfall in that part of the country," Anderson said.

   Tom Russell, of Russell Marine Group, told DTN via email that the lower 
Mississippi River, including Baton Rouge and New Orleans, Louisiana, is still 
high and falling slowly. "River levels in the harbor are moderately high with a 
very slow-falling river. Due to high water, safety protocols are in place and 
water will be high enough to remain in place for the balance of May. Barge and 
ocean vessels operations have some minor delays due high water but moving OK."

   As of 8 a.m. Central Daylight Time on May 4, the Mississippi River at Baton 
Rouge was still sitting slightly above flood stage at 35.26 feet and is 
expected to hover there for the next week. Severe weather, including heavy 
rainfall, which moved through south Louisiana on April 27-28, caused Governor 
Bobby Jindal to declare a state of emergency because of the heavy damage and 
flooding caused by the storms. On May 4, the National Weather Service at New 
Orleans/Baton Rouge, Louisiana, continued a flood warning for the Mississippi 
River at Baton Rouge until Thursday morning. "Minor flooding is occurring and 
minor flooding is forecast," the NWS noted. 

   The forecast for the river is that it will remain near 35.2 feet through 
Tuesday, May 5, and then begin slowly falling. Forecasts are based on rainfall 
that has occurred, along with anticipated rain for the next 12 hours. 
Adjustments to river forecasts will be made if additional heavy rainfall 
occurs. Here is the real-time link to the river level at Baton Rouge and other 

   The Waterways Action Plan for the Baton Rouge Annex states: "During a 
waterways crisis, a wide range of controls and actions are initiated from 
various involved parties, including industry and federal government agencies. 
In general, the industry will take action to reduce potential marine casualties 
during low- and high-water situations. During high-water conditions (25 feet 
and above Baton Rouge gauge), the industry may reduce tow sizes to allow more 
control over the tow and to more effectively utilize towboat horsepower. The 
Coast Guard and Army Corps of Engineers are also required to take specific and 
timely actions to aid in preventing marine casualties while facilitating 
commerce. Dredging operations by the USACE is a typical mission to reduce the 
risk in hazardous locations on the river."

   The forecast for the upcoming week could bring more rain. Anderson said, 
"The Delta has similar forecast details as the Eastern Corn Belt -- dry through 
the weekend of May 2-3 and most of the following week, with rain of that 
1.5-inch type developing Friday, May 8, through Mother's Day weekend. The Delta 
pattern differs from the Eastern Corn Belt in that this week will have more 
consistent showers, with another inch approximately by the end of the week." 

   Both the soybean and corn river basis were stronger the week ending May 1 
along the Ohio River down to the Gulf. Better river conditions and higher 
export sales were reported for both old-crop corn and soybeans and were 
supportive to the basis levels. Barge freight rates also added to the basis 
strength as barge freight on the Lower Ohio River was down 40% from the prior 
week ending April 24. Barge freight at St. Louis was down 10% and the Cairo to 
Memphis corridor was down 30%.

   Russell said, "The Deep South recorded one of the wettest-ever Aprils. Grain 
loading operations were greatly impacted and backed up, but most terminals are 
now getting in front of schedules."

   Mary Kennedy can be reached at 

   Follow Mary Kennedy on Twitter @MaryCKenn

New Daily Price Limits Effective May 1

   Hey -- guess what? May Day is almost here. It's this Friday, to be specific. 
When I was a little girl, I used to make baskets out of construction paper, 
fill them with popcorn and leftover Easter candy, leave them on my neighbor's 
front steps and play ding-dong ditch. I can't help but laugh at myself two 
decades later. The fact my mother let me do it in the first place still 
perplexes me, except I now understand that most of my neighbors weren't home to 
be disturbed by the doorbell. 

   There's something else to remember this May Day: CME's new daily price 
limits. Last year, CME introduced a formula for establishing new limits (more 
on the math below) that would reset on May 1 and November 1 each year. This 
time, only the limits for corn, Chicago wheat, soybean oil, oats and rough rice 

   (All price limits are per bushel unless otherwise noted.)

Commodity      Current Price Limit     New Price Limit    New Expanded Limit
Corn           $0.25                   $0.30              $0.45
Soybeans       $0.70                   $0.70              $1.05
CBOT Wheat     $0.35                   $0.40              $0.60
KC Wheat       $0.40                   $0.40              $0.60
Soybean Oil    $0.025/pound            $0.02/pound        $0.03/pound
Soybean Meal   $25/ton                 $25/ton            $40/ton
Oats           $0.25                   $0.20              $0.30
Rough Rice     $0.90/cwt               $0.75/cwt          $1.15/cwt

   Under CME's new variable price limit formulation, the daily limit is set at 
7% of the average settlement price of 45 consecutive trading days. The May 
readjustment will be based on the July contract's settlement prices while the 
November adjustment will use the December contract for most grains, and the 
November contract for soybeans and rice. 

   CME has previously told me that historically, 99% of the price changes in 
the grain market have been 7% or less. With the variable limit format, CME 
expects maybe one or two days with limit moves each year. 

   CME also established minimum daily price limits -- 20 cents on corn, 50 
cents on soybeans and 30 cents on the wheats -- in case the 7% formula is 
overly restrictive. The higher of the two calculations will be used as the 
price limit.  

   The variable price limit mechanism allows for expanded daily limits. If the 
contract settles up or down the limit, the next day's limit will be expanded 
50% and rounded up to the next 5-cent mark. For example, if corn futures settle 
up 30 cents per bushel (in two contract expirations or in the last contract of 
the crop year), the limit will expand to 45 cents per bushel the next day and 
remain at that level until no corn futures contract expirations settle at the 
expanded 45 cents limit.

   If the criteria is met in one of the contracts of the soybean complex 
(beans, meal or oil), the limits will expand for the whole complex. 

Better Weather, Lower Grain and Oil Prices, More Power Help Railroads Improve 

   OMAHA (DTN) -- A combination of milder weather, lower prices for grain and 
oil and more locomotives has helped railroads improve placement of railcars 
this spring, according to the latest railroad company reports. 

   One year ago, BNSF owed South Dakota 671 cars, Minnesota 1,496, North Dakota 
7,175 and Montana was owed 3,217 cars. System wide, 14,618 cars were owed, 
according to a BNSF report to the Surface Transportation Board. In their report 
to the STB on April 22, BNSF reported South Dakota was owed three cars, 
Minnesota eight, North Dakota 203 and Montana was owed 169. System-wide, the 
total amount of cars owed stood at 554, a stark contrast compared to one year 
ago. Part of the decrease in cars owed can be attributed to BNSF adding more 
locomotives into service. 

   According to the CP report to the STB on April 22, "Our outstanding grain 
car orders remain at zero this reporting week, as they have for the previous 
nine weeks. We spotted a total of 1,432 grain cars this week, which total 
includes single cars and cars in dedicated trains, and we received 293 new 
grain car orders. From a grain order perspective, we continue to be current in 
the United States. With respect to the Rapid City, Pierre & Eastern Railroad 
(RCP&E), RCP&E did not request any grain cars this week. On average, there was 
a plus-12 locomotive balance again this reporting week, meaning there were 12 
more CP locomotives on RCP&E than RCP&E locomotives on CP." 

   Besides a milder winter overall compared to last winter and railroads adding 
more power, grain prices are lower than one year ago, which is causing farmers 
to sell less product. One year ago, cash corn was priced at $4.77, cash 
soybeans were $14.58, cash spring wheat was $7.08 and cash winter wheat was 
$7.38. In comparison, the cash price on Friday, April 24, was $3.47 for corn, 
$9.29 for soybeans, $5.29 for spring wheat and $4.66 for winter wheat. 

   Another factor is the decrease in oil prices, which has slowed tank car 
movements that were clogging railways last year, leaving little room for grain 
cars. One year ago, June oil futures were trading at $100.84 per barrel and on 
April 24, June was trading at $57.15 per barrel. In the week ended April 24, 
Baker Hughes North American Rotary Rig Count reported that the number of rigs 
drilling for oil in the United States totaled 703, compared with 1,534 a year 

   The USDA Grain Transportation update reported, "There is a continued shift 
in grain transportation away from rail towards other modes. Shorter-distance 
domestic movements to processing facilities within states are more likely to 
favor truck transportation, whereas long-distance exports movements tend to 
favor rail or barge. In addition, some traffic shifted to barge, which has 5% 
more grain traffic year to date, compared to the three-year average." For a 
more in depth comparison year over year, here is the link to the USDA GTR 
report on April 23:


   In January, BNSF announced major capital projects it plans to complete in 
2015 to maintain and grow its rail network. The company said it will spend more 
than $100 million per state in nearly half its network to increase velocity, 
add capacity and improve their network. Here is the link to the full plan:

   On April 24, the BNSF reported, "Our capital maintenance activity is now in 
full production with work continuing on new double-track projects along our 
Southern Transcon route. The Panhandle subdivision, which runs from Amarillo, 
Texas, eastward through Oklahoma and into southern Kansas, will collectively 
receive approximately 18 miles of new double-track, nearly half of which is 
already in service. In addition, we will add approximately nine miles of new 
double-track along our Clovis subdivision in New Mexico, which is expected to 
finish in June and eliminate a significant bottleneck on the Southern Transcon. 
As this expansion work is being done, some trains may experience minor delays 
through the area."

   Last November, the BNSF completed an additional eight miles of double-track 
on their Glasgow subdivision, which runs from Minot, North Dakota, to eastern 
Montana. Maintenance work in the Dilworth, Minnesota, area was nearly completed 
and work along the Minneapolis/St. Paul to Chicago main line was scheduled to 
finish in early December. All of these improvements made by the BNSF created 
more track space in key areas and allowed for a smoother flow of trains 
throughout their entire system.

   Mary Kennedy can be reached at 

   Follow Mary Kennedy on Twitter @MaryCKenn

Grain Shipping Season Begins in Duluth-Superior

   OMAHA (DTN) -- As of mid-April, high water conditions on the Ohio River and 
Lower Mississippi River (LMR) continue to affect navigation conditions, 
reducing tow sizes and delaying transit times. 

   Thomas Russell from Russell Marine Group, a New Orleans-based freight 
logistics company, told DTN via email, "Another round of rolling thunderstorms 
in the Ohio River Valley has caused the river to remain in high-water situation 
with some localized flooding. Conditions are improving and the Ohio River is on 
slow fall. Barge traffic is moving but slow in areas due to high water." 

   Russell told DTN that in the LMR, from Cairo to Memphis, water levels are 
high but "not flooding as water off the Ohio River flushes through the system. 
Some safety areas are set up, but barge traffic is moving."

   Russell said that the weather in New Orleans and the Deep South in general 
has been wet. "Grain terminals have lost eight to nine days due to weather 
causing back up at most terminals," he said.

   The real problem is in the Port Harbor-Baton Rouge to New Orleans. Russell 
told DTN that the water in the port, like the entire LMR, remains at high 
levels as water off the Ohio River pushes through. "Safety zones are set up, 
which has slowed the shifting of barges and barge fleet activities. Some 
loading terminals are restricted to daylight-only docking and undocking 
operations until water levels drop below 12 feet in the harbor," Russell said.

   A number of ships have recently gone aground at the Southwest Pass (SWP), 
likely caused by the high water carrying a lot of sand and silt and apparently 
has caused river bottom shoaling. Russell said that this is the only pass that 
pilots can bring ocean vessels in and out of the river. The SWP is a 
20-mile-long pass that connects the Mississippi River with the Gulf of Mexico. 
"The SWP is the river delta where sand and silt carried into the river tends to 
deposit," Russell said. "Dredges have been working on any trouble areas that 
pop up." 

   Russell said, "Accumulation of sand/silt tends to build shoals on the river 
bottom in unexpected locations in the Pass. SWP is not deep enough like other 
parts of the Nola-Baton Rouge Harbors to absorb with extra sand/silt build up. 
As the river rises, the bottom follows and the result can be vessel 

   Southwest Pass must be dredged on an ongoing basis in order to maintain a 
deep draft of 47 feet for the bigger ocean vessels. "Most of the ocean vessels 
carrying grain to the biggest grain market, Asia, need deep drafts," added 

   After another vessel went aground in the SWP early last week, the pilots 
felt there was enough uncertainty about shoals building up and temporarily 
reduced the deep draft from 47 to 40 feet midweek until new soundings could map 
the depth of the river bottom. Russell said, "Vessels drafting over 40 feet 
were not allowed to transit the SWP until soundings (the act of measuring 
depth) were completed, so they can pinpoint areas of concern for the Corps to 
concentrate on dredging." 

   On April 20, Russell said that the soundings had been completed, and due to 
excess shoaling in an area near the head of SWP, the pilots have imposed a 
maximum draft of 42 feet for all vessels until dredges can clear the area. Any 
ship over 35-foot draft can only transit one way during this time.


   On Monday, April 14, the Port of Duluth-Superior welcomed Kom, the first 
"saltie" to have made full transit of the 2,342-mile Great Lakes-St. Lawrence 
Seaway. According to the Duluth Seaway Port Authority, "Kom is a 465-foot bulk 
carrier that flies the flag of Malta and was built in 1997. It began its 
current voyage in A Coruna, Spain. The Kom will load 12,100 metric tons of 
durum wheat and then depart for Italy, where the wheat will be milled into 
flour for pasta-making," the Port Authority reported.

   The latest arrival on record of the port's first saltie was just last year, 
as the Diana arrived on May 7, 2014, due to harsh ice conditions that covered 
the entire Great Lakes. Ironically, the earliest on record happened just one 
year earlier when the Federal Hunter sailed into port on March 30, 2013. 

   "The arrival of the first saltie each year is a tangible reminder for 
residents and tourists alike that the Port of Duluth-Superior is an 
international seaport," said Vanta Coda, Port Authority executive director. 
"Situated over 2,300 miles inland, it anchors the westernmost edge of this 
nation's fourth seacoast -- the Great Lakes St. Lawrence Seaway -- which links 
the heartland of North America to markets in Europe, the Mediterranean and 
North Africa. This bi-national waterway enables farmers from the Upper Midwest 
-- as well as shippers of project cargo, iron ore and coal -- to compete in the 
global marketplace."

   Mary Kennedy can be reached at

   Follow Mary Kennedy on Twitter @MaryCKenn

Port of Portland Loses More Business

   OMAHA (DTN) -- After nine months of stalled labor negotiations and the loss 
of a major customer, the Port of Portland had another setback, losing a second 
customer at its container-handling Marine Terminal 6 (T-6). The terminal has 
been operated by International Container Terminal Service, Inc. (ICTSI) since 
2011 after signing a 25-year lease with the Port of Portland for operation of 
the container/break bulk facility at Terminal 6, according to the company's 

   On Feb. 10, Hanjin Shipping Co., which accounted for 78% of the business at 
T-6, officially withdrew from the Port of Portland, saying its last day would 
be March 4. In a Feb. 11 article, the Associated Press (AP) reported that 
Hanjin's pullout wasn't a surprise. In recent years, the company has been 
unhappy about the pace of work among longshore workers. "If you are in 
Portland, you should know why. Can't afford the expense of operating there. 
Simple," Mike Radak, senior vice president for Hanjin USA, told AP.

   The Hapag-Lloyd website said "In an effort to improve the schedule integrity 
of our Mediterranean Pacific Service (MPS), Hapag-Lloyd took the decision for a 
permanent omission of the port of Portland, Oregon, effective at the end of 
March 2015." With the departure of Hapag-Lloyd and Hanjin Shipping Co., the 
only remaining shipping line is Westwood Shipping Lines, a smaller shipping 
company, which specializes in forest products, and containerized and oversized 

   ICTSI Oregon, Inc. released a statement on its website saying, "ICTSI 
Oregon, Inc. is very disappointed to hear the news of Hapag-Lloyd's decision to 
cease its direct MPS service calling Portland. Hapag-Lloyd has been very 
supportive and loyal to the Portland market. Coupled with Hanjin's recent 
announcement to leave Portland and discontinue its Asia service, Hapag-Lloyd's 
departure will adversely affect regional businesses that rely on Terminal 6." 
Here is the link to the full press release: 

   The news is not good for shippers who relied on the Port of Portland to 
ship, among other things, agriculture products. SL Follen Company, which 
exports hay and feed products from the U.S. to Asia and the Middle East, told 
KOIN News of Portland that costs will rise for their business. "We decided to 
go temporarily through Texas at an even higher cost to us," Vince Follen told 
KOIN 6. "We were probably going to have to go to Tacoma and then truck it down, 
which meant at least another thousand dollars in through-put costs just to get 
the cargo back to Oregon."

   Mike Hajny, vice president of Wesco International, Inc., a hay exporter in 
Ellensburg, Washington, told DTN in an email that Portland cargo has been an 
absolute nightmare as of late. "We have a plant south of Salem that is owned by 
another gentleman, but we market all of his product. Since Hanjin has pulled 
out, all of the Portland cargo has to be railed or trucked to Seattle/Tacoma. 
As you can imagine, the rail is over capacity, and trucking from Salem to 
Tacoma on a daily basis is a logistical headache with the current port 
situation. The Port of Portland has always been a problem child, but it is 
going to cause some major changes in pricing structure and product shipment in 
our business model."

   According to AP, the ICTSI is trying to attract new lines to the container 
terminal. That may be a tough sell due to the labor problems between ICTSI and 
dockworkers. The other issue is the location of T-6. Because it is inland along 
the Columbia River, it is less convenient than other West Coast ports.


   On Friday, April 3, ILWU Coast Longshore Caucus delegates voted to recommend 
approval of the tentative agreement reached on Feb. 20, 2015, between the union 
and employers represented by the Pacific Maritime Association (PMA), according 
to a press release on ILWU's website. The proposed five-year contract covers 
20,000 dockworkers at 29 West Coast ports.

   All 90 delegates spent the week prior to April 3 reviewing the proposed 
agreement "line-by-line" before voting by 78% to recommend the proposal.

   "This agreement required 10 months of negotiations -- the longest in recent 
history," said ILWU International President Bob McEllrath, "but we secured a 
tentative agreement to maintain good jobs for dockworkers, families and 
communities from San Diego to Bellingham. Longshore men and women on the docks 
will now have the final and most important say in the process."

   The next step will be mailing the proposal to affected longshore union 
members who will then discuss it at local union meetings. A secret ballot 
membership ratification vote will be the final step in the process, and the 
final tally will be conducted on May 22.

   Mary Kennedy can be reached at 

   Follow Mary Kennedy on Twitter @MaryCKenn

Sorghum S&D Shake-Up

   Bell Eagle, Tennessee, used to be in the heart of cotton country. But now 
Richard Jameson grows corn, soybeans, wheat, cotton and, for the first time 
since 2004, milo. 

   "There is a lot, and I mean a lot, of interest in grain sorghum in the 
mid-south for 2015," Jameson told DTN. "I noticed, and so did other farmers I 
know, that the USDA enumerators did not ask us in Tennessee if we were going to 
plant milo this year when they called in early March."

   Historically, Tennessee doesn't grow much milo, also called grain sorghum, 
and that's probably why enumerators didn't ask, he said. 

   "Using my operation as an example, my acres in milo will be 20% of my total, 
after not planting any since 2004," Jameson said. "The outside sales rep from 
the co-op told me this week that he has orders for 6,000 acres of milo in 2015 
after only 1,500 last year."

   In March's Prospective Planting report, USDA forecast farmers would plant 
7.9 million acres to sorghum, up from 7.1 million acres in 2014. On Thursday, 
USDA made major revisions to sorghum's supply and demand balance sheet, cutting 
the ending stocks by 33%. 

   "USDA's April ending stocks estimate of 18 mb was bullish for sorghum and 
below expectations," said DTN analyst Todd Hultman said. "The risk ahead is 
that so much of this market depends on China's demand, and will their demand 
for sorghum hold up after they agreed again to accept U.S. corn?"

   China approved the biotech corn trait MIR 162, also known as Agrisure 
Viptera, for import last December, ending a year-long standoff that caused 
trade to grind to a halt. So far, current and outstanding export sales to China 
are a mere fraction -- 179,000 metric tons vs. 2.6 million metric tons -- of 
what they were before the trade disruption. 

   Sorghum sales are a different story. More than 5.1 million metric tons of 
sorghum, about 200 million bushels, have already been shipped to China. Another 
1.6 mmt of sales are on the books for this year, as well as about 400,000 
metric tons for the next marketing year. 

   USDA adjusted the supply and demand table to reflect the current pace of 
export demand, up 50 mb to 350 mb. USDA also lowered feed use and use for 
ethanol, noting that no sorghum was used for ethanol production in February. 

   It also made a large adjustment to the residual component of demand.

   "U.S. sorghum feed and residual use for 2014-15 is projected at 85 million 
bushels, despite indicated feed and residual disappearance for the first half 
of the marketing year (September-February) of 154 million bushels," USDA 
stated. "Early harvested 2015-crop sorghum, particularly from Texas, is 
expected to augment 2014-15 marketing year supplies and support exports at 350 
million bushels during the 2014-15 marketing year that ends August 31.

   "The Prospective Plantings report indicated that Texas producers intend to 
increase sorghum plantings by 20 percent for 2015. Last year, more than 80 
percent of the Texas sorghum crop was mature by mid-August. These additional 
supplies, exported before the September 1 start of the new marketing year, push 
feed and residual use during the second half of 2014-15 (March-August) well 
into negative territory. These supplies will also boost first-quarter 
(September-November) feed and residual disappearance in the 2015-16 marketing 
year, as in 2014-15." 

   Back in Tennessee, Jameson said it's been so rainy and wet that corn 
planting is delayed -- just 2% compared to the five-year average of 10% planted 
as of April 6. It's giving Jameson, and his neighboring farmers, extra time to 
reconsider their crop mix for 2015. 

   Hultman and DTN Senior Analyst Darin Newsom agree that given the risks 
(relying almost solely on China's purchases), it's still worth planting milo 
this year. 

   Newsom added: "especially if you can lock in a strong new-crop basis early 
and let the futures market (try to) rally this spring." 

   Katie Micik can be reached at 

   Follow Katie Micik on Twitter @KatieMDTN

Will China Import More Corn? 

   There's no bigger long-term question in the grain markets today: Will China 
import more corn? 

   The answer appeared to be a clear 'yes' just a few years ago. After all, 
China's share of the U.S. export market had surged from 2% in 2010 to 13.5% in 
2013. China was on the path to becoming a regular and consistent buyer. But 
then it began rejecting corn cargo ships for low-level presence of biotech 
traits that we're yet approved for import, and China's potential as a major 
market for U.S. corn was once again in question. 

   Despite the fact that China has since approved MIR 162, the biotech trait at 
the heart of the issue, corn sales to China amount to barely a trickle. There 
are lots of reasons as to why, with the three biggest being China's domestic 
corn policies, the substitution of grain sorghum and U.S. grain traders' 
reluctance to risk another rejected corn cargo. 

   A recent article in the magazine Choices, a peer-reviewed publication run by 
the Agricultural and Applied Economics Association, attempts to answer that 
question by taking an on-the-ground fundamental look at China's livestock 
industry, the elusive statistics that just don't add up, demand for different 
feed grains and changes to China's self-sufficiency policy. 

   I don't think I've ever read an article that so thoroughly explains the 
state of China's corn and livestock markets. It's written by Brian Lohmar, who 
is currently the U.S. Grain Council's China director. He previously served as 
the director of economic research for Bunge CHINA and as a China specialist for 
USDA's Economic Research Service. He knows China agriculture as well, or 
better, than any American I've met. 

   I highly encourage you to take the time to read the article, but for those 
of you who are just plain busy this time of year, here's the CliffsNotes 
version. (Here's a link to the full article: 

   -- The growth and modernization of China's livestock industry has changed 
the grain markets, but there's very poor quantifiable information on meat 
supply and demand in China. 

   Lohmar explains that generally, China is the largest producer of pork, eggs, 
and aquaculture products in the world and the second largest producer of 
poultry. Yet getting an understanding of the underlying supply and demand is 
quite difficult. Based on official statistics, China slaughters 715.6 million 
hogs annually, about 40.7 kilograms per capita. Yet consumption estimates show 
that Chinese consumers eat 21.2 kg/year at home. Even considering the amount 
consumed outside of the home, there's a pretty stark discrepancy. 

   China's Commerce Department even started gathering data on slaughter, and it 
doesn't add up to the official pork production numbers either, Lohmar said. All 
of this, especially when combined with the feed conversion ratio, plays an 
important role in understanding China's feed production estimates and demand 
for certain feed ingredients.

   -- In 2012, total feed use in China was only 267.7 mmt, far below the 350 
mmt suggested by commercial feed production estimates. Protein meal inclusion 
in rations has increased much faster than energy feed inclusion, at about 7% 
per year over 10 years compared to 3.5%. 

   "The point of all this is that China's official production and consumption 
estimates for livestock products are far apart and one must go through 
substantial gymnastics to arrive at estimates that are reasonable in themselves 
and reasonably close to each other," Lohmar writes. "Moreover, even an estimate 
that assumes meat production is much lower than official production estimates 
is well beyond the individual estimates of feed use for specific ingredients 
such as corn and soybean meal. For a country that puts such emphasis on not 
only development of the livestock industry but also on maintaining feed grain 
production growth to meet domestic demand, it is somewhat surprising that there 
are no real reliable estimates of livestock production, feed demand or demand 
for important feed ingredients such as corn. Or at least the estimates that do 
exist, do not seem to match each other."

   He concludes that meat consumption is likely below the official production 
numbers, meaning there's substantial room for continued growth. Second, as 
protein meal inclusion rates increase to a level that maximizes efficiency, the 
growth of energy feed and protein meal will begin to converge. "For energy 
feed, this means an acceleration of growth vis--vis total feed demand growth."

   -- China has conflicting goals: maintaining high domestic corn prices and 
developing a competitive livestock industry, all while attempting to embrace 
market mechanisms. 

   China's decision to adopt a 95% self-sufficiency policy for grains in the 
mid-1990s lead to the boom in soybean imports as farmers focused on growing 
food grains. 

   China's domestic corn production grew from about 99 mmt in 1993 to 213 mmt 
in 2013. Lohmar notes that 70% of the growth was due to expanded acreage, not 
yield improvements. It's also not clear where the 15 million hectare expansion 
of acreage came from. With China's fierce competition for land, Lohmar doesn't 
see acreage increasing, so any future gains in China's crop will have to come 
from yield. Yield improvements face challenges from China's land tenure system 
that favors small farms and makes it uneconomical to implement the 
fertilization programs needed to enhance yields. 

   "... It seems that corn production growth in China will slow in coming 
years," Lohmar writes. "Meanwhile, as protein meal inclusion growth begins to 
slow and converge with overall feed growth, demand for energy feeds will do the 
opposite. Energy feed growth can be expected to rise to converge to overall 
feed demand growth, and the additional energy feed will likely come from corn 
or other feed grains. Together, these two trends will cause corn import demand 
to grow, especially if demand growth for animal products remains robust."

   China's focus on expanded corn production has lead it to pay increasingly 
higher prices to farmers in the Northeastern provinces for nearly five years in 
a row. Global prices have declined significantly in the past couple of years, 
and China reacted by restricting imports of cheaper global corn. This forces 
livestock feeders to pay higher prices for feed, making them less competitive. 

   "Whether China decides to import corn to support domestic livestock 
production rather than import the livestock products directly, will depend in 
part on how China resolves the current situation of large, expensive stocks and 
transitions to a policy that allows corn prices to converge closer to import 
parity," he writes. "However, it will also depend on whether China's producers 
can improve efficiency and also whether they can reduce some of the 
environmental impacts of large livestock operations.  Livestock producers in 
China are increasingly efficient, but the industries, in aggregate, are still 
not as efficient as more developed industries in many of China's trading 
partners, who also currently have the additional advantage of low corn prices."

   Lohmar eventually sees China liberalizing its corn import policies and 
trying to get its domestic prices to converge with global prices. "As demand 
for animal products continues to grow, and the industry continues to modernize 
and adjust to new realities, we will likely see imports of both feed products 
and animal products rise, with corn being a key component of these trends."

Truck Driver Shortage

   While we have had our attention on ag transportation difficulties at 
railroads and at ocean ports, several issues also have been developing for 
over-the-road trucks and drivers.

   In October of 2014, Bob Costello, chief economist and senior vice president 
of the American Trucking Associations (ATA) told the attendees at ATA's 
management conference, "The one dark cloud is a driver shortage that is "as bad 
as ever and is expected to get worse in the near term." 

   In an April 1 press release on the ATA's website, Costello said, "Due to 
growing freight volumes, regulatory pressures and normal attrition, we expect 
the problem to get worse in the near term as the industry works to find 
solutions to the shortage."

   Costello said one of the reasons for the shortage is demographics; the 
average age of a truck driver is 49 years old vs. an average of 42 years old 
for all U.S. workers. Another reason is the gender issue; the average number of 
women employed in the U.S. is 47% while only 6% of truck drivers are women. He 
also said getting a commercial drivers license is expensive and not easy, and 
while trucking companies reimburse the expense, many pay it back in 
installments. Pay has been an ongoing issue and many trucking companies are now 
offering driver bonuses to entice workers. "Even with pay increases, we are 
still having trouble attracting people," said Costello.

   A driver shortage makes it "difficult to add capacity" and it "increases 
operational hardships by costing freight delays," Costello said. Here is a link 
to his interview posted on the ATA website: 

   HireRight, a leading provider of online background checks, drug and health 
screenings, and employment eligibility verifications released their annual 2015 
Transportation Spotlight. The report also addresses the problems plaguing the 
trucking industry. "The ATA estimates that the current driver shortage tops 
35,000 driver candidates; and an additional 240,000 new truck drivers will be 
needed by 2023," noted the report.

   "While there are a multitude of reasons, the top three reasons why drivers 
leave an organization remain fairly consistent from year-to-year; to make more 
money (49% in 2015 vs. 51% in 2014); to spend more time at home (40% in 2015 
vs. 41% in 2014); and to receive better benefits(32% in 2015 vs. 27% in 2014). 
Almost a quarter (24%) of respondents reported health issues as being a reason 
for driver turnover. Life on the road is an extremely physically demanding 
occupation. The average life expectancy of a trucker is less than that of the 
general public. As the workforce continues to age, regulatory agencies will 
continue to scrutinize the health of drivers." Here is the link to download the 
entire report: 


   On November 28, 2014, the Federal Motor Carrier Safety Administration 
(FMCSA) announced "it is considering a rulemaking that would increase the 
minimum levels of financial responsibility for motor carriers, including 
liability coverage for bodily injury or property damage; establish financial 
responsibility requirements for passenger carrier brokers; implement financial 
responsibility requirements for brokers and freight forwarders, and revise 
existing rules concerning self-insurance and trip insurance. FMCSA asked for 
public comments on these topics that were due February 26, 2015." Here is a 
link to the announcement: 

   The National Grain and Feed Association (NGFA) responded and said it "values 
FMCSA's efforts to promote safety on the roadways and supports efforts to keep 
drivers of commercial motor vehicles operating safely." However, it said, 
"While safe operation of commercial motor vehicles is in everyone's best 
interest for myriad reasons, the FMCSA proposal to increase the minimum levels 
of financial responsibility for motor carriers raises questions as to how this 
proposal would achieve that objective."

   NGFA urged the FMCSA to forgo issuing such a proposed rule, or "at the very 
least, evaluate the impacts of additional premium costs on commercial freight 
transportation" before doing so.

   Others support the proposed rule; Joan Claybrook, chair of Citizens for 
Reliable and Safe Highways, posted this comment on the FMCSA website: "Congress 
recognized in the Motor Carrier Act of 1980 that minimum insurance requirements 
encourage safe operations by carriers but the incentive provided by this 
mandate is seriously diluted if the requirements are grossly outdated. With 
updated substantial minimum insurance requirements that reflect the current 
realities of the industry, risky carriers will seek to avoid serious crashes 
instead of simply treating such tragic events as nothing more than the cost of 
doing business. As such, I support raising the minimum levels of financial 
responsibility for motor carriers." Here is link to view the 2,179 comments 
received by the FMCSA: 

   Another pending FMCSA mandate is the rule mandating the use of electronic 
logging devices. According to the FMCSA, "The proposed rule will ultimately 
reduce hours-of-service violations by making it more difficult for drivers to 
misrepresent their time on logbooks and avoid detection by FMCSA and law 
enforcement personnel. Analysis shows it will also help reduce crashes by 
fatigued drivers and prevent approximately 20 fatalities and 434 injuries each 
year for an annual safety benefit of $394.8 million."

   "ATA supports FMCSA's efforts to mandate these devices in commercial 
vehicles as a way to improve safety and compliance in the trucking industry and 
to level the playing field with thousands for fleets that have already 
voluntarily moved to this technology," said ATA President and CEO Bill Graves.

   However, many owner-operators aren't in agreement and say they are concerned 
over costs, privacy and how the data will be stored. The proposal by the FMCSA 
is expected to cost the industry $1.6 billion, which could cause an increase in 
rates and become a financial burden for smaller motor carriers.

   The final ruling for implementation of electronic devices is expected to be 
issued by the end of 2015 and implemented by 2017.

   Mary Kennedy can be reached at 

   Follower her on Twitter @MaryCKenn


Your local weather forecast from DTN can be sent to your email every morning free through DTN Snapshot.
Copyright DTN. All rights reserved. Disclaimer.
Powered By DTN