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Market Matters Blog           06/27 14:31
SOLAS Update; OCEMA Members to Accept Marine Terminal Weights
DTN's Brexit Vote Coverage
SOLAS Deadline Nears; Still No Clear Picture on Implementation
Barge/Secondary Rail Freight Costs Moving Higher
Happy New (Marketing) Year, US Winter Wheat!
Burning Question: When Will Old Crop Move?
STB Issues Proposed Rule on Permanent Rail Service Updates 
GIPSA Proposes Changes to USGSA Regulations
New Water Resources Bill Jumps First Hurdle
Industry Still Seeks Clarification on Implementing SOLAS VGM Amendment

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SOLAS Update; OCEMA Members to Accept Marine Terminal Weights

   There have been some new developments concerning Safety of Life at Sea 
(SOLAS) mandatory weight reporting since my blog titled "SOLAS Deadline Nears; 
Still No Clear Picture on Implementation" was posted on June 20. 
https://goo.gl/rbQNwy 

   On that day, the Agriculture Transportation Coalition (AgTC) put out a press 
release saying, "The Ocean Carrier Equipment Management Association (OCEMA) 
officially announced that their member ocean carriers will accept the marine 
terminal weights, so that exporters do not have to provide the combined 
cargo/container weights to the carriers. There is still work to be done, 
particularly for containers arriving at terminals without going through the 
gates, by on-dock rail." OCEMA is an association of 19 major U.S. and foreign 
flag international ocean common carriers. Here is a link to the announcement by 
OCEMA: http://goo.gl/bNa1SB 

   I asked Midwest Shippers Association (MSA) Executive Director Bruce Abbe if 
the picture was a little clearer since OCEMA's announcement. "Yes, I would say 
so," he said. "I'm guessing now that with this option being now through OCEMA 
as a noted, endorsed method that many, if not most ports and terminals will 
offer it. And for others, they had best inform anyone shipping through them 
what their policy will be. I expect there will be differing levels of adoption, 
but the trend is for many of them to provide it. And then will the carriers 
accept it? I expect most will."

   However, Abbe also said he expects many freight forwarders will not want to 
take any chances with shippers' container cargo come July 1 and many of them 
will probably try to provide some kind of VGM (verified gross mass) weight -- 
the combined weight of the cargo and the container -- reporting via whatever 
the system is the carriers will each provide.

   "Hopefully, someone or all of them will track and inform shippers/forwarders 
what systems are available at the different ports and systems," he said. "If 
terminal-weighing will be done, that's probably what should be used. But if 
not, shippers/forwarders should plug in something."

   "There was also some uncertainty when it came to on-dock rail container 
service," said Abbe. "In the case of on-dock rail, most of those containers are 
not weighed at some (not all) ports. Charleston, South Carolina, for example, 
doesn't have on-dock rail, so everything gets weighed now anyway (to meet OSHA 
requirements, has been for 25 years.) Seattle, which serves our region, has 
what some call on-dock rail by BNSF at SIG (Seattle International Gateway) but 
in fact it isn't true on-dock rail because the boxes have to be pulled off and 
put on chassis for a short run over to the terminals of choice/booking. So 
maybe they are weighed at the terminals. Hope so."

   Abbe said he recommends shippers/forwarders should provide a VGM weight, 
according to whatever the carrier makes available for their systems and that 
they tell/email the forwarder to say they are providing a VGM. He added that if 
the terminal is going to weigh and report it, they should go with that one.

   "I just don't have a good handle on how this will all be adopted and played 
out over the next few days ahead of July 1," said Abbe. "I would not advise 
shippers to just do nothing new unless they know for sure that their shipment 
is going to go through a port where the terminals will provide the VGM. In 
time, I think that is what will be the case ... what the system will adopt.

   "And the shippers/forwarders/logistics providers ought to be concerned 
enough and informed enough to make sure there is no slacking on this. Plus, 
with the International Maritime Organization (IMO) recommending 'more 
flexibility' at the beginning of VGM requirements the first three months, that 
hopefully things will go ahead without major interruptions in the U.S."    

   What will happen overseas is still very unclear, Abbe told me, because many 
countries and ports haven't given any indication yet on what their systems will 
be. "It's been a confusing mess getting here."

   Mary Kennedy can be reached at mary.kennedy@dtn.com 

   Follow her on Twitter @MaryCKenn

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DTN's Brexit Vote Coverage

    Results from the U.K's Brexit vote -- deciding whether or not it will stay 
in the European Union -- will be coming in during the overnight hours. And 
while the finality, if "Leave" carries the day, won't be seen for a number of 
years, market reaction is expected to be immediate and volatile. With that in 
mind, DTN analysts will be covering the developments in this blog overnight. 
Updates will appear in the comments section, and we invite your participation 
(questions, comments) as well. 

   DTN Market Analyst Todd Hultman will take the first shift from 7 p.m. CDT to 
midnight, when much of the news could possibly break. DTN Senior Analyst Darin 
Newsom will take over at midnight and discuss developments up through Early 
Word Grains analysis early Friday morning.

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SOLAS Deadline Nears; Still No Clear Picture on Implementation

   On July 1, the International Maritime Organization's Safety of Life at Sea 
(SOLAS) Container Weight Verification rule will take effect, requiring that 
shippers verify gross container weight -- the combined weight of the cargo and 
the container -- prior to shipping. There is still no clear picture for many 
shippers as to the "how, who or where" mechanics of this new rule. If shippers 
don't comply or are unable to comply fully, their containers will likely be 
prevented from loading aboard a ship. It could be a mess at ALL container ports 
on July 1 in places where there is still confusion.

   The Ag Transportation Coalition posted this statement on their website, 
which sums up the confusion and problems facing shippers due to the SOLAS rule: 
"Currently, the shipper is responsible to accurately report the weight of its 
cargo, but does not own, control, or maintain containers. This rule was never 
submitted to Congress, reviewed or approved by a federal agency, nor published 
in the Federal Register. There has been no input from the shipping community. 
Now shippers, steamship lines, terminal operators, and governments are 
scrambling to create best practices and implementation guidance for this new 
rule. Unless thoughtfully considered by individuals with intimate familiarity 
with the export supply chain process, this rule will create major turmoil at 
the marine terminals and a very significant impediment to U.S. exports."

   Midwest Shippers Association (MSA) Executive Director Bruce Abbe told me 
that the Port of Charleston, South Carolina, "kind of led the way in deciding 
they would offer to do the weighing for containers coming in, since they do a 
version of this anyway. At first they were going to charge a fee (something we 
all were concerned might occur everywhere)... but it was pretty nominal what 
they were talking about, if at all. So Charleston has been a bit of the hero 
port in this so far."

   On May 5, South Carolina Ports Authority (SCPA) posted a press release on 
its website stating, "Last week, the U.S. Coast Guard announced its approval 
for U.S. ports to verify the weight of containers on behalf of the shipper to 
comply with the Safety of Life at Sea (SOLAS) regulations, and will provide 
this weight to the shipper or exporter." 

   "It has been our position all along that we have employed a best practice in 
safely loading ships in our port for the last 20 years due to our weighing of 
all export containers," said Jim Newsome, SCPA president and CEO. "We applaud 
the Coast Guard for recognizing this in its recent Declaration of Equivalency 
to the International Maritime Organization on the SOLAS regulations. 

   "For many years, SCPA has weighed every export container received at its 
terminals on calibrated scales consistent with requirements in OSHA regulation 
1918.95 (b)(3). SCPA will assist its export shipper customers and the container 
shipping lines in complying with their obligations under the SOLAS regulations 
regarding verified gross mass (VGM) of containers effective July 1, 2016."

   Abbe said: "There has been movement on the issue of ... if terminals will 
let containers onto their property without a VGM files, or turn them away. 
Gradually more of them... Norfolk soon, then others, have said they now will 
allow them in. Short period of time until they have to have the VGM (I see this 
as an initial policy to deal with potential initial congestion issues.) I can't 
say if they will offer a service to weigh them, or if there will be a charge, 
or what time length they'll allow until detention fees kick in, etc. But 
gradually more ports/terminals are stepping up with things like this. There has 
been some announcements and changes later by carriers, ports, etc., so it's 
tough to track." 

   American President Lines Ltd (APL), one of the world's leading ocean 
carriers, has a dedicated SOLAS web page on their company website which 
includes tracking and updating which ports and terminals are doing what as far 
as these acceptance policies. http://goo.gl/OZ6YeO

   IMPACT ON GRAIN INDUSTRY 

   Abbe said that since nearly all grain exporters have certified scales at 
facilities they use, they should supply it themselves and not pay for the 
port/terminal to do it. "Avoid ports/terminals that have unnecessary costly 
policies to do this, or potential penalties. And be aware of which 
ports/terminals are doing what," Abbe said.

   "For many grain, soy and DDGS export container shippers, it ought to be 
relatively easy to submit a 'verified' cargo weight because ag/grain elevators 
and facilities use a certified weighing scale, already," said Abbe. 
"Identity-preserved (IP) soybean exporters like many MSA members that load bags 
or super sack totes also know the weight of their cargo now. When they load 
them at their plant, they're sure of what they load."

   Rail shippers of bulk grain, DDGS, and soy exporters to the coast where 
product is transloaded into containers will likely face some added challenges. 

   "The actual container is loaded by someone else, a logistics service 
provider," Abbe said. "So, since the shippers are to be held responsible -- but 
someone else is loading it -- I see a likely need for some amended language in 
service contracts to clarify these matters."

   Grain and other ag products shipped by containers often will see small 
weight changes for moisture that can develop while in route when going through 
rain, humid or dry conditions. Abbe told me, "I've seen no word on any standard 
margin of error or flexibility on weight differences from a posted VGM to allow 
for things like moisture or minor changes in weight while in transit from the 
shipper to the terminal. Most other countries have them. It's something we 
need." 

   Lastly, Abbe said his message to shippers is to "keep track of everything 
filed per each container and be in close contact and on the same page as their 
forwarders, and any transloaders if they use them on executing this." 

   On Thursday, June 16, Federal Maritime Commission Mario Cordero released a 
firm statement saying: "The time has come for ocean carriers to embrace the 
obvious solution to achieving compliance that Marine Terminal Operators can 
offer. Specifically, Cordero asserted the weight of export containers, as 
determined by terminal operators, can and should be classified as the Verified 
Gross Mass (VGM) of the container." Here is the link to the entire statement: 
http://goo.gl/nJpFzN

   For anyone interested or affected by SOLAS, here is link to register for a 
webcast sponsored by Logistics Management On June 30, 2016, at 2 p.m. EDT: 
https://goo.gl/xEcZnq

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow Mary Kennedy on Twitter @MaryCKenn

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Barge/Secondary Rail Freight Costs Moving Higher

   Barge freight and secondary rail freight costs have moved higher in the past 
week as demand is spiking due to the rise in cash grain prices. 

   "Mississippi Gulf grain inspections totaled 0.788 million metric tons, up 
33% from the previous week, and 22% above last year, due primarily to higher 
wheat and corn inspections," according to the USDA Grain Transportation Report 
for the week ended June 2.

   In the past 10 days, barge freight has seen a 50% hike in some corridors and 
a 35% to 60% hike in others for the last two weeks of June placements. 

   Since June 1, the corn cash price has increased 18 cents, according to the 
DTN Cash Index as of June 10, and the soybean cash price has jumped 97 cents. 
And this was on TOP of the rallies we saw in May. 

   For the week ending June 10, soybean futures gained 46 1/4 cents in the 
front-month July contract and 77 1/2 cents in the November contract, extending 
the streak of gains to nine weeks. This rally in soybeans is the longest in 
more than 40 years.

   The higher corn and soybean futures have inspired farmer selling, which is 
creating a demand for barges on all river segments. Demand for old-crop winter 
wheat to Brazil out of the Gulf has been steady, as well. On June 8, the middle 
of last week, Ceres Barge, LLC, reported the market was up on old and new crop 
barges "as the higher board generated a huge grain movement on almost all river 
segments. The June/July slots are getting booked up quickly. As of Friday, 
there were some higher values in various slots, mainly July." 

   New-crop barge freight has jumped at least 50% to 60% as both the soybean 
and corn new crops are so far in good condition and are on pace for a large 
harvest in the fall.

   Barges in some corridors are also being sold with "terms," which means 
shippers need to load barges and release within "free time" or face penalties. 
This is due to the fact that barge freight is higher in the coming months 
versus freight costs for June/July. Extra penalties on top of demurrage will 
discourage shippers from buying cheaper nearby freight and holding it. For 
example, freight in St. Louis corridor is 225% over tariff for June versus 475% 
in September and 550% in October. All corridors have similar differences in 
nearby freight costs versus deferred.

   The cost for new-crop secondary rail shuttles rose late last week as high as 
$1,000 per car over tariff for first-half October and $1,400 for second half. 
As of June 9, costs were at $800 for first half and $1,500 for last-half 
October. Freight for June also rose the past week with first-half June at $50 
per car and last half at $200 per car. One week ago, June was trading at 
negative numbers. 

   One thing to remember is that railroads parked locomotives -- otherwise 
known as "power" -- and furloughed workers in the past six months due to lack 
of grain movement. A BNSF worker in the Northtown yard in Minnesota told me 
there are orders to start returning power to service, and BNSF shuttle loaders 
in eastern North Dakota mentioned they expect parked shuttles to be back in 
service by harvest.

   LOWER RAIL TARIFFS WILL HELP MOVE LARGE WINTER WHEAT CROP

   It's no secret the U.S. is looking at a large crop of wheat this summer and 
early fall. The first wheat crops, hard red and soft red winter, are starting 
to come off the fields in the south and harvest will head north into July. 
Yields are expected to be near records in some areas, and USDA on Friday 
confirmed it in the June WADSE report. "Projected production for 2016/17 is up 
79 million bushels mainly on improved prospects for the hard red winter wheat 
crop in the Great Plains following excellent growing conditions throughout the 
spring months. Consequently, the winter wheat yield is forecast to be record 
high," according to the report.

   Tim Luken, manager at Oahe Grain in Onida, South Dakota, is serviced by the 
Rapid City, Pierre and Eastern (RCPE), a Class II railroad operating across 
South Dakota and southern Minnesota with portions of the railroad extending 
into Wyoming, and Nebraska and is serviced by the Canadian Pacific (CP). Luken 
told me the tariff rate at Onida "went down about 4 cents a bushel over Chicago 
and more going to Minneapolis and even south to destinations via the Union 
Pacific (UP). Since the UP has lowered their wheat rates, the CP figured out 
they better follow suit or risk losing business." 

   Luken said the "RCPE actually received a better rate from the UP being the 
RCPE could originate in Mankato where UP has their yard and being the RCPE does 
have trackage rights from Tracy to Mankato or not. I am assuming this is the 
reason CP did what they did. So any rate decrease gets passed on to the 
producer. RCPE has been very aggressive on getting better rates for us and are 
very good to work with."  

   That's good news for Luken since he has told me more than once that his 
winter wheat crop is the "best I have seen in years and hoping for quality 
because there will be quantity." So, lower wheat rates means better margins for 
his elevator and better savings to his producers.

   "This crop is going to have to move someplace, and elevators will be the 
first stop saving what little room they have on farm storage," said Luken. "I 
feel farm storage is still 40%-45% full of off-quality grain not wanting to go 
anywhere because of discounts and hoping for good quality this year to get rid 
of some of the off-quality grain still on farm."

   He told me his producers have been locking in new-crop contracts not only 
for new crop coming off field delivery, but also deferred months October, 
November and December. "The carry in the market is telling them that, and I 
have also been steering them in that direction to do so." On June 10, the carry 
from the July contract to the September was at 17 cents, and the carry from the 
September contract to December was at 42 cents. 

   Protein content will be "the number-one big question around here and where 
the mills will set their levels," Luken said. "Mills have not had to change 
their grind for many years, and this may be a year they have to from a 12 pro 
to maybe an 11.8 pro level. If we do not see a 12 protein crop, average basis 
will have to do the work. Time will tell."

   In the past few weeks, flour mills and resellers (Gulf exporters) have been 
paying up for 12% protein old-crop winter wheat, fearing that the new crop may 
not make an average of 12% protein this year due to the cooler, wet growing 
conditions last month. U.S. Wheat Associates reported June 8 that harvest is 
27% complete in Texas and 28% complete in Oklahoma.

   "Kansas is just now starting to get into full swing with less than 1% 
harvested," USW said. "Harvesting is underway from central Texas to southern 
Kansas and continues to move north and west very quickly and should continue to 
do so if the warm, dry weather continues." USW said that while test weight and 
yields are very good so far, average protein seen is 11%." 

   It's still too early to tell, but we could see the discounts widen below 12% 
if protein levels don't come up.

   Mary Kennedy can be reached at mary.kennedy@dtn.com 

   Follow her on Twitter @MaryCKenn

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Happy New (Marketing) Year, US Winter Wheat!

   Too much of a good thing isn't always a good thing. That was pretty much the 
case this past year after the U.S. produced a large, good-quality, high-protein 
hard red winter wheat crop. The rest of world also produced a large crop. Not 
all of it was as good as the U.S. crop, but there was still plenty to go 
around. The end result was a cheap basis for U.S. HRW wheat most of the crop 
year.

   U.S. Wheat Associates reported that in 2015-16, wheat farmers across 16 
states grew a crop that "provided the characteristics buyers need to meet the 
growing global demand for high-quality baked goods and other wheat foods. Even 
though less was seeded, farmers produced more HRW than in 2014-15."

   The average grade for last year's crop was U.S. No. 2 due to the test weight 
average of 59 pounds. A No. 1 grade requires 60 pounds. The average dockage was 
0.8% and total defects were 1.8%. Best of all, the average protein was 12.4%. 
Approximately 22% of samples tested were less than 11.5% protein, 41% between 
11.5% and 12.5%, and 37% above 12.5%, according to the 500 samples from the 12 
states making up the Gulf and Pacific Northwest tributary regions collected by 
USW and its partner organizations.

   The crop was sound, coming in at an average of 400 falling numbers. Falling 
number measures the effect of the enzymes on wheat quality in flour or meal. It 
also measures if there is any sprout damage. Falling numbers below 200 are a 
sign of severe sprout damage and unacceptable for milling. Mills require a 300 
FN or better to be considered for flour milling.

   OLD-CROP BASIS WEAKER FOR MOST OF YEAR

   The DTN National Average Basis held above the five-year average through 
November 2015, then dropped below and stayed there for the rest of the 2015-16 
crop year, ending the year at an average of -56 vs. the prior year average of 
-40. 

   Alex Basset, a risk management consultant at INTL FCStone Inc. in Kansas 
City, Missouri, told DTN in an email, "HRW basis was weaker than normal as we 
had little export demand of any kind." If you followed weekly export sales and 
weekly inspections for last year, you would have seen the world "dismal" used 
over and over again when summarizing the weekly reports.

   Dan Maltby, a former HRW buyer in Kansas City and currently a consultant for 
Risk Management Group Minneapolis, told DTN that "one of the things ailing 
winter wheat is that world wheat production continues to outstrip world wheat 
demand and U.S. ending stocks bore the brunt of that."

   For most of the last crop year, Maltby added, "U.S. wheat exports were also 
negatively impacted by a relatively strong dollar, especially when compared to 
other wheat exporters, but this has recently moderated somewhat. Still-cheap 
wheat prices at harvest time again sink to be competitive with corn feeding."

   WHAT WILL NEW CROP YEAR BRING?

   In the May 10 USDA WADSE report, U.S. HRW production, projected at 863 
million bushels, was up 4% from a year ago. The U.S. all-wheat 2016-17 carryout 
was projected at 1.0239 billion bushels, up from the current 2015-16 estimate 
of 978 million bushels. If realized, it would be the highest carryout seen 
since the 1987-88 crop year. Foreign wheat carryout for 2016-17 was projected 
at a new record of 257 million metric tons, up 14 million metric tons from the 
current 2015-16 estimate. Production was put at 727 million metric tons, down 
from last year's record of 734 million metric tons, but if realized, would be 
the second-largest production number in history.

   So far in this new crop year, there has been strength in HRW wheat basis, 
but mainly for 12 proteins. All buyers of milling quality are concerned that 
new-crop HRW wheat will be lower protein. Basset said, "Early harvest results 
out of Texas and Oklahoma are showing good test weight and good production with 
below-normal proteins as a result of good moisture and cool temps, which will 
likely be the case across the Plains. There is still a lot of low test weight 
off quality wheat around from last year, which should keep spreads wide, and 
wide spreads incentivized commercials to carry wheat."

   USW reported on June 3 in their weekly harvest report that the 2016 HRW 
wheat harvest continues to be slower than normal and struggling to make 
significant progress due to relentless rain across Texas and Oklahoma. "Texas 
harvest is 18% complete. Wheat in central and northeast Texas has been mature 
and ready to cut for a couple of weeks. Some wheat has been cut in coastal 
areas and west-central Texas, but moisture has kept combines out of most 
fields. Wheat throughout Oklahoma has now been ready to cut for several days, 
but harvest progress has also been delayed by moisture in the fields. Test 
cutting has been reported as far north as the Oklahoma/Kansas state line. The 
weather forecast is for dryer conditions early next week. This could allow 
harvest to begin from central Texas to southern Kansas. Early test weight 
reports continue to be very good and producers are pleased with the yields. 
Early protein reports continue to average about 11.5%."

   "As we head into a new year, while U.S. export projections are somewhat 
improved," Maltby said in an email. "Argentina's wheat crop had problems, 
Russian Ruble has risen, Canadian wheat stocks will remain tight; very wide 
carrying charges in KC (73 cents from July '16 to July '17) and a cheap basis 
indicate the best marketing option for producers and wheat handlers alike is to 
store as much wheat for as long as possible."

   Basset added, "We saw a new-crop barge to Brazil in export sales Friday and 
could see this continue. It all depends on quality of the Argentine crop, and 
we will need to watch the crop in the Black Sea as they have exported wheat to 
Brazil as well."

   "We are staring at another large crop, which will likely keep new-crop basis 
under pressure unless we have quality concerns or bump in exports," Basset 
continued. "It will be tough for the U.S. to see a major increase in exports as 
the U.S. dollar stays strong; we will need to see quality issues elsewhere to 
have a better chance."

   Informa Economics on Friday released its latest U.S. survey-based crop 
production estimate, increasing its winter wheat production forecast by 21 
million bushels from 1,427 million bushels to 1,448 million. "The bulk of the 
increase was for HRW wheat production, which is forecast at 882 million 
bushels, up about 19 million bushels from USDA's May forecast. No demand 
changes were made to the U.S. 2016-17 balance sheet. The additional supplies 
fell to ending stocks, which now are forecast at 1,115 million bushels for the 
2016-17 crop year."

   Maltby said, "The most interesting question on the horizon then is ... will 
U.S. wheat acreage decline again? If it does not, then it suggests wheat must 
be used in some rotations, no matter what the price, and of course if that's 
the case, wheat prices' only hope of a rally is tied to something other than 
wheat demand. IF acreage drops, and producers continue to switch to oilseeds or 
corn, or try something 'new,' like pulses, then possibly the stage would be set 
for production to be less than demand."

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow Mary Kennedy on Twitter @MaryCKenn

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Burning Question: When Will Old Crop Move?

   Flat price increases in the last few weeks have begun teasing some old-crop 
soybeans and corn out of storage -- more beans than corn, according to my 
sources. Buyers and transportation companies are expecting a large movement of 
stored old-crop grain starting in mid-June.

   On April 18, I wrote a column about the amount of old-crop corn, soybeans 
and other grains that had not been priced. Here is a link to that story for 
comparison to what the situation looks like now: https://goo.gl/iiHLAK 

   From April 18 to May 18, the DTN cash corn index price gained 15 cents and 
the cash soybean index picked up a whopping $1.07. DTN National Average corn 
and soybean basis weakened by 3 cents since April 18, but given the rise in the 
cash prices, it didn't seem to matter; unless you had set the basis prior to 
the rise in futures, which put you ahead of the game. 

   "In my neck of the woods, what I like to call the 'easy bushels' have been 
moved when it comes to corn. By easy bushels I mean the grain that needed to go 
to ensure bin quality, cash flow and other needs were taken care of prior to 
planting season. The rally in the market combined with reasonably solid basis 
values at the start of said rally really helped make that decision much easier 
for guys," Angie Setzer, vice president of grain at Citizens Elevator in 
Charlotte, Michigan, told me.

   Setzer said her "draw area" runs throughout Michigan and into northern Ohio 
and Indiana. "Going into summer, the corn bushels that are on the farm will 
likely be a bit harder to buy. We'll either need to see basis improvement start 
to kick in or see another leg up in the market to get much of what is left on 
the farm to move in June or early July. Of course that won't apply to everyone, 
but many of the guys I work with are now wanting to see if their bet on holding 
bushels into the summer will pay off. That combined with the slow start to 
planting pace in Michigan has some holding back on additional old-crop sales 
until they feel confident the crop they're planting this spring will be 
worthwhile." 

   On the bean side of things, Setzer said, "Most old-crop beans that have been 
sitting on the farm have been shipped. There may be some sitting out there just 
in case this market gets even crazier than what it has been, but for the most 
part, at least with the guys I work with, the bean bins are relatively empty. 
At this point on the side of the buyer, the movement in grain April into May 
has provided more than enough available supply in the short term with many 
feeling comfortable on the purchase side through June. 

   "I am starting to see some feeders poke their heads up inquiring on summer 
values, with some plants also inquiring what it will cost to get late-summer 
bushels bought. At this point with our shorter crop last year and the late 
start to planting, we could see things in this area get extraordinarily 
interesting, value-wise, late in the summer into harvest. The tale of two very 
different worlds when it comes to values in the Eastern Belt versus the Western 
Belt will continue."

   Tim Luken, manager of Oahe Grain, in Onida, South Dakota, said, "I can tell 
you I bought more grain 30 days ago in one week than I did in the last four 
months before that. Ever since then, farmers have been selling off and on. We 
get a rally, some gets sold. A fair amount of corn has moved already and put 
into position via DP or contract."   

   A grain merchant in northeast Illinois told me that farmers in his area are 
generally 80%-90% sold on beans and 50%-60% sold on corn. "There is a lot of 
old-crop corn to move off the farm yet. Unpriced, farm-stored beans are hard to 
find right now. Most sold beans early to create cash flow needs this winter."

   PRODUCERS WEIGH IN

   DTN Managing Editor Cheri Zagurski maintains a reader advisory group of 
producers/grain merchants that she gathers information from on a regular basis 
throughout the growing and harvest season. I asked her to pose these questions 
to them: How much grain do you have left to sell? Of that amount left to price, 
how much of that grain is stored on farm and needs to be moved to the elevator? 
Is some of it on delayed price storage and already moved? 

   Mark Israel from southern Georgia said: "I would say that we have 
approximately 100,000 bushels corn left to sell. It is all stored on our farm 
in bins. We also have wheat and a few beans, but I'm not really sure how much."

   Bob Birdsell of Stanberry, Missouri, replied that he only had a small amount 
left. "We still have one-third of our '14 corn because we got very little '15 
corn planted. We have sell orders in, but they just can't quite get there. It 
is stored on the farm. We just about got there and they widen the basis out, 
then the market dropped ... just about there again. We have 20% 2016 corn 
priced. The beans are gone; about three weeks too early but they are gone. 
Thirty percent of '16 crop is priced."

   Jason, Willemarck, of Baraboo, Wisconsin, said: "I still have 1,500 bushel 
of corn left in storage. Soybeans have already been sold back in February. Corn 
I have is in storage at the elevator, which makes it easier to sell when I need 
to. Yes, storage fees apply but that is small and just easier when I sell. Plus 
I don't have to worry about getting it to market and spoilage. The goal in mind 
is to make an average price for the crop as time moves on. That price, though, 
has to take into consideration all the input costs and storage. Usually by the 
end of summer I have the rest of the old-crop sold already. I always have 
new-crop contracts already in place for fall delivery. Again it all plays a 
role in risk management and I take a long look at the overall price and 
breakeven point for the year." 

   Loren Hopkins, Deerfield Farms in northeast Ohio, said: "Here in northeast 
Ohio, farmers seem to be emptying their bean bins since the cash price went 
over $10. The elevator I manage is receiving more beans than corn. Farmers are 
still hoping for $4 cash corn. We also filled a lot of new-crop bean targets 
over $10."

   "This is a hot topic as far as what is left in the country," Luken told me. 
"Railroads call and ask, grain buyers calling and asking, newspapers calling 
and asking ... everyone wants to know when old crop will hit the road. Here it 
is almost the end of May, corn is in, beans being put in and only 45-60 days 
from harvest. I still feel we will get some big movements in June."

   It appears that most of the industry is anticipating the same thing. But for 
now, until farmers are done with all of their planting, it is a waiting game.

   Mary Kennedy can be reached at mary.kennedy@dtn.com 

   Follow her on Twitter @MaryCKenn

******************************************************************************
STB Issues Proposed Rule on Permanent Rail Service Updates 

   Class I railroads will be required to provide weekly reports on their 
service performance under new rules proposed by the Surface Transportation 
Board (STB) late last month. The new requirements are aimed at preventing 
widespread rail service issues such as those in 2014 that affected numerous 
commodity shippers, including grain shippers. 

   On Friday, April 29, the STB issued a Supplemental Notice of Proposed 
Rulemaking (SNPR) for the establishment of weekly reporting of rail service 
performance data by the Class I railroads and the Chicago Transportation 
Coordination Office (CTCO). "Through this SNPR," the board stated, "it (STB) is 
proposing to establish new regulations requiring all Class I railroads and the 
CTCO, through its Class I members, to report certain service performance 
metrics on a weekly basis."

   The push for more reporting began on Oct. 8, 2014, when, in response to 
service challenges affecting a broad cross-section of rail shippers, the STB 
ordered all Class I railroads and the Chicago Transportation Coordination 
Office, through its Class I members, to begin filing, on an interim basis, 
weekly reports containing "specific railroad performance data." Later, during a 
proceeding on Dec. 30, 2014, the board proposed making the weekly reporting 
requirements permanent. 

   In that proceeding, the board received 17 opening comments submitted by 35 
parties and nine reply comments from 30 parties. A number of parties filed 
written comments requesting meetings with board staff to discuss the proposed 
rail service performance metrics. 

   In a decision served Nov. 9, 2015, the STB announced that it would "waive 
its ex parte prohibition for the limited purpose of permitting parties to have 
discussions with board staff so that the agency could develop a more complete 
record with regard (to) rail service issues-performance data reporting. Parties 
were allowed seven days to submit written comments in response to the ex parte 
meeting summaries."

   In a Dec. 23, 2015, comment to the STB, the National Grain and Feed 
Association (NGFA) urged the board to proceed expeditiously by "issuing an 
updated proposal to require the weekly reporting of a standardized set of rail 
service performance metrics with sufficient detail and granularity to be useful 
to rail customers and the board itself to evaluate future service trends and 
anomalies."

   The NGFA noted that, "rail service metrics can provide an early alert of 
impending service disruptions, allowing shippers and receivers critical 
additional time to mitigate the business harm and economic loss if and when 
those disruptions occur."

   USDA also commented that "If reporting requirements had been in place before 
recent service challenges, the problems would have been identified sooner and 
the situation may have been less disruptive."

   In its Dec. 23 comments to the STB, the Association of American Railroads 
(AAR) pointed out that railroad service is often a function of the amount of 
resources on hand to meet demand for transportation. "The amount of resources 
available is driven by forecasts that in large part originate with shippers. If 
those forecasts are not accurate, railroads will be challenged to keep their 
networks fluid. In such cases, railroad metrics will rise and fall, but they do 
not reveal anything about the causation of service problems or efforts to 
resolve them."

   "Instead, the board's focus in this proceeding should be on monitoring the 
overall health of the rail network. For this purpose, the metrics published by 
the AAR are sufficient and many of the more granular metrics currently being 
collected by the board are unnecessary and create a distorted view of railroad 
operations," the AAR said. 

   Finally, AAR requested that the STB consider annual, rather than quarterly, 
reporting on infrastructure projects.

   The STB reported in their April 29 decision that regulations being proposed 
in this SNPR reflect the board's analysis of comments and the productive 
discussions between staff and stakeholders. "The Board looks forward to 
receiving an additional round of opening and reply comments, due respectively 
May 31, 2016, and June 28, 2016, and intends to issue regulations shortly 
thereafter. In soliciting additional comments, the agency urges stakeholders to 
comment on the potential utility of each request, and to propose specific and 
detailed changes or modifications, if improvements can be made to a particular 
request."

   In issuing the SNPR, STB Chairman Daniel R. Elliott III commented: "The 
railroads' reporting of service performance data on an interim basis has been 
very useful to the Board in monitoring the industry's recovery from the severe 
service downturn of 2013-2014. It also provides us with a near real-time 
perspective on the pulse of the industry, and benefits rail customers and other 
stakeholders in the same way. The rules proposed today will promote 
transparency going forward, and enhance the Board's ability to detect and 
respond to service issues."

   The entire Docket No. EP 724 (Sub-No. 4) can be seen here: 
http://goo.gl/kTvEsP  

   Mary Kennedy can be reached at mary.kennedy@dtn.com 

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
GIPSA Proposes Changes to USGSA Regulations

   USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA) is 
proposing to revise existing regulations and add several new regulations under 
the United States Grain Standards Act (USGSA) in order to comply with 
amendments to the USGSA made by the Agriculture Reauthorizations Act of 2015. 
The USGSA was signed into law by President Barack Obama on Sept. 30, 2015. 

   Specifically, the rulemaking proposes to eliminate mandatory barge weighing, 
remove the discretion for emergency waivers of inspection and weighing, revise 
GIPSA's fee structure, revise exceptions to official agency geographic 
boundaries, extend the length of licenses and designations, and impose new 
requirements for delegated states.

   To see the entire proposal, visit: https://goo.gl/IZpgJl

   On April 25, The National Grain and Feed Association (NGFA) and the North 
American Export Grain Association (NAEGA) sent joint comments to GIPSA Deputy 
Administrator Randall Jones stating that they generally support the proposed 
changes and offered several recommendations to clarify the intent of the 
statutory revisions. 

   The NGFA comprises more than 1,050 member companies that operate more than 
7,000 facilities and handle more than 70% of the U.S. grain and oilseed crop. 
The NAEGA is a not-for-profit trade association that consists of private and 
publicly owned companies and farmer-owned cooperatives that are involved in and 
provide services to the bulk grain and oilseed exporting industry.

   In their joint statement, NGFA and NAEGA said several of the amendments made 
to the USGSA by Congress under the Reauthorization Act are the most significant 
changes to the statute in nearly 20 years. 

   "The changes and how they are implemented can have a positive impact on the 
global competitiveness of U.S. grains and oilseeds whose exports are valued at 
more than $50 billion annually," the groups stated. "These key changes include 
calculation and adjustment of fees to maintain a three- to six-month operating 
reserve for inspection and weighing services, as well as new definitions and 
clarification of provisions in existing requirements, and the addition of a new 
section to the statue that would require delegated states to notify GIPSA of 
any intention to temporarily discontinue service."

   The discontinuation of service amendment is being put in place in hopes of 
avoiding what happened in July 2014 when the Federal Grain Inspection Service 
(FGIS) suddenly refused to send inspectors into United Grain Corp.'s Vancouver, 
Washington, export facility due to "safety concerns" over crossing picket 
lines. A labor dispute between UGC and the Longshore and Warehouse Union had 
been underway for nearly 17 months and tensions were running high. Without an 
FGIS certificate available, UGC was pretty much stopped in their tracks as far 
as exporting grain, and had they been given a 72-hour notice, it may have 
allowed them time to make other arrangements.

   The USGSA mandates that most U.S. export grain be officially inspected and 
weighed whenever official standards and procedures are utilized, with such 
activities required to be performed and supervised by FGIS. According to the 
NGFA, "In certain cases, FGIS can choose to delegate its inspection authority 
to a state agency to perform the service, or to waive the official inspection 
requirement in response to a contractual agreement between the buyer and 
seller, the act requires that FGIS personnel provide official inspection 
service and official weighing or supervision of weighing service at export 
locations." 

   GIPSA's proposal also "requires delegated states to notify GIPSA of any 
intent to temporarily discontinue official inspection or weighing services at 
least 72 hours in advance, except in the case of a major disaster." 

   The NGFA and NAEGA, along with their members, would like GIPSA to add 
language to provide that "export port locations are notified if official 
service is to be discontinued 72 hours in advance."

   In their proposal, GIPSA also stated: "The Reauthorization Act amended the 
USGSA to require GIPSA to waive the mandatory official inspection and weighing 
of export grain in emergency or other circumstances that would not impair the 
objectives of this Act whenever the parties to a contract for such shipment 
mutually agree to the waiver and documentation of such agreement is provided to 
the Secretary prior to shipment. This would allow grain shipments to continue 
in the event that the official system is not able to fully perform all of its 
duties."

   In their letter to GIPSA, the NGFA and NAEGA stated that they opposed 
GIPSA's proposed definition of the term "emergency" as including "a situation 
outside the control of the service (i.e., GIPSA) or a delegated state that 
prevents the prompt issuance of official certificates..." The groups 
recommended an "emergency" instead be defined as any situation that prevents 
prompt issuance of certificates, in accordance with Sec. 800.160(c)."

   CHANGES IN FEES AND REACTION BY INDUSTRY

   Official inspection fees can be costly for a shipper, but they are necessary 
for a mill or exporter to accept grain. Years back, shippers could submit 
grades to their State Grain Inspection Agency, but that practice has ceased 
partially due to grain not representing the grades at time of shipment when 
they arrive to be milled or exported. It's basically good protection for both 
the shipper and end user to have officially probed grades.

   The USGSA Act requires two actions be taken by the secretary of agriculture 
with respect to fees for official inspection and weighing. One action is that 
all fees related to official inspection and weighing services must be adjusted 
at least annually to maintain a three- to six-month operating reserve. The 
other is that the export tonnage fees for official inspection and weighing must 
be based on the rolling five-year average of export tonnage volumes. 

   In its proposed rule, FGIS would implement the two fee actions on a calendar 
year basis beginning Jan. 1, 2017. In addition, FGIS would adjust Schedule A 
and Schedule B fees periodically, taking into account other Schedule A fee 
adjustments that may have occurred to maintain a three- to six-month reserve. 
Here is a link to the FGIS fee schedule: https://goo.gl/ohkKoC

   NGFA and NAEGA strongly recommended that the determination of whether 
Schedule A fees should be adjusted should be based on the midpoint of the 
three- to six-month range, which is 4.5 months. "Thus, the targeted reserve 
would be 4.5 months of average operating expense based on the previous fiscal 
year's operating expense. All Schedule A fees would decrease or increase 2% for 
each $1 million that the reserve is more or less than 4.5 months of operating 
expense. NGFA and NAEGA further recommend that there be no cap on the amount 
that Schedule A fees can change. Based on projections, NGFA and NAEGA estimate 
that its recommended approach would result in a fee reduction of 10% or more 
for new Schedule A fees implemented effective Jan. 1, 2017." 

   To read the NGFA and NAEGA's full letter to GIPSA with more information on 
the recommendations on proposals and a more in-depth look into FGIS financial 
information as it relates to fees, visit: https://goo.gl/6ZSKlq

   The NGFA and NAEGA recommendations could help reduce inspection costs, which 
would benefit farmers and end users. Inspection fees are costly and, in the 
end, are passed down to the farmer in the price he receives for his grain. Any 
savings can help not only a farmer's bottom line, but everyone in the chain of 
transporting grain to its final home.

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow Mary Kennedy on Twitter @MaryCKenn

   

******************************************************************************
New Water Resources Bill Jumps First Hurdle

   Aging locks and dams on U.S. river systems have been a problem for shippers 
for quite a while, but hopefully recent action in Washington, D.C., will soon 
start money flowing toward repairs.

   In an effort to get back to the pattern of passing water resources bills 
every two years, Congress geared up for a Water Resources Development Act 
(WRDA) in 2016. The WRDA is new legislation that provides critical investment 
in water infrastructure and includes support for water reuse. It was introduced 
in the Senate April 26 and passed by the Environment and Public Works (EPW) 
Committee April 28 by a vote of 19-1. The WRDA 2016 bill is expected to come up 
for the full Senate to vote on in May.

   Included in the WRDA is $4.5 billion for U.S. Army Corps of Engineers 
(USACE) water resources projects, including $1.65 billion for two Corps 
flood-control projects in California, one in West Sacramento and the other in 
the American River watershed. In addition, there is $4.852 billion allotted for 
drinking water and clean water infrastructure. 

   The previous bill, passed in 2014 with enormous bipartisan support, 
authorized USACE to perform various water-related, water resources projects, 
but had no authorization of funds for drinking water and clean water.

   U.S. Senators Jim Inhofe, R-Okla., chairman of the EPW Committee, and 
Barbara Boxer, D-Calif., ranking member of the Senate EPW Committee, introduced 
the 2016 legislation, which is the main vehicle for authorizing water projects 
to be studied, planned and developed by the U.S. Army Corps of Engineers. It is 
also the legislative vehicle for implementing policy changes with respect to 
the Corps' water resource projects and programs. The bill did not, as expected, 
include lockage feeds or tolls to finance public-private water projects.

   Waterways Council, Inc., President/CEO Michael J. Toohey issued this 
statement regarding Thursday's mark-up and passage of the Water Resources 
Development Act 2016 by the Senate Environment and Public Works Committee: "We 
thank Chairman James Inhofe and Ranking Member Barbara Boxer for their 
collaborative efforts to develop a WRDA 2016 bill that addresses inland 
waterways system priorities. Particularly, we applaud the committee's rejection 
of lockage fees/tolls to finance public-private partnerships (P3s) on the 
nation's waterways. WCI is also supportive of the Senate bill's authorization 
of $16.7 million in modification work for Calcasieu Lock in Louisiana, and for 
the Brazos Island Harbor project (funded with $116 million Federal and $135 
million non-Federal funds). 

   "We also applaud the provision to remove Inland Waterways Trust Fund capital 
projects from the five-year/no funding de-authorization rule until Olmsted is 
substantially off the books. [Editor's note: Olmsted Locks and Dam is on the 
Ohio River, on the border between Illinois and Kentucky.] We appreciate the 
return to regular order of WRDA bills every two years. We look forward to 
working with Senators Inhofe and Boxer, and all Senate members, to adjust the 
threshold for major rehabilitation as recommended by the Inland Waterways Users 
Board and the Capital Development Plan. A modern, efficient inland navigation 
system is a critical link in the transportation supply chain, ensuring U.S. 
competitiveness in world markets."

   AGING MISSISSIPPI RIVER LOCKS, DAMS IN DIRE NEED OF FUNDS

   It is no secret that the lock and dam infrastructure on the Mississippi 
River and its tributaries are in dire need of substantial investment in both 
repair and modernization. It is especially obvious every time there is severe 
flooding. In 2015, the river was inundated by two severe floods -- one in the 
summer and one at the end of the year lasting into early 2016. Not only are the 
aging locks and dams stressed by the high water, but the shoaling that is left 
behind by floods can be a danger to barge traffic until the USACE can dredge 
the areas affected. 

   In addition to shipping delays, flooding along the Mississippi River 
displaces wildlife. The National Wildlife Foundation said, "For hundreds of 
miles along the Mississippi River, 'battures' no more than a half-mile wide 
provide refuge for all sorts of animals, even in cities such as New Orleans and 
Baton Rouge. Rising river waters have forced many animals up onto the levees 
and over it into communities." The dictionary defines the term battures as 
applied, principally, to certain portions of the bed of the Mississippi River, 
which are left dry when the water is low, and are covered again, either in 
whole or in part by the annual swells. 

   The Upper Mississippi River Basin Association (UMRBA) is a regional 
interstate organization formed by the governors of Illinois, Iowa, Minnesota, 
Missouri, and Wisconsin to coordinate the states' river-related programs and 
policies and work with federal agencies that have river responsibilities.

   On April 22, Dru Buntin, executive director of UMBRA sent a letter to the 
U.S. Senate Committee on Environment and Public Works and U.S. House of 
Representatives Committee on Transportation and Infrastructure thanking them 
for their commitment to improving the nation's water resources by "undertaking 
a new water resources development act." 

   "The Upper Mississippi and Illinois River system is an incredibly valuable 
commercial transportation corridor that directly connects the Midwest to 
international markets, lowering input costs for manufacturing, energy, 
agriculture, and other economic sectors while also facilitating exports. It is 
a tremendous ecological treasure that draws in $17.1 billion annually in 
revenue from tourism and outdoor recreation while also supplying affordable 
drinking water to many of our residents," said Buntin. 

   Buntin added, "The states further recognize that the river is an economic 
engine for the national economy and plays a key role in achieving international 
food security, moving at least 60% of the nation's corn and soybean exports. 
The river is a critical component of the national surface transportation system 
and provides a highly valuable corridor for important migratory fish and 
wildlife habitat."

   The lack of inadequate federal investment in the inland waterways system has 
been controversial for years. Buntin said, "There is an incredible, 
longstanding discrepancy between the Upper Mississippi's contributions to the 
Inland Waterways Trust Fund and the return investment in the region's 
navigation infrastructure. In addition, Upper Mississippi lock and channel 
maintenance is consistently underfunded. Given the tremendous need for the 
Upper Mississippi to remain a functional transportation corridor, Upper 
Mississippi stakeholders are concerned about the future state of the 
infrastructure."

   UMRBA has urged the administration, Congress, industry, and other key 
stakeholders to identify and explore innovative financing and project delivery 
approaches where appropriate to maximize infrastructure investment on the 
waterways. 

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow her on Twitter @MaryCKenn

******************************************************************************
Industry Still Seeks Clarification on Implementing SOLAS VGM Amendment

   With just a little over two months remaining before new rules for verifying 
the weight of shipping containers before they are loaded onto cargo ships go 
into effect, agricultural-product and other shippers still have many answered 
questions about how the new system will be enforced.

   The International Maritime Organization (IMO) is a specialized agency of the 
United Nations responsible for developing and maintaining a comprehensive 
regulatory framework for worldwide shipping. In May of 2014, the IMO amended 
the Safety of Life at Sea (SOLAS) rules to require, as a condition for loading 
a packed container onto a ship for export, that the container has a verified 
gross mass (VGM). 

   Effective July 1, 2016, any shipping container leaving from any port in the 
world must be accompanied by a shipping document signed either electronically 
or in hard copy by the shipper on the bill of lading listing the VGM of a 
container in order to be loaded onto a ship. After that date, it would be a 
violation of SOLAS to load a packed container onto a vessel if the vessel 
operator and marine terminal operator do not have a verified container weight.

   The SOLAS amendment, which will apply globally, provides two methods 
shippers may use to determine the container weight once the container packing 
process has taken place. Method one is weighing the whole container after it 
has been packed. For example, weighing the whole truck and container at 
certified weighbridge and subtracting truck and chassis weight. Method two is 
weighing all cargo and contents of the container individually, and adding those 
weights to the container's tare weight and factor in additional loading 
equipment weight, if any. 

   Shippers, freight forwarders, vessel operators, and terminal operators will 
all need to establish policies and procedures to ensure the implementation of 
this regulatory change. (A freight forwarder, forwarder, or forwarding agent, 
is a person or company that organizes shipments for individuals or corporations 
to get goods from the manufacturer or producer to a market, customer or final 
point of distribution.)

   The problem facing the industry right now is that nobody really knows all 
the answers as to who is responsible for the official VGM. Midwest Shippers 
Association (MSA) Executive Director Bruce Abbe told me, "There is still a 
pretty alarming lack of communication and clarification from the ocean carriers 
on a practical, implementation level as to how this is to happen through the 
supply chain.

   "We are now only 70 days today out from when the rule is to go into effect 
across the globe -- when shippers must file a verified gross mass weight of the 
loaded containers when booking shipping. There is still a pretty alarming lack 
of communication and clarification from the ocean carriers on a practical, 
implementation level as to how this is to happen through the supply chain.

   "It's a pretty fluid situation," said Abbe. "Unless we get some clear, 
doable procedures in place for executing this, we could definitely see some 
major congestion and disruptions at some ports, and some significant added, 
unexpected costs for shippers. But frankly, there is no reason for this to 
happen. If the carriers just get the systems filing information out there, and 
if they clarify a few procedures and rules (like tolerances) there is no reason 
this can't be accommodated without any problems.  

   "It's important to remember, for the most part shippers are providing the 
key weight information of their container cargo now when submitting their 
shipping instructions," Abbe added.   

   Mike Hajny, vice president of Wesco International, Inc., a hay exporter in 
Ellensburg, Washington, agreed. He told me since they already weigh all their 
cargo at their facility, "It isn't a huge issue for us."

   Hajny added, "One concern is if steamship lines will accept the empty 
container weight printed on the door, or will insist on an actual physical 
weight of the empty container. At this time, it appears they will all accept 
the door weight. If this is the case, the reporting will be a non-issue for us 
given our extensive and detailed database system. This will require another 
layer of data reporting to steamship lines, but it appears it will be 
manageable for us."

   CONFUSION: WHO IS RESPONSIBLE FOR THE VGM?

   According to IMO SOLAS guidelines, the new SOLAS amendment spells out 
clearly that the shipper of a container shall ensure the verified gross mass is 
stated in the shipping document. "The shipping document shall be signed by a 
person duly authorized by the shipper and submitted to the master or his 
representative and to the terminal representative sufficiently in advance, as 
required by the master or his representative, to be used in the preparation of 
the ship stowage plan."

   The amendment clearly states that if the shipping document, with regard to a 
packed container, does not provide the verified gross mass and the master or 
his representative and the terminal representative have not obtained the VGM of 
the packed container, it shall not be loaded onto the ship.

   Abbe told me there is "implied liability" in these rules that would seem to 
put that liability all on the shippers. "The shippers have always been prepared 
to submit the weight of their cargo (we do now) ... but don't feel we should 
have to submit (have liability) for the combined, added weight of the container 
equipment ... which the carriers own," said Abbe. "Testing has shown that the 
posted "TARE weight" on the sides of containers are often off from actual 
weight. The equipment often has been repaired changing actual weight, or it 
just wasn't accurate. While that may seem like what should be a minor 
difference, the carriers simply haven't specified any acceptable tolerance 
levels here in the U.S."   

   HOW WILL AG SHIPPERS BE AFFECTED?

   Most ag shippers will use "method 2" set by the IMO, Abbe said, whereby they 
determine the weight of their cargo and add in the weight of the container and 
submit the combined VGM. Abbe said the carriers should be doing this themselves 
but "don't expect it; they'll keep the onus on the shippers if they can."

   "For many grain, soy and DDGS export container shippers, it ought to be 
relatively easy to submit a 'verified' cargo weight because ag/grain elevators 
and facilities use a certified weighing scale, already," said Abbe. "Not all 
other container shippers have this to use." Abbe added, "Identity preserved 
(IP) soybean exporters like many MSA members that load bags or super sack 
totes, also know the weight of their cargo now. When they load them at their 
plant, they're sure of what they load."

   However, Abbe noted that bulk grain, DDGS, and soy exporters that ship rail 
cars to the coasts where it is transloaded into containers, face some added 
challenges. "The actual container is loaded by someone else, a logistics 
service provider. So, since the shippers are to be held responsible -- but 
someone else is loading it -- I see a likely need for some amended language in 
service contracts to clarify these matters. This is one of big concerns; such a 
lack of information on how to implement this so close to deadline."

   "Our MSA grain transloader members also have scales and can and do provide 
weights now in existing processes. But, again, what constitutes 'verified' in 
their eyes has folks concerned."

   For most grain container shippers, the max weight is determined by federal 
highway trucking weight limits, and those are well below what the max is for 
the ocean carriers and railroads. "But for some who may have their grain loaded 
near a rail ramp or port that may be in a 'heavy weight' trucking corridor, 
they will need to make sure they are within the allowed weight levels. No one 
should be overloading -- now or after July 1. But terminals now do check 
weights and at times catch and reject some, as they should," Abbe said.

   What are the tolerances? "There hasn't been any announcement of recommended 
tolerances yet that I am aware of for the U.S.," said Abbe. "Ag products, grain 
in containers, chilled products, often will see small weight changes for 
moisture that can develop while in route in containers when going through rain, 
humid or dry conditions. 

   "Hong Kong, the U.K., and Japan have set a plus-or-minus 5% tolerance level, 
while India has adopted a weight tolerance of plus or minus 200 kilograms (441 
pounds), according to the Journal of Commerce," added Abbe. "That would be 
considered very doable here for ag shippers. But no indication yet."

   For anyone unaware of all this and then sends containers that arrive at the 
terminals without a VGM filed on July 1, there does not seem to be any 
consistency or clarity as to what will happen. "And, it appears to be different 
at different ports," Abbe said. "We know it will be a "No VGM/No load" 
situation; the container won't be loaded on the vessel.

   "Some port terminals have said they'll stop the containers at the gate if 
they don't have a VGM. So the trucker and shipper/forwarder will have to figure 
something else out. Take it somewhere undetermined or figure out how to get a 
verified weight done and submitted. Other ports have said they'll let the 
container in and will hold it somewhere on the side for a period of time. There 
are likely demurrage costs coming in those situations; notable cost penalties," 
said Abbe.

   "Our concern at this point is that we are getting too close to the deadline 
time for these procedures to not only not be communicated to the whole supply 
chains that serve these carriers, but also to not have their actual 
implementation procedures put in place." Abbe told me that according to the 
American Shipper poll, nearly 60% indicated they did not understand how to 
comply with the VGM rule.

   "We are expecting most carriers will enable an electronic data information 
(EDI) system to be put in place. At least three software providers for shipping 
documentation filings that freight forwarders use are developing VGM filing 
means. And carriers presumably will offer something like this in their own 
booking systems, but it hasn't come out yet."

   Abbe said that an MSA forwarder member told him this past week that he has 
asked eight carriers when their systems for VGM filings will be out, and they 
all said, "When we know, we'll let you know."

   A friend of mine who brokers ag containers told me that, basically, the new 
regulation is another layer of reporting and time requirements. He said that 
when you add it to security requirements and the compliance to the new FSMA 
rules, it all conspires to make things more difficult to export. He told me, "I 
am glad I am getting close to retirement."

   Mary Kennedy can be reached at mary.kennedy@dtn.com 

   Follow her on Twitter @MaryCKenn

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