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Market Matters Blog           10/01 13:28
CFTC Fines Two Grain Trading Operations
Low Water, Lock Repairs Cause Shipping Delays
Perspective on China's Big Soybean Buy
Possible Rail Shutdown Threatened if Safety Law Extension Not Granted
FSA Acreage Debacle
Heavier Loads on the Roads? 
Railroads Respond to STB Requests to Provide Service Outlook
2014-15 Crop Year Ends For Corn, Soybeans, Spring Wheat Basis
STB Needs to Make Timely Decision on Revenue Adequacy, Grain Rates
A Windshield Tour

CFTC Fines Two Grain Trading Operations

   The Commodities Futures Trading Commission publicized two enforcement 
actions against physical grain trading operations in the past week. The total 
price tag: Just shy of $1 million dollars. 

   In the first, announced last week, CFTC ordered Cargill's Mexico branch to 
pay a $500,000 fine for executing wash trades between March 2010 and August 

   In the second, announced Wednesday, grain merchandiser Alfred C. Toepfer 
International was ordered to pay a $400,000 fine for inaccurately reporting its 
physical positions in grain markets. The misstatements occurred before ADM 
acquired Toepher in 2014. 

   CFTC sends out emails almost daily listing enforcement actions, but they're 
most commonly for issues like commodity pool fraud, brokers operating without 
the proper licenses and such. 

   When you take into account last April's charges that Kraft Foods manipulated 
the soft red winter wheat market, clearly, the commodities market regulator is 
focusing on anti-competitive practices across the spectrum of market 

   In the case against Cargill de Mexico, CFTC alleged that it "engaged in wash 
sales and unlawful non-competitive transactions in certain agricultural futures 
products, including corn, soybeans, and wheat on the CBOT, as well as in hard 
red wheat traded on the KCBT," a CFTC press release stated. "Before orders for 
these trades were entered on an exchange, Cargill de Mexico employees, either 
acting alone or with another employee, entered equal and opposite transactions 
in the same futures contract for another account that was also owned by Cargill 
de Mexico, and matched the product, quantity, price, and timing of those orders 
and trades. The Order finds that by so prearranging, structuring, and entering 
these orders, which negated the risk incidental to an open and competitive 
marketplace, Cargill de Mxico also engaged in noncompetitive transactions."

   In addition to the fine, CFTC ordered Cargill de Mexico to improve training 
for employees on compliance and ethics as well as submit reports on how it's 
preventing these kinds of uncompetitive practices from occurring. 

   The tone of the Toepfer enforcement press release was a little different. 
CFTC seemed to sing the company's praises for replying quickly, cooperating and 
"instituted remedial action to strengthen the internal controls and policies 
relating to the preparation of CFTC Form 204 reports."

   Form 204 reports show the composition of fixed price cash positions in each 
commodity that a company hedges, and CFTC uses it to check compliance with 
speculative position limits.  

   "The Order finds that during the period from at least May 2010 through 
December 2013, Toepfer held reportable positions in Form 204 commodities and 
was required to file Form 204 reports showing the quantities of the fixed price 
purchase and sale open cash positions of such commodities it hedged. The Order 
further finds that during the period, Toepfer filed 44 Form 204 reports with 
the CFTC that did not accurately state the quantities of Toepfer's fixed price 
cash positions of each such commodity it hedged.  

   "Specifically, the Order finds that Toepfer included in its Form 204 reports 
both basis and fixed priced cash positions. Toepfer, thereafter, submitted 
corrected Form 204 reports and displayed significant cooperation during the 
CFTC's investigation of the matter."

   So what's the take away for farmers and agribusinesses? CFTC may not act 
swiftly, but they're monitoring both speculative and commercial traders for 
engaging in practices that skew the market.  

Low Water, Lock Repairs Cause Shipping Delays

   As the gut slot of harvest nears, farmers who rely on hauling their grain to 
a river terminal could face added costs and storage issues. Low water and 
construction are hampering river traffic in many areas and barge loadings may 
continue to be compromised if these conditions don't improve.

   In early July, heavy rains overburdened the Illinois River system, the 
center area of the Upper Mississippi River, and the Upper Mississippi River 
between St Louis and Cairo. Flooding conditions existed in these three problems 
areas for weeks, which led to slowdowns in barge traffic and some river traffic 
closures. At the end of July, waters started to recede, but by then barges were 
behind in delivering shipments to the Gulf. River terminal corn basis dropped 
nearly 20 cents between the first and fifteenth of July and barge freight was 
either not quoted or was lower.

   Fast forward to September 24 and low water is now bothering barge traffic 
and causing corn and soybean basis levels to weaken at affected river 
terminals. Tom Russell, co-owner of the Russell Marine Group told DTN via 
email, "Water levels on the Lower Mississippi are still relatively low but 
recently holding steady. A safety zone remains in effect at mile 480-490 where 
several groundings did occur earlier in the month. There have not been any 
additional groundings, but transit through this area is currently restricted to 
daylight only. A dredge will be on location to clear up the shoaling from Sept 
23 to Oct 7. Some off-and-on closures will take place during this time period.

   "Some shoaling has occurred on the Upper Mississippi between St Louis and 
Cairo that has required some dredging operations. Dredging operations are 
currently taking place at mile 48 until Sept 30. Barge traffic is allowed to 
transit through the area at slow speed," added Russell. "The New Orleans and 
Baton Rouge Harbor is also experiencing low water levels. Ocean vessel and 
barge traffic are moving but some shoaling is occurring alongside some terminal 
docks." Ceres Barge Line noted on their daily freight wire to DTN, "Drafts are 
being cut in St. Louis and south as river stages are working their way lower 
and no rain in sight." Water levels at St. Louis are at 9.3 feet and expected 
to drop to 4.7 feet or lower by October 8.

   Barge operators have reported shippers seem to have enough freight in front 
of them, but it is tough getting empties on the Illinois and Mid-Mississippi 
rivers. This may worsen as low water and delays due to repairs may limit the 
barge supply to certain areas.


   Ingram Marine's website posted Sept. 24, that on the Mid/Lower Ohio, "Lock 
52 main chamber was closed as of 9/14/15 and will be closed until 9/25/15 for 
lock and dam sill repair. While the auxiliary chamber will be available, major 
delays are occurring. Lock 52 auxiliary chamber will be closed for repair 
10/5/15 to 10/19/15, but the main chamber will be available and delays are 
expected. Lock 53 is not operating, but is expected to open by Friday, 
September 25." 

   The U.S. Army Corps of Engineers (USACE) said on their website, "USACE Lock 
52 and another nearby lock were built in 1929 and are scheduled to be replaced 
by the Olmsted Locks and Dam project in 2018, with the cost put at $3 billion. 
Olmsted will replace locks and dams 53 and 52 and greatly reduce tow and barge 
delays through the busiest stretch of river in America's inland waterways. 
Locks and Dams 52 and 53, in the lower portion of the river, are remnants of 
the original 1929 river navigation system. The highest tonnage in the nation 
passes through Lock and Dam 52. Locks and Dams 52 and 53 on the lower Ohio 
River are the last of the old wicket dams. The wickets are constructed of heavy 
timber about 4 feet wide and up to 20 feet long. Raising or lowering the 
wickets is done by a crew on a steam boiler winch barge and track hoe that 
moves along the upstream face of the dam." 

   Martin Hettel, a senior manager with AEP River Operations, a large inland 
river vessel operator told the Wall Street Journal there was a bottleneck of 72 
tow boats and 757 barges on September 20. Hettel said, "AEP had seven of its 
own tow boats waiting in the snarl, moving about 105 barges, mainly of grain." 
According to the USACE, both locks were expected to fully reopen by Friday, 
Sept. 25, but delays will continue to be an issue. 

   "Tows waiting to pass through Locks 52 and 53 are experiencing four- to 
five-day delays," Russell said, which are causing exporters at the Gulf to 
become concerned about loading waiting vessels in time for scheduled shipments. 
Basis on the Ohio River has been weaker with corn basis dropping over 20 cents 
so far and soybean basis over 8 cents for the week ended Sept. 25. However, 
both Gulf soybean and corn basis levels have been firm, hoping to entice grain 
to move south of the dredging and lock delays.

   But the Gulf is not without its problems. Russell told DTN, "The New Orleans 
and Baton Rouge Harbor is also experiencing low water levels. Ocean vessel and 
barge traffic are moving but some shoaling is occurring alongside some terminal 

   Mary Kennedy can be reached at

   Follow her on Twitter @MaryCKenn

Perspective on China's Big Soybean Buy

Chinese buyers agreed to purchase 484 million bushels of soybeans for a little 
more than $5 billion at a contract signing ceremony in Iowa on Thursday.    
That's a lot of beans -- about 17% of what USDA thinks China will import in the 
2015-16 marketing year. 

   "There is a lot about this sale that I don't understand," one reader wrote 
to me. "Why such a large sale now? If my math is correct, that comes out to 
$10.95 per bushel. Cash beans in my area are $8.40ish. I could just be naive 
about international sales but it seems weird to me, weird in the sense of the 
timing. If we are going to have such a large crop soon there should be an 
abundance of cheaper beans in the near future. How long has this sale been in 
the works? Are they fearful of supply, or just ensuring a reliable supply? I 
don't keep track of what international buyers typically pay for soybeans. Is 
this a cheap buy right now for them? Maybe they anticipate the low is in and we 
are set for a rally?"

   I love a good, complex question.  

   I think there are several important points to keep in mind. 

   First, there's a strong ceremonial aspect to China's culture. I've been to 
several of these signing ceremonies in the past and they are very formal. 
Important people give speeches. A representative from a U.S. grain company sits 
next to someone from Chinese company. They're introduced to the audience, sign 
a contract and shake hands. Rinse and repeat, until everyone has had a chance 
to sign and shake hands. Then they pass around champagne and have a toast. I'd 
say less than half actually drink it. It's more about the tradition of 
celebrating success by raising a glass of fizzy white wine and hearing it clink 
against your friend's glass. 

   These signing ceremonies recognize and honor the successful U.S.-China trade 
relationship. It's as much of a cultural exercise as a business deal. 
Relationships are at the heart of trade, and this is one way the soybean 
industry recognizes and respects our relationship with China. 

   There were 24 agreements signed yesterday. Some of them were actual 
contracts with all of the specific terms (price, quantity, deliver date, etc.) 
figure out, but others were framework agreements that left a lot of the details 
to be determined at a later date. The actual sales and shipments of the beans 
bought on Thursday will likely be spread throughout the 2015-16 marketing year. 
So while this was a large one-day event, this isn't going to impact the market 
all at once.  

   As for the difference in prices, it's important to remember end users pay 
more for grain than farmers are paid at their local elevators because there's a 
cost involved with shipping grain halfway around the world, hence the 
difference between the purchase price and a farmer's cash grain bid.  

   Transportation makes up about 20% of the total customers in China pay for 
grain, according to this Soy Transportation Coalition chart 

   So, to my reader's question, does the magnitude of this sale -- it's the 
largest in price and volume ever -- reflect the Chinese perspective on global 
soybean supply? 

   According to the latest supply and demand report, USDA thinks China will 
import 79 million metric tons of soybeans in 2015-16, about 2 mmt more than 
they bought the year prior. Now, that's not 79 mmt from us, the world's second 
largest soybean exporter. That's from everywhere. 

   Chinese companies agreed to buy 13.1 mmt from the U.S. on Thursday, or 
almost 17% of what USDA thinks China will buy this year. That's an impressive 
amount for a one-day sale. 

   Low prices tend to spur new demand. One thing we know about China is that 
its burgeoning middle class is eating more meat, and as Chinese farmers raise 
more hogs and poultry, they feed more soybean meal. It also means higher demand 
for vegetable oil. This has led to an excess of crush capacity in China.

   China has the capacity to crush 130 mmt of soybeans each year, but it only 
crushed 71 mmt in the 2014-15 marketing year, according to a USDA report from 
earlier this year ( That means businesses are very 
confident, and invested, in continued growth. Low prices give them an 
opportunity to utilize some of this excess capacity. 

   Crush margins -- the difference between what companies pay for beans and 
what they earn from selling the meal and oil -- are also expected to stay 
positive this year. According to an article on, margins for the 
second half of the year are expected to average $15 per metric ton. While 
that's down from the $30 per ton they received in the first half, it's an 
improvement from last year's narrow margins. ( 

   China is making money with beans at these prices, and apparently, they think 
the profit margins are good enough to commit to lock in 17% of what they're 
likely to buy this year. 

   So, back to my reader's question: "Are they fearful of supply, or just 
ensuring a reliable supply?" 

   I don't think China is worried about running out of beans to buy, unless 
they know something I don't. USDA's currently forecasting global ending stocks 
for 2015-16 at almost 85 mmt with a stocks-to-use ratio of 27.4%. Brazil is 
expected to grow -- and is starting to plant -- a crop that's several million 
metric tons larger than last year's bin-buster. All indications point to a 
bounty of beans. 

   With a healthy crush margin on the table, I lean towards thinking China's 
just trying to ensure they have reliable supply of high-quality U.S. beans. But 
then again, does anyone really know what China's thinking?

Possible Rail Shutdown Threatened if Safety Law Extension Not Granted

   MINNEAPOLIS (DTN) -- The deadline for U.S. railroads to install a new 
federally mandated system of safety measures is only a few months away. But 
with most railroads still a year or more away from implementing the new system, 
some members of Congress and agriculture groups are concerned that if the 
deadline isn't met, railroads will stop rail service and cease hauling 
commodities and other products.

   The Rail Safety Improvement Act of 2008 mandated that positive train control 
(PTC) be implemented across a significant portion of the nation's rail industry 
by Dec. 31, 2015. PTC are integrated command, control, communications and 
information systems for controlling train movements with safety, security, 
precision and efficiency. Now, as that deadline looms, some in Congress are 
concerned if railroads don't meet the deadline they will stop rail service 
and/or cease hauling certain commodities affected by the PTC rule, which would 
be detrimental to agriculture.

   Besides agriculture, passenger rail service could also be negatively 
affected if the PTC rule deadline stands. Positive train control is required by 
federal law to be in place on all Class I railroads and other railroads 
carrying passengers by the end of the year. Some railroads are already warning 
they will stop service due to the deadline.  

   Sen. Claire McCaskill, D-Mo., said on her website, "Amtrak has notified the 
Kansas City Terminal Railway of its intention to discontinue passenger service 
into and out of Kansas City starting next year if the matter of how to pay for 
PTC on the railway's 85 miles of track is not resolved. Last year more than 
737,000 people traveled on Amtrak in Missouri." McCaskill added, "There's no 
way Amtrak or Missouri can pay $30 million for this."

   In a Jan. 28 hearing, U.S. Senator John Thune, R-S.D., chairman of the 
Senate Committee on Commerce, Science and Transportation, said, "Although the 
PTC deadline is quickly approaching, it remains unattainable. Through the end 
of 2014, railroads have invested over $5 billion in PTC, and they expect to 
spend billions more in the coming years," according to his website.

   "They have begun installation of the radio towers, locomotive technology, 
and other PTC infrastructure, but full compliance with the statutory 
requirements cannot be achieved by the end of this year. The FRA and the 
Government Accountability Office have documented the immense technical and 
programmatic challenges with implementing PTC," said Thune.

   Then, during a Senate committee hearing held September 15 for Sarah 
Feinberg's nomination as administrator of the Federal Railroad Administration 
(FRA), Thune and other members of his committee told Feinberg that some 
railroads have already said they will shut down service on January 1, 2016, 
unless a compromise is reached. According to various news sources, Feinberg has 
been clear that the FRA will enforce the current deadline and will fine 
railroads that are not in compliance.

   In a letter to Thune, Carl R. Ice, president and CEO of BNSF said, "Despite 
our strong commitment to this technology, BNSF has faced significant technical, 
regulatory and operational obstacles to meeting the PTC implementation deadline 
imposed, the RSIA and will not meet the RSIA deadline for deployment. As a 
result, BNSF believes that Congress must move the PTC deadline in order to 
achieve successful PTC implementation and to avoid potential significant and 
unnecessary congestion and shipper service impacts.

   "We have analyzed what train operations could continue if operations are 
halted on mandated subdivisions without PTC installed and believe that 
operations across our entire network will likely be compromised by congestion 
and effectively shut down. BNSF would do whatever is reasonably possible to 
mitigate this impact, but the consequences for the economy and for our company 
would be substantial," said Ice.

   Mike Steenhoek, executive director of the Soy Transportation Coalition told 
DTN in an email, "This is an issue that is causing concern among agricultural 
shippers. Once the calendar turns to 2016, will railroads be able to fully 
accommodate soybeans and grain produced from the 2015 harvest? Moreover, as we 
know, many cooperatives have made/are making plans to receive and distribute 
fertilizer for spring of 2016. In order to conduct this planning, cooperatives 
require a predictable forecast for rail service. The lack of resolution to the 
PTC debate is creating uncertainty. 

   "There are a number of significant headwinds currently confronting U.S. 
agriculture -- from low commodity prices to the strengthening of the U.S. 
dollar.  This is certainly not the time to add insult to injury by allowing 
such a self-imposed problem to materialize," Steenhoek added.


   On Sept. 4, the U.S. Government Accountability Office (GAO) released a study 
on the issue, finding that, "Most railroads in GAO's review (20 of 29) estimate 
that they will implement positive train control (PTC) -- a communications-based 
system designed to prevent certain types of train accidents -- one to five 
years after the statutory deadline of Dec. 31, 2015 (three did not have an 
estimated completion date). Of the remaining six railroads, one was exempted 
from installing PTC based on limited speeds on its track, and four commuter 
railroads and one small freight railroad estimate they will have PTC 
operational on their own tracks by the deadline.

   "However, the ability of these five railroads to fully operate with PTC may 
be affected because other railroads that operate equipment on their tracks -- 
known as tenants -- or that own tracks that they operate on -- known as hosts 
-- may not be equipped with PTC. In addition, the ability of railroads to meet 
the deadline may be affected by the interoperability of their PTC system with 
those of other railroads and whether they can obtain final system approval from 
the Federal Railroad Administration (FRA). Railroads GAO interviewed said they 
continue to face implementation challenges."

   The report added, "GAO recommends that FRA develop a plan that outlines how 
the agency will hold railroads accountable for making continued progress toward 
the full implementation of PTC by, among other things, collecting any 
additional information needed to track progress of individual railroads. DOT 
agreed with the recommendation."

   While there are some who feel the railroads have had enough time to 
implement PTC, there are others who know some railroads could hold true to 
their threats. Farmers and grain shippers are concerned if rail service slows 
or stops on some lines as of Jan. 1, 2016, there could be another economic 
disaster similar to 2014 if the PTC deadline is not extended.  

   Mary C. Kennedy can be reached at 

   Follow her on Twitter @MaryCKenn

FSA Acreage Debacle

   Numbers junkies were thrown for a loop this morning when USDA erroneously 
published the last year's Farm Services Agency acreage data instead of this 
year's data. 

   Historically, FSA's prevent plant acreage estimates grow from month to month 
as they receive updated information from farmers. The market, and Twitter, 
reacted when the numbers unexpectedly showed a decline in corn prevent planted 

   But when the dust settled and FSA released the correct data set shortly 
after 9 a.m. CT, the numbers conformed to historical trends. Prevent plant corn 
acres inched up slightly to 2.35 million from 2.30 last month. Soybean 
prevented planting acres grew to 2.22 ma from last month's 2.17 ma. 

   The confusion, and irritation, over this morning's debacle is just a new 
chapter in the conversation about how this particular release fits into the 
bigger picture of acreage estimates. It's important to remember that FSA used 
to only release this information when the data was final at the end of the 
year. The agency switched to a monthly release in 2011. 

   USDA's National Ag Statistics Service (NASS) incorporates FSA's acreage data 
into its corn and soybean estimates in the October Crop Production because 
that's when it feels FSA's numbers have reached a level of statistical 

   However, the two agencies operate on different definitions, so FSA's numbers 
don't directly translate to changes into NASS's acreage estimates. Lance Honig, 
who leads NASS's crop statistics branch, explained in a memo (that you can find 
here: how the categories differ. 

   "The FSA categories 'acres planted' and 'acres failed' represent acres 
actually planted to each specific crop, and combined are comparable to the NASS 
planted acreage definition. The FSA category 'acres failed' also serves as a 
minimum level of abandonment and is useful to NASS in establishing harvested 
acreage estimates. The FSA category 'acres prevented planted' is helpful in 
understanding current conditions, but does not directly correspond to any NASS 
acreage estimates." 

   It's important to not read too much into these numbers. At best, they lend 
numbers to conversations about this spring's planting challenges and can help 
gauge trends. At worst, I've seen them over used to try to make an overly 
bullish or bearish argument about how "off" NASS's acreage numbers. 

   The bottom line: Don't read too much into these numbers, especially with the 
Grain Stocks report and updated Crop Production estimates coming our way soon.  

Heavier Loads on the Roads? 

   MINNEAPOLIS (DTN) -- Individual states could decide whether to raise the 
maximum allowable weight for freight-shipping trucks from the current 80,000 
pounds to 91,000 pounds under a bill introduced in the U.S. House on Sept. 10.

   U.S. Representative Reid Ribble, R-Wis., who introduced the Safe, Flexible, 
and Efficient (SAFE) Trucking Act, stated in a press release last week that the 
bill "would allow our freight shipping industry to be more efficient while 
creating less pavement wear and tear and improving safety on our shared roads 
and bridges." (

   The National Grain and Feed Association supports the bill and said in a 
press release that the SAFE Trucking Act would mean more efficient grain 
transportation by allowing trucks to carry an additional 11,000 pounds of 
weight on federal highways while adhering to U.S. Department of Transportation 
safety guidelines.

   "Federal highway truck weight limits currently are lower than most state 
road weight limits, and this inconsistency presents obstacles to efficient 
movement of U.S. grains," said NGFA Director of Economics and Government 
Relations Max Fisher. "Congressman Ribble's bill would improve this situation, 
taking better advantage of our Interstate highway system infrastructure while 
still protecting highway safety." 

   The dairy industry, in a press release, said they also welcomed the 
legislation. "IDFA (International Dairy Foods Association) thanks Congressman 
Ribble for his leadership on an issue that is vitally important to the makers 
and marketers of dairy products and the many other industries relying on trucks 
to move goods to market, as to those who share our highways with them," said 
Connie Tipton, president and CEO of IDFA. 

   In February 2015, the Soy Transportation Coalition (STC) published an update 
of an earlier 2009 report that analyzed the impact of increasing semi weight 
limits on federal roads and bridges from an 80,000-pound, five-axle 
configuration to a 97,000-pound, six-axle configuration. The STC said in their 
report: "If supply of trucking is not keeping pace with demand for trucking, we 
need to find safe and responsible ways to increase trucking capacity."

   The study, funded by the soybean checkoff, noted that, "The impact on roads 
of a six-axle, 97,000-pound semi is less than a five-axle, 80,000-pound semi. 
Most research has found that stress to bridges depends more on the truck's 
total load than the number of axles."

   The study also noted, "For transporting soybeans and soy products, allowing 
six-axle, 97,000-pound semis will result in 1.2 million fewer truck trips, 5.5 
million fewer gallons of fuel consumed, 56,000 fewer tons of carbon dioxide 
emissions, and between $11 million to $28 million in reduced fuel costs. 
Allowing six-axle, 97,000-pound semis will enable farmers to transport at 
minimum an additional 183 bushels of soybeans per load. By 2022, this will 
annually save soybean farmers 602,000 truck trips, 1.7 million gallons of fuel, 
and between $4 million to $8 million in reduced fuel costs."


   In June 2015, the U.S. Department of Transportation (DOT) released a report 
examining the impacts of increasing current federal truck size and weight 
limits. The DOT said it needs more data to determine the safety ramifications 
of allowing heavier trucks on the nation's roads. Various news agencies 
reported that in a June 5 letter to Congress, DOT Under Secretary for Policy 
Peter Rogoff said the research for the study "revealed very significant data 
limitations that severely hampered the Federal Highway Administration's efforts 
to conclusively study the effects of the size and weight of various truck 

   Rogoff added, "As such, the department believes that no changes in the 
relevant truck size and weight laws and regulations should be considered until 
these data limitations are overcome." DOT recently stated that public comments 
must be submitted by Oct. 13 to be considered for inclusion in the MAP-21 
Comprehensive Truck Size and Weight Limits Study Report, which will be 
submitted to Congress. (MAP-21 is a 2012 transportation funding bill.)

   According to the Association of American Railroads (AAR), "The study noted 
that if federal truck weights were increased to 91,000 pounds, more than 4,800 
bridges would need to be strengthened or replaced because of added stress, at a 
cost to taxpayers of more than $1.1 billion. The DOT analyzed just 20% of the 
nation's bridges for its report -- the remaining 80% are probably even more 
vulnerable to heavier trucks."

   The AAR added that, "In addition, because many parts of the Interstate 
highway system were not built for longer and heavier trucks, their widespread 
use could require massive new spending to strengthen or replace bridges and 
pavement, as well as to widen vehicle lanes and shoulders. The (AAR) on their 
website stated that, 'Freight railroads support a continuation of existing 
truck size and weight allowances.'"

   Mary Kennedy can be reached at 

   Follow Mary Kennedy on Twitter @MaryCKenn

Railroads Respond to STB Requests to Provide Service Outlook

   MINNEAPOLIS (DTN) -- Will the nation's railroads be ready for harvest? 
That's the question transportation regulators, and grain shippers want answered 
ahead of harvest this fall following last year's lengthy and widespread 

   On July 13, Surface Transportation Board (STB) Chairman Dan Elliot sent a 
letter to all the Class 1 railroads asking them if they will be ready for the 
"fall peak" period. He asked that each railroad provide their general outlook 
and plans for the remainder of 2015 as well as the entire winter season. Each 
railroad was asked to provide specific answers to different issues, but the 
main theme was the same for all railroads: "Provide the expectations for any 
season peaks in traffic and the actions it will take to prepare, with specific 
references to critical commodities such as grain, coal, propane and automotive 
traffic." Here is the link to the letter sent to the BNSF:

   The BNSF responded to the STB saying, "After an incredibly challenging 2014, 
BNSF's network is performing well. We, and more importantly our customers, 
began to see marked improvements in service performance in the fourth quarter 
of last year as the capacity expansion projects that were part of our $5.5 
billion 2014 capital plan were placed in service. We have continued that 
momentum through this year, and it continues to build as our $6 billion 2015 
capital plan is executed across our network." 

   "We won't realize the full capability of the network while we are 
constructing these expansion projects and undertaking this year's significant 
maintenance program. Our customers will see additional velocity improvement as 
the expansion projects and annual maintenance are concluded for the year, in 
addition to realizing the benefit of the additional capacity through the fall 
and into the winter," added the BNSF.

   "We are well-positioned to address anticipated fall and winter volumes with 
additional resources available. Current economic conditions have required us to 
store over 750 locomotives and, unfortunately, furlough over 1,700 people. 
While we are doing everything we can now to bring our employees back to work, 
we will be able to move quickly to deploy people and locomotives if volumes 
increase more rapidly than expected."

   In their weekly update as of Aug. 28, the BNSF website reported: "The 
operation experienced mostly steady performance and good fluidity across the 
network this week. Minor service interruptions associated with ongoing 
maintenance and capital expansion as well as the wildfire situation in the 
Pacific Northwest contributed to a small spike in total trains held. We also 
moved the highest weekly volume of 2015 to date at 207,908 units, exceeding the 
200,000 level for the fifth week in a row and the 14th week this year."

   On Aug. 27, the BNSF reported that there was a track outage in their Hi-line 
subdivision at Essex, Montana, due to the wildfires. Train traffic was 
suspended and crews applied approximately 18,000 gallons of water and about 80 
gallons of foam to a one mile span along the tracks to slow down the fire's 
advance and mitigate any damage to property.

   The BNSF stated that, "If conditions improve, several trains are staged and 
ready to take advantage of any opportunity to operate through the area safely. 
We will also continue to re-route traffic to minimize any service disruption 
caused by this situation. Fire conditions could worsen Saturday with strong 
winds in the forecast; however, a changing weather pattern will increase the 
chances for rain and bring much cooler temperatures to the area as we move into 
next week."


   One year ago on Sept. 4, 2014, the STB held a nine-hour hearing in Fargo, 
North Dakota, to address industry concerns over rail backlogs that had 
persisted for over 10 months. State leaders, shippers and farmers were all 
concerned the rail backlog would cost the U.S. export business if purchasing 
countries became concerned they would not receive grain shipments on time. As 
the 2014 harvest was fast approaching, some elevators at the time of the 
hearing were waiting for cars ordered for the spring of 2014. A shipper in 
South Dakota told DTN last fall that he would be unable to dump new-crop 
soybeans because his elevator was full and he was waiting for past-due orders.

   At the time of the hearing, the Class 1 railroads were still struggling to 
catch up, but as the fall and winter progressed, there was less grain shipped 
due to lower cash prices and a more mild winter than the previous year, which 
certainly made a difference for railroads in placing empties and moving loaded 

   Probably the biggest help to alleviating congestion was the slowdown in oil 
car shipments due to the collapse of crude oil prices. Fewer oil cars crowded 
the railroads as oil production slowed due to the cheap prices. Many shippers 
and agriculture organizations believed that the oil cars were likely the 
biggest culprit in preventing timely placement and movement of grain cars. 

   Bob Zelenka, executive director of the Minnesota Grain and Feed Association, 
told the STB at the Sept. 4, 2014, hearing that railroads did not adjust 
quickly enough to the unprecedented oil traffic. "It just added substantial 
congestion to the whole BNSF and CP network," Zelenka said, "and neither was 
well prepared with the infrastructure to handle that increase in volume." 

   The difference in service from one year ago can be seen in the comparisons 
by the BNSF for the week ending Aug. 25, 2015. Total trains held for the week 
were at an average of 69.4, down by 70.3% versus the same week last year. 
Locomotive velocity, measured in miles per day (MPD), was 278.0, versus 249.2 
for the week ending Aug. 19, 2014, with car velocity at 214.0 MPD versus 176.7. 
Train velocity was at 18.3 miles per hour (MPH) versus 14.6 MPH, up by 25.3% 
versus one year ago. Total volume was at a year-to-date high of 207,908 units 
moved in Week 33 versus 198,959 units at the same time last year, and terminal 
dwell was at 25.0 hours, down by 11.3% from one year ago. 

   One item stuck out in the latest service update by the BNSF more than the 
others: past-due car orders. The BNSF reported that for the week of Aug. 22, 
past-due car orders system wide, were at 425 cars and days late was at 3.2. One 
year ago, for the week ending Aug. 19, past due orders were at 2,609, at an 
average of 12.9 days late.

   Yes indeed, what a difference one year makes. 

   Here is the link to all Class 1 Railroads fall service plans to the STB:

   Mary Kennedy can be reached at 

   Follow Mary Kennedy on Twitter @MaryCKenn

2014-15 Crop Year Ends For Corn, Soybeans, Spring Wheat Basis

   As the 2014-15 crop marketing year draws to a close, let's look at how basis 
fared in the past 12 months. In general, at the end of August 2015, corn, 
soybean and wheat basis is about 30 to 40 cents weaker than the 5-year averages 
for each crop. 


   The national average soybean basis for the last week of the crop year is at 
7 cents under the November futures, 1 cent weaker than last week and 34 cents 
weaker than the DTN five-year average at this time.

   The average soybean basis for the 2014-15 crop year was -35. Basis spiked at 
the beginning of the crop year as supplies became tight ahead of new-crop 
harvest. Processors were bidding strong with many paying above posted prices in 
order to meet their needs for crushing. 

   Once harvest began in late September 2014, with good yields reported, 
soybean basis dove off its highs -- which can be seen on the accompanying 

   Soybean basis spiked a little in June as heavy rains caused the closure of 
the Illinois River twice, stopping river terminals from loading out beans. High 
water problems also existed in St. Louis, slowing and in some cases, stopping 
barges from getting to the Gulf and preventing empties from moving back up 

   After USDA surprised the market on August 12 with an average soybean yield 
estimate of 46.9 bushel per acre, the cash price fell apart, leaving the basis 
to do the work of enticing farmer selling in order to meet exporter and 
processor needs. The market had expected USDA to report lower yields due to 
heavy rains and flooding in much of the Eastern Corn Belt, causing many fields 
to go unplanted and damaging waterlogged soybean plants. As the crop year comes 
to a close, basis has been mixed, but new-crop basis has been stronger as 
exporters need soybeans to start fulfilling export contracts at the Gulf and 
Pacific Northwest.


   The national average corn basis for the last week of the 2014-15 crop year 
is at 23 cents under the September futures, 1 cent stronger than last week and 
29 cents weaker than the DTN five-year average at this time. The average basis 
for the crop year was -28. 

   Corn basis was steady most of this crop year thanks to decent export and 
ethanol demand. Ethanol plants have enjoyed positive margins much of this year, 
encouraging them to keep producing ethanol, which in turn requires more corn 
usage. In June, basis was firm due to the heavy rains caused by Tropical Storm 
Bill, which greatly affected the Illinois and Upper Mississippi river levels 
and caused problems down river as flood debris threatened moving tows and 
barges. Basis remained steady as the year came to an end, mainly due to 
continued demand from exporters and ethanol plants and lower cash prices caused 
by the prospects for a large harvest this fall.


   The national average spring wheat basis for the last week of the 2014-15 
crop year is at 47 cents under the September Minneapolis futures, unchanged 
from last week and 37 cents weaker than the DTN five-year average at this time. 
The average basis for the crop year was -10. Spring wheat basis was strong at 
the beginning of the crop year due to lower protein and low vitreous kernel 
content, along with rain, which prolonged harvest. Premiums for higher protein 
milling quality wheat spiked as mills vied for blending material. The high 
basis for the crop year for spot 14 protein on the MGEX spot market was at 
+350mwz and the high for spot 15 protein was at +675mwz. In contrast, current 
MGEX spot 14s are trading at +70 to +105 and 15 proteins are at +160.

   As the 2015 new-crop harvest moves along, average protein so far has been 
reported at 14.3 vs. the final 2014 average of 13.6. With 75% of the spring 
wheat harvested as of one week ago, the samples so far are showing test weights 
of 61.9 pounds vs. last year of 60.6 and average vitreous kernel count is at 
77% vs. last year of 65%, making the new-crop grade DNS vs. NS last year. Dark 
Northern Spring Wheat is the preferred flavor of wheat by the nearly all buyers 
of U.S. spring wheat.

   Mary Kennedy can be reached at

   Follow her on Twitter @MaryCKenn


STB Needs to Make Timely Decision on Revenue Adequacy, Grain Rates

   MINNEAPOLIS (DTN) -- The Surface Transportation Board needs to quickly move 
ahead with a comprehensive set of proposals for railroad grain shipping rates 
and rail revenue adequacy in order to create more certainty for both shippers 
and railroads, the former acting chairman of the STB told attendees at this 
year's National Grain and Feed Association Ag Transportation Summit. The event 
was held Aug. 4-5 in Rosemont, Illinois.  

   Deb Miller, former acting chairman of the STB, told attendees at the summit 
that, in her opinion, "The STB should move forward with a comprehensive package 
of all current proposals before the board and not piecemeal them one by one." 
Miller said that "shippers and railroads need more certainty as some of the 
issues have been open for years."

   The STB is currently reviewing whether to establish a new process that 
agricultural commodity shippers could use to challenge freight rates they 
believe are unreasonable or unlawful under the Staggers Rail Act of 1980. It is 
also reviewing how it annually determines whether a rail carrier is revenue 
adequate -- that is, whether it is earning sufficient revenue to cover its 
costs and earn a reasonable return sufficient to attract capital.

   Shippers and railroads had until Aug. 6 to submit new or additional comments 
to the STB on these two key issues before the board. The STB also held two 
hearing prior to the public comment period deadline. The first, on June 10, 
addressed the rail transportation of grain and rate regulation review. A second 
hearing addressing railroad revenue adequacy was held July 22-23. 

   Miller told attendees at the NGFA Transportation Summit last week that she 
was "amazed by the level of complexity for a shipper to bring a rate case 
before the board." She said that she felt there were "fairly simple" things the 
board could do to make the process more helpful. She said that "many shippers 
have complained that it's not easy to get tariff rates, especially those that 
are password protected." The current process is unclear if a group of shippers, 
rather than just one shipper, could bring a rate case before the board, which 
would spread out the legal costs, she said.

   In a June 23 filing commenting on the June 10 STB hearing, a group of 
shippers said that they "concur with the NGFA, the Alliance for Rail 
Competition, and the U.S. Department of Agriculture that the board's current 
rail rate reasonableness rules are not usable to test the reasonableness of 
railroad rates for the transportation of agricultural commodities. For the 
multitude reasons explained by these parties, the current rules are too costly, 
too unwieldy, too time consuming and provide no opportunity for relief to the 
vast majority of captive rail shippers of agricultural commodities." The group 
included the National Oilseed Processors Association, South Dakota Grain and 
Feed Association, Wisconsin Agribusiness Association, Michigan Agri-Business 
Association and Minnesota Grain and Feed Association among other state shipper 

   Miller also talked at the NGFA summit about the second issue at hand 
concerning rail revenue adequacy. She said that as railroads have become more 
revenue adequate, there needs to be a "different approach" to the issue. 

   Current STB Chairman Dan Elliot said at the June 22 hearing, "Now that the 
industry is both financially healthier and restructured with fewer large 
railroads, the STB needs to examine core practices to meet the goals Congress 
has laid out for the agency," Elliot said. "The board's reexamination of its 
economic regulatory policies does not mean that significant changes to these 
policies are in order."

   Miller noted the comments from the Association of American Railroads (AAR) 
made it clear that re-regulation of the railroad industry "was bad." 

   In their comments at the July 22 hearing, the AAR urged the STB to "beware 
of upending numerous national economic goals if they choose to pursue 
re-instituting revenue caps on freight rail companies." AAR President and CEO 
Edward R. Hamberger testified, "Now comes a handful of interest groups that 
want you to cut their transportation costs by direct government intervention at 
the expense of the greater good. Let's call it what it is: They want you to 
institute a regime of wide-ranging price controls on freight railroads." 

   Miller said at the NGFA summit that the rail industry is a mix of public and 
private ownership with private companies fully funding their own business. 
However, she was quick to point out that what happens on one rail line can 
affect other networks and that since networks are shared, there is still a 
"common carrier obligation." 

   According to Wikipedia, a common carrier "offers its services to the general 
public under license or authority provided by a regulatory body. The regulatory 
body has usually been granted 'ministerial authority' by the legislation that 
created it. The regulatory body may create, interpret, and enforce its 
regulations upon the common carrier (subject to judicial review) with 
independence and finality, as long as it acts within the bounds of the enabling 

   Miller said that the resolution on the proposals could take place by the end 
of this year.

   Mary Kennedy can be reached at   

   Follow Mary Kennedy on Twitter @MaryCKenn

A Windshield Tour

   I've done a wee bit of driving over the past week. It started with a trip to 
see my sister in Springfield, Illinois. I left Omaha, drove south and cut 
across northern Missouri. On Monday I drove to Chicago for the Agricultural 
Transportation Summit, and on Wednesday took a straight shot back to Omaha 
across northern Illinois and central Iowa. 

   I drove more than 1,000 miles in the past week, and what I saw was all over 
the board. As for general observations, the best crop seems to be in Iowa. Corn 
had great color, height and consistency. There's lots of variability in 
Illinois, and it's clear that some fields lost a lot of nitrogen.  

   Missouri was banking on beans, but just couldn't get them in the ground. 
There's been a lot of corn planted across US 36 the past few years, but there's 
a lot that just didn't get planted this year. I have a feeling USDA will trim 
soybean acres in next week's report (they resurveyed producers in Missouri due 
to the lateness of planting). 

   Holy weeds, Batman. Even if farmers got the crop planted, it looks like a 
lot of folks in Missouri and Illinois couldn't get into their bean fields to 

   Now, for more details. 

   I-29 to Rockport, Missouri --- Crops looked like they were planted late, but 
overall corn height was pretty consistent across the fields. Soybean fields 
were late, but looked okay. There were a few good looking bean fields closer to 

   I-29 Rockport to St. Joseph --- There was a fair amount of prevent planting 
in the river bottoms. Weeds were everywhere in some of those fields. Most of 
the beans were tiny & hadn't closed rows yet, some were a rather yellowish 
green. Corn was a lighter color green than you'd like to see, and it looked 
like the crop emerged unevenly. 

   US 36 from St. Joseph to Chillicothe --- It's very, very variable with a lot 
of prevented planting. I think oats and oat mixes were a very popular cover 
crop choice. Some of the double crop beans that were planted into wheat stubble 
looked like they were up to about 8 leaves per plant. First crop beans, if they 
got planted, were really uneven and weren't the right color. I saw a few fields 
of what looked like corn that hadn't tasseled, but I noticed a few fields of 
sorghum that had just started to flower near Chillicothe, so I wonder if that 
wasn't what I saw. Corn in the area looked decent, but it depended on whether 
the field was on a hill or in a valley. Farmers had definitely planned on 
expanding soybean acreage here. In years past this road was corn, corn, corn, 
and it was not that way this year. 

   US 36 Chillicothe to Hannibal --- The crops looked better than the western 
half of the state. Much less prevent plant, and some soybean fields had closed 
rows and had a nice deep green color. Others still looked sickly and small, but 
overall there was a more equal mix between decent and poor fields. Corn had 
some height variability issues, but I didn't see as many fields turning 
yellowish green. Overall it looked healthier. 

   I-72 to Springfield, Illinois --- Lots of corn on this side of the river, 
and it looked much better and much more consistent than anything I saw in 
Missouri. The corn was a deeper green and there were more even fields, except 
around the Illinois River bottom. Corn straight-up died in some of the wettest 
fields there, and there was hardly a soybean field to be seen. Crops looked 
much better from Jacksonville to Springfield, but there were still signs of 

   I-55 Springfield to Bloomington --- You could see the issues related to a 
wet spring in Illinois --- corn of varying heights, yellowing, etc. It's far 
from dead, however. There were some bean fields planted really, really late, 
but others looked pretty healthy. 

   I-88 Chicago to Davenport, Iowa -- Corn east of Interstate 39 showed signs 
of wet spring. Most cornfields had varying heights, and rows were still visible 
in a large number of soybean fields. I saw one or two fields that were more 
mature than others, but they also had a brownish tint. In the western part of 
the state, it seemed like crops planted on the hills looked much better than 
what was planted in the low spots. I've seen years where those low spots have 
had more ponding issues than this year. 

   I-80 across Iowa -- Best crops I saw. The corn had consistent color and 
height. I'd almost forgotten what corn was supposed to look like until I got to 
Iowa. Sure, I'd seen a few good fields scattered across parts of Missouri and 
Illinois, but the change was dramatic. Soybean fields looked healthy, 
consistent and like farmers had a chance to spray for weeds. What a change! 

   In summary, corn's all over the board. I didn't see too much that looked 
outstanding (except in Iowa), but there are some good fields out there. It's 
not dead by any means. It's just not ideal. Soybean fields were generally 
planted late, and some look better than others. 


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