Moving Grains: Panama Canal Inspection to Reduce Transit Capacity
Test and Structural Inspection Scheduled for Panama Canal Lock, Reduces Transit Capacity
The West Lane of the Gatum Locks on the Panama Canal will be closed for 10 hours on February 25 in order to perform a caisson test and structural inspection on Miter Gate-40 to verify the retaining structure is watertight and operating properly.
Due to the maintenance work, the estimated transit capacity of the Canal is 29 to 31 vessels per day, rather than the normal transit capacity of 35 to 37 vessels, depending on vessel mix and other factors. At this time, no major delays are anticipated.
Mississippi Gulf Grain Inspections Boost Total
For the week ending February 11, total inspections of grain (corn, wheat, soybeans) in the Mississippi Gulf reached 1.72 million metric tons (mmt), up 72 percent from the previous week, and the highest since late October 2015. Total inspections of grain (corn, wheat, soybeans) for export from all major export regions reached 2.9 million metric tons, up 32 percent from the past week, 15
percent above last year, and 19 percent above the 3-year average.
Corn and soybean inspection jumped 51 and 37 percent. Wheat inspections, however, were down 5 percent from the past week.
Pacific Northwest (PNW) grain inspections were down 5 percent from the previous week. Outstanding export sales (unshipped) were down for corn, wheat, and soybeans.
Canadian Pacific to Seek STB Declaratory Order
On February 16, Canadian Pacific (CP) announced that it “will seek a declaratory order from the U.S. Surface Transportation Board (STB) confirming the viability of the voting trust structure that CP has suggested as part of its proposed merger with Norfolk Southern Corp. (NS).”
Recently, CP has made three offers to NS, all of which the NS board unanimously rejected, citing concerns over regulatory uncertainty and urging CP to obtain the declaratory order. This latest news followed shortly after CP filed a proposal to have NS shareholders vote at their upcoming annual meeting on whether the NS board should “engage in good faith discussions with CP.”
Both events reflect CP’s continued pursuit of a CP-NS merger. Together, the two railroads accounted for 25 percent of North American grain carloadings in 2015, making the proposed merger an important issue for grain shippers.
Diesel Fuel Prices Fall Below $2 per Gallon
The average U.S. On-Highway Diesel Fuel price fell to $1.98 per gallon this week—3 cents lower than the previous week and 89 cents lower than the same week last year. Prices have fallen 26 cents since the beginning of the year. U.S. average diesel prices have not been this low since February 2005. In its latest Short Term Energy Outlook, the Energy Information Administration (EIA) forecast prices to average $2.22 in 2016, 7 cents lower than its forecast in January.
Additionally, EIA forecasts crude oil prices to continue to fall in 2016, averaging $38 per barrel, the lowest level since 2004.
Snapshots by Sector
During the week ending February 4, unshipped balances of wheat, corn, and soybeans totaled 23.7 mmt, down 22 percent from the same time last year. Net weekly wheat export sales of .263 mmt were up notably from the previous week. Net corn export sales were .405 mmt, down 64 percent from the previous week, and net soybean export sales were down .667 mmt, significantly above the past week.
U.S. Class I railroads originated 22,257 grain carloads for the week ending February 6, down 3 percent from the previous week, up 5 percent from last year, and up 7 percent from the 3-year average.
Average February shuttle secondary railcar bids/offers per car were $19 below tariff for the week ending February 11, up $110 from last week, and $31 higher than last year. There were no non-shuttle secondary railcar bids/offers this week.
For the week ending February 13, barge grain movements totaled 742,196 tons, 24 percent lower than last week, and up 17 percent from the same period last year.
For the week ending February 13, 463 grain barges moved down river, down 25 percent from last week; 842 grain barges were unloaded in New Orleans, up 21 percent from the previous week.
For the week ending February 11, 41 ocean-going grain vessels were loaded in the Gulf, 7 percent less than the same period last year. Sixty-six vessels are expected to be loaded within the next 10 days, 12 percent more than the same period last year.
For the week ending February 11, the ocean freight rate for shipping bulk grain from the Gulf to Japan was $22.75 per metric ton, up 1 percent from the previous week. The cost of shipping from the PNW to Japan was $12.75 per metric ton, 2 percent more than the previous week.
The bulls were again winners in an exciting week for longs and producers. In last week’s report, I said the markets bias would be near unchanged to a bit lower.