Moving Grain: Corn Export Forecast Up – Reduced South American Prospects

©Debra L Ferguson Stock Photography

New Canada Transport Bill Spurs Investment in Grain Hopper Cars

On May 23, the Transportation Modernization Act (Bill C-49) became law in Canada, which modifies the Canada Transportation Act, among others. Its provisions span rail, marine, and air transportation. Bill C-49 includes a new long-haul interswitching remedy for shippers (extending the limit of 30km of an interchange to 1,200km under certain conditions), adds clarity on the criteria used by the Canadian Transportation Agency to assess reasonable service, and modifies the revenue cap policy known as “Maximum Revenue Entitlement” for rail transportation.

Changes stemming from the new law are already taking shape. On May 24, Canadian National Railway (CN) announced its plan to purchase 1,000 new generation grain hopper cars over the next two years. CN has operations in the U.S., originating about 59 thousand carloads of grain and other farm products in 2017 (about 4 percent of all Class I operations in the U.S.).

Corn Export Forecast Up with Reduced Prospects for South American Crop

According to the May 31, USDA Economic Research Service report, Outlook for U.S. Agricultural Trade, agricultural exports are projected at $142.5 billion for fiscal year 2018, up $3.0 billion from the February forecast, due to anticipated increases in corn and cotton exports. The value of corn exports is forecast at $10.3 billion, up $1.3 billion from the February report, based on larger volumes and higher unit values.

The strong export forecast reflects weather-reduced exportable supplies in Argentina, and worsening prospects for second-crop corn (safrinha) in Brazil. The May 31 forecast of corn exports was 57 million metric tons, up 11 percent from the February forecast. The trade prospects could be potential good news for the barge industry that is currently returning to normal navigation conditions after enduring high water conditions for most of calendar year 2018.

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Grain Inspections Down but Remain Above Average

For the week ending May 31, total inspections of grain (corn, wheat, and soybeans) for export from all major U.S. export regions reached 2.5 million metric tons (mmt); down 10 percent from the previous week, up 23 percent from last year, and 35 percent above the 3-year average. Despite the drop in week-to-week inspections, grain inspections during the last four weeks are up 21 percent from last year, and 47 percent above the 3-year average.

Total inspections of wheat dropped 23 percent from the previous week, while corn and soybeans decreased 9 and 4 percent, respectively, for the same period. Total inspections of grain decreased 17 percent in the Mississippi Gulf and 6 percent in the Pacific Northwest (PNW). Outstanding (unshipped) export sales of each of the three major grains are down from the past week.

Snapshots by Sector

Export Sales

For the week ending May 24, unshipped balances of wheat, corn, and soybeans totaled 27.8 mmt, up 30 percent from the same time last year. Net weekly wheat export sales were .030 mmt, down 73 percent from the previous week. Net corn export sales were .993 mmt, up 16 percent from the previous week. Net soybean export sales were .273 mmt, up significantly from the previous week.

Rail

U.S. Class I railroads originated 25,796 grain carloads for the week ending May 26; up 16 percent from the previous week, 4 percent from last year, and 21 percent from the 3-year average.

Average June shuttle secondary railcar bids/offers, per car, were $279 above tariff for the week ending May 31, down $21 from last week, and $325 higher than last year. Average non-shuttle secondary railcar bids/offers, per car, were $375 above tariff; up $197 from last week, and $453 higher than last year.

Barge

For the week ending June 2, barge grain movements totaled 977,111 tons, 32 percent higher than the previous week and up 2 percent from the same period last year.

For the week ending June 2, 615 grain barges moved down river, 155 barges more than the previous week. There were 678 grain barges unloaded in New Orleans, 4 percent lower than the previous week.

Ocean

For the week ending May 31, 28 ocean-going grain vessels were loaded in the Gulf, 7 percent less than the same period last year. Forty-eight vessels are expected to be loaded within the next 10 days, 17 percent less than the same period last year.

For the week ending May 31, the ocean freight rate for shipping bulk grain, from the Gulf to Japan, was $42.00 per metric ton, 3 percent less than the previous week. The cost of shipping, from the PNW to Japan, was $24.25 per metric ton, unchanged from the previous week.

Fuel

For the week ending June 4, the U.S. average diesel fuel price remained unchanged from the previous week, at $3.29 per gallon; 72 cents higher than the same week last year.

Full report.


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