Market News & Headlines >> Grain Glut, Slow Rail Service to Create Problems
Rising grain stockpiles will exceed permanent storage capacity in some U.S. producing states this fall and railroad service to U.S. grain shippers may not recover in time for harvest, possibly resulting in damage to grain stored on the ground, a USDA official told a Congressional panel on Wednesday.
Grain stocks this harvest season are expected to exceed permanent storage facilities by about 694 million bushels, or about 3.5% of expected U.S. harvest totals, in seven states – South Dakota, Indiana, Missouri, Illinois, Ohio, Michigan, and Kentucky – in decreasing order of storage capacity shortage, said Arthur Neal, deputy administrator of the Transportation and Marketing Program for USDA’s Agricultural Marketing Service.
The grain overstock is the equivalent of 173,500 jumbo hopper rail cars, 13,219 barges or 762,600 truckloads. South Dakota could be short of grain storage capacity by 197 million bushels, while Indiana is estimated to be short by 196 million bushels, Neal told a hearing of the Senate Commerce Committee examining congestion on U.S. rail lines.
The storage capacity shortage is the biggest since 2010, when there was an 805- million-bushel shortfall in permanent storage distributed throughout the top 14 grain-producing states, Neal said. “Because 2013 grain is reportedly still in storage and waiting to be moved before the 2014 harvest, it is critical to move as much of the 2013 grain crop as quickly and efficiently as possible,” he added.
While railroads had been making progress toward eliminating a backlog of overdue railcar deliveries; that may no longer be the case. According to its Sept. 5 report to the Surface Transportation Board, BNSF railway had 2,231 grain cars past due an average of 8.9 days, up 10% from the 2,029 it reported the prior week.
The lack of rail capacity is driving up costs for other U.S. transportation modes, Neal noted. Barge operators expect strong demand for their services during harvest. As of Sept. 2, the average barge rate from the Illinois River to the Mississippi River Gulf for October delivery was 43% higher than the five-year average.