Sara Muri, Top Producer Business & Crops Online Editor
The transportation bill for barge operators on the Mississippi and Ohio rivers is skyrocketing. Currently, barge rates are at their highest mark since 1990. Seasonable demand, late harvests, damaged crops, and a shrinking barge fleet are all to blame.
How high are the barge rates?
Depending on location, says Mike Steenhoek, Soy Transportation Coalition executive director, barge freight rates have increased dramatically.
USDA provides these current barge rates:
|Location||% Change Over 2007||Rate Per Ton|
Steenhoek says these significant increases in rates are having a ripple effect throughout the industry. "It is going to be reflective in the prices farmers receive,” he says. "Transportation is a preeminent factor in basis discrepancy.” Steenhoek says if grain shippers and processors cannot secure barge transportation, it could be emulated in their bids.
Why the high rates?
- Seasonable Demand: A seasonal pattern for barge rates exists, says Ken Erickson, senior vice president of transportation and logistics services with Informa Economics in Memphis, Tenn. "We are at a period where barge freight rates peak,” he says.
- Behind-Schedule Harvest: This year, he says, harvest in a large part of the country has been delayed, two or three weeks, which adds extra challenges to the freight schedule. Normally, freight rates relax around this time because harvest is nearly finished. But, with a late harvest, the rate relaxation has not occurred and probably won't until corn harvest finishes, Erickson says.
- Hurricane Aftermath: Combined with a later harvest, Hurricanes Gustav and Ike have also impacted the rates, Steenhoek says. He says the storms resulted in large amounts of damaged grain. Around 37% of Louisiana's soybean crop was damaged by the two hurricanes, Steenhoek says.
Where is all that damaged grain? It's sitting on about 350 of the country's 10,000 covered-hopper barges. Steenhoek says the damaged grain that does not meet export requirements is left without a destination.
Erickson says this grain will basically sit idle until higher-quality grain is shipped to the Gulf to be blended with the lower-quality commodities. Then, the grain should qualify for export.
- Dwindling Barge Fleet: Mixed in with this year's weather influences, an outdated infrastructure and system are also contributing to higher rates. Erickson says that about one-third of the operating U.S. barges are 25 years or older. When these barges need to be retired, they are not replaced. "We have a period of strong demand and a falling fleet,” he says. "The industry is not replacing the fleet fast enough.” Erickson says currently it costs around $750,000 to build a new covered barge. If the river economy sees a turnaround, more may be build, he says.
You can e-mail Sara Muri at firstname.lastname@example.org.