Aug. 30 (Bloomberg) -- A logjam of grain barges is worsening on the Mississippi River after New Orleans terminal closures during Hurricane Issac compounded a slowdown in U.S. exports already delayed by low water levels during a drought.
The number of barges moving north on the Mississippi fell to 117 in the week ended Aug. 25, down 75 percent from five weeks earlier and 14 percent smaller than a year earlier, data from the U.S. Army Corp of Engineers show. The U.S. is the world’s largest exporter of corn, soybeans and wheat.
“It will take the whole month of September to straighten out the logjam of empty barges stuck south of Memphis,” Troy Lust, a senior risk manager for commercial grain at INTL FCStone Inc., a commodity brokerage in West Des Moines, Iowa, said in a telephone interview. “We have starved the market for empty barges ahead of harvest. It’s a horrible combination that will increase demand for rail shipments that must compete with ethanol plants and soybean processors for reduced supplies.”
Soybean and corn futures rose to records in Chicago this month as the worst drought in at least 50 years reduced U.S. production for a third straight year. Farmers, who began harvesting this month, will produce 10.779 billion bushels of corn, 13 percent less than last year, even after farmers planted the most acres since 1937, the U.S. Department of Agriculture said Aug. 10. The soybean crop may fall 12 percent to 2.692 billion bushels, the smallest in five years.
Barges on the Mississippi handle about 60 percent of U.S. grain exports. Cargill Inc. shut its Louisiana grain facilities at Reserve and WestWego, Mark Klein, a spokesman for the Minneapolis-based company, said Aug. 28. Archer Daniels Midland Co. has four grain elevators and port operations in New Orleans, all of which are currently shut.
“The impact on ADM will depend on the strength of the storm and where it hits,” Jackie Anderson, a spokeswoman for Decatur, Illinois-based ADM, said in an e-mail Aug. 27. “ADM has a vast transportation network and can make alternate shipping arrangements to meet customers’ needs in the event that port operations are reduced by the storm.”
Rail-car deliveries through Aug. 22 to export terminals in the U.S. are down 17 percent this year compared with the same period a year earlier, USDA data show. Shipments in the last four weeks are up 15 percent from the same period in 2011, as barge-freight costs rose 23 percent, the government said.
Isaac, which reached the Gulf of Mexico coast on the seventh anniversary of Hurricane Katrina, was downgraded to a tropical storm with top winds of 70 miles (113 kilometers) an hour as it moved northwest at 6 mph, the National Hurricane Center said at 4 p.m. local time. It was 60 miles west of New Orleans. The storm is still causing life-threatening storm surges and inland flooding, according to the center.
The lack of rain across the Midwest caused the shipping channel in the Mississippi River to shrink, meaning less freight can be carried by barges on the nation’s largest waterway and its tributaries, including the Ohio and Illinois Rivers.
As much as 9 inches of rain may fall in central Illinois from remnants of Isaac, the government said.
“Heavy rains and winds will certainly threaten Midwest crops and further cut yield potential,” Richard Feltes, the vice president of research for R.J. O’Brien & Associates in Chicago, said in a telephone interview. “The rain will help to improve barge shipping, but the threat of additional crop losses will support higher prices,” said Feltes, who forecasts corn may rise to $9 a bushel and soybeans may top $20 a bushel.
Corn futures for December delivery rose 2.3 percent to close at $8.135 yesterday on the Chicago Board of Trade, while soybean futures for November delivery settled at $17.53, up 1.8 percent. Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show.
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