Commodity crunch: Flooding expected to increase shipping rates

For two weeks, something has been missing in downtown Cape Girardeau: the screeching whistle of freight trains warning of their approach.

And on the Mississippi River nearby, the daily parade of towboats pushing barges has dwindled as the shipping lanes north of St. Louis remain closed due to high water. The U.S. Army Corps of Engineers closed locks on several dams from just north of St. Louis to the Iowa border as floodwaters moved south in mid-June.

So far, there have been few reports of transportation bottlenecks. But the issues caused by this year's flooding will increase the costs of shipping bulk commodities, costs that are already far above historic rates, especially for river shipments.

On Friday, the basis rate, also known as the "take-out," for wheat delivered to the Consolidated Grain & Barge terminal near the Southeast Missouri Regional Port Authority stood at $2.15 a bushel. That's how much the shipping company deducts from the grain price set daily at the Chicago Board of Trade.

In 2005, when shipping resumed from the Port of New Orleans following Hurricane Katrina, the basis in Southeast Missouri was about 75 cents per bushel. And that was considered exceptionally high at the time.

The shipping costs are being driven not only by the escalating cost of fuel but also by international buyers unwilling to pay the commodity prices being driven up as traders bet on how much major crops have been damaged by the 2008 floods, said John Sutton, manager at Consolidated.

"It is terrible," Sutton said. "All that stems back to your speculators and this Chicago trading. It should be based more on what the grain value is."

FRED LYNCH ~ flynch@semissourian.com Phillip Cissell with Consolidated Grain and Barge watched as a trunk dumped 1,000 bushels of wheat for storage on Friday.

The rising cost of shipping hits farmers and consumers at every turn. It adds to the cost of fertilizer, seed, coal, fuel and other commodities shipped in bulk. And the pinch it is putting on farmers is beginning to generate questions and complaints -- U.S. Sen. Kit Bond was asked about it June 23 at the Rhodes Travel Center on Route AB when he visited Southeast Missouri to talk about energy policy.

"They are not happy with it," Sutton said. "And you can't blame them."

The news about farm prices seems all good for producers. At the Chicago Board of Trade, corn futures reached almost $8 a bushel Friday, while soybean contracts traded for $15.60 and wheat contracts finished the trading week at $9.12. The question is, who is benefiting from those prices? Many farmers, as prices have risen in recent years, have signed contracts to sell their grain well in advance of harvest. In some instances, those contracts have been signed before the crops were planted.

Larry Quade, a farmer who raises soybeans, corn and wheat near Allenville, said recently that because of early contracting for his grain, he will receive less than $3 a bushel for his wheat after the shipping costs are deducted.

"It is hard to understand but this speculative market has wreaked havoc," Sutton said.

The difficulties of moving goods is almost making the question of shipping costs a moot issue. Because of high water, a Burlington Northern Santa Fe train that would normally run through Cape Girardeau on its way from St. Louis to Chaffee, Mo., must detour through Springfield, Mo., or on tracks through Southern Illinois, said Dan Overbey, executive director of the Semo Port.

The port's railroad spur to the north over the Diversion Channel is closed as well, Overbey said.

Most port facilities remain fully operational, Overbey said. Many older ports, not built to handle the current high water levels, have closed.

Locally, traffic is even up a little bit as shippers hoping to deliver materials north of St. Louis inquire about facilities. The port would really pick up extra business if rising river levels closed additional ports, Overbey said.

"It is more just on an individual emergency basis," materials that must reach their destination by a set time, Overby said.

While most facilities at the Semo Port are operational, Consolidated Grain is not loading much because the high water makes maneuvering barges into position under the loading conveyor difficult. Instead, wheat being delivered at the port is being stored on a newly completed ground ring and pad capable of protecting 1 million bushels of grain.

"We might be able to load, but it is nip and tuck," Sutton said.

rkeller@semissourian.com

335-6611 extension 126

Does this affect you?

Have a comment?

Log on to semissourian.com/today