Grain exports through a farmers' eyes

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Dean Campbell thought his co-op could moved pretty fast when it came time to load a barge with grain. But they're slowpokes compared to the flash of speed we saw during a visit with major grain exporters at the Port of New Orleans a few weeks ago.

"It amazes me that they can unload a fully-loaded barge in 45 minutes,•bCrLf says Campbell, a grain farmer from Coulterville, Ill. "Those barges hold 50,000 bushels, so that's a pretty good turn time on volume of grain.•bCrLf

Campbell (left) was at the port as chairman of the Soy Transportation Coalition, a group established late last year by seven state soybean boards, the American Soybean Association and the United Soybean Board to provide information and education on behalf of the U.S. soybean industry on shipping and transportation.

Watching the big ocean-going vessels loading up on grain is a beautiful thing for any farmer. With the silent waters of the Mississippi churning below us, one might think everything here happens at its own pace. Just the opposite is true. Ships that are not loaded in the allotted time are hit with major penalties, called demurrage. We were told one Panamax vessel could get clipped for $120,000 a day if it weren't loaded by its designated time. More typically, demurrage may cost $20,000 to $30,000 a day.

On the other hand, shippers get bonuses of about half those amounts if they load vessels early and get them on their way.

"It behooves them to be on time,•bCrLf grins Campbell.

Basis study If only the rest of the grain transport industry worked the same way. Further up the transport pipeline, inefficiencies abound. Some is a result of a lack of competition, particularly among rail roads. Some of it may be due to a lack of investment, such as the 80-year-old lock and dam system on the river system. Those inefficiencies cause big gaps in basis. STC has funded a large-scale basis study that looks into what's driving the oft-times erratic differences between futures and cash grain prices.  (Look for those results in an upcoming issue).

"As a farmer I'm concerned with the lack of convergence between futures and cash prices,•bCrLf says Campbell.  "We want to find out what's behind this. It may be inefficiencies in transportation, or something else. It may have something to do with this tremendous amount of investment into the grain market from the outside, from, say, investment firms.

As a past elevator operator, Campbell always counted on basis to behave in a more predictable manner throughout the year. During harvest it was always wider, and by mid season it got very close.

"We don't have that normality in the market to count on anymore,•bCrLf he says. •bCrLfIt makes it kind of frustrating to do marketing and count on the normal trends. It's a new risk farmers have to be aware of.  It puts tremendous strain on the entire system, monetarily and mentally, for grain elevators and farmers.•bCrLf

The goal of the basis study is to try to find out how much of the basis change is truly based on transportation inefficiencies, and how much is coming from other factors in the market. If the study reveals problems or lack of competition in the transportation area, farmers will be able to see how those problems impact their pocketbook in the form of lower grain prices. And they can take those issues to their political leaders.

Once farmers take up a cause, there's a good chance something positive will happen.

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