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Grain exports decline, disrupting its maritime and rail supply chain


The Grain Transport Report, a weekly publication by the Agricultural Marketing Service (a division of the U.S. Department of Agriculture) released information showing that total export inspections for grain (corn, wheat and soybeans) declined 22 percent from the previous week.

The report said that year to date (January 1-24) inspections for grain exports decreased by 9 percent, from 9.073 million metric tons (mt) in the same period in 2018 to 8.268 million mt in 2019. The impact of declining exports can be seen across the U.S. grain supply chain.

“The decrease in exports – particularly with soybeans – we have been witnessing has had a notable impact on the agricultural supply chain,” said Mike Steenhoek, executive director of the Soy Transportation Coalition. “Farmers have stored a substantial percentage of their soybeans due to the decrease in demand, so less has been absorbed by trucks, rail, the inland waterways and export terminals. The pipeline that feeds into the Pacific Northwest export terminals – which historically supplies a substantial amount of Chinese demand – has experienced a particular downturn.”

The report said that soybean exports year to date (through January 24) declined 24 percent, from 4.672 million mt to 3.566 million mt between 2018 and 2019. Meanwhile wheat exports decreased by 3 percent; only corn exports increased (by 12 percent).

According to Jay O’Neil, an agriculture economist at Kansas State University and founder of O’Neil Commodity Consulting, slowing economic growth in China is contributing to the reduction in U.S. grain exports. China is the largest importer of U.S. soybeans, importing an average of over 31 million mt annually between 2015 and 2017. Chinese soybean imports accounted for 75 percent of the market-share of the top five importers of U.S. soybeans – which also includes Indonesia, Japan, Mexico and the Netherlands.  

O’Neil also said that grain is the third-largest dry-bulk commodity (unprocessed raw materials) after coal and iron ore. Grain makes up 12 to 14 percent of the dry-bulk maritime trade volume.

Ocean freight rates for U.S. grain shipments have also fallen since last year. The Agricultural Marketing Service report said that the cost to ship bulk grain from the Gulf of Mexico to Japan fell 18 percent, from almost $50 per mt on October 18 to $41 per mt on January 24.

With less grain demand from overseas, U.S. railroads have also seen fewer grain deliveries.

According to a recent Susquehanna Rail Report, total U.S. rail volumes decreased four percent in the forth week of January 2019 and grain volumes declined 4.9 percent. Grain made up 4.4 percent of rail carloads carried by Class 1 freight rail. Canadian Pacific (NYSE: CP) was the most exposed to grain shipments with grain making up nine percent of its loads.

In the first four weeks of January 2019, Kansas City Southern (NYSE: KSU) experienced a 5.7 percent decrease in grain traffic, the most of any of the Class 1 railroads. KSU was the only Class 1 railroad in the first four weeks of January to experience decreased rail traffic (5.3 percent).

FreightWaves reported that the annual post-harvest September-October peak in rail traffic generated by grain transport decreased 29 percent from 28,500 carloads in 2016 to 20,200 carloads during the same period in 2018.

According to the Grain Transport Report, weekly grain deliveries by rail to U.S. ports for export decreased 6 percent, from 7,690 carloads on January 16 to 7,234 on January 23. Year-to-date grain deliveries to ports by rail decreased 14 percent, from 32,157 carloads in 2018 to 27,619 carloads in 2019.

The only port region where grain rail delivery carloads increased was the Atlantic and East Gulf of Mexico where carloads increased 113 percent. Pacific Northwest deliveries declined 8 percent, Mississippi Gulf deliveries declined 36 percent, and Texas Gulf deliveries declined 46 percent.

Bloomberg reported on January 31 that China “agreed to buy a substantial amount of American soybeans” after the most recent round of trade talks, potentially creating more business for participants in the U.S. grain supply chain.