USDA Expects Grain Storage to be 'Tight' This Fall

Aug. 16, 1999

With crop production 1% greater this year than in 1998 and carry-in stocks at the highest level in more than a decade, USDA expects grain storage to be strained this fall to meet the demand. The Central Plains and Eastern and Western Corn Belts will have the most problems.

"Although some additional harvest-time capacity can be made available through temporary storage facilities, the 1999-2000 fall harvest is shaping up to be a storage headache for farmers and elevator operators," says USDA.

Grain and soybean use in 1999-2000 should increase 2% from 1998-99 to a record 15.8 billion bushels. Use will increase because of stronger domestic demand for processing and milling and stronger export demand. Increases in domestic and export use will increase transportation demand over the coming year. Stronger exports in recent months already have increased demand for barge and rail transportation.

Texas Gulf ports have seen stronger wheat exports for several months, increasing rail demand in that market. Exports at Pacific Northwest ports also have increased from year-earlier levels, adding to rail demand. Increases in ocean freight rates from the Gulf to Japan since March have increased the rate differential between the Gulf and Pacific Northwest, increasing Pacific corn exports.

Stronger corn and soybean exports in recent months have increased demand for barge freight substantially over year-earlier levels. July barge rates were up 7% from last year and 19% more than the five-year July average. Barge demand for fall is expected to remain strong with October rates being quoted greater than current levels.

The most significant development in rail transportation this summer has been the operational takeover of Conrail by CSX Transportation and Norfolk Southern which began June 1, according to USDA. Implementation of the Conrail transaction was far from "seamless." Problems from the takeover affected shippers located on former Conrail lines as well as shippers and receivers on the original CSX and Norfolk systems. Many of those affected were livestock producers in the Southeast whose feed grain and feed ingredient stocks ran dangerously low, says USDA.

Eastern rail conditions appear to have improved substantially since early July, the report continues. "The focus now will be on how well CSX and Norfolk Southern are able to handle the substantial increases in traffic expected during the peak fall shipping season," USDA adds.

The information developed by USDA and the Surface Transportation Board is available on the Internet at http://www.ams.usda.gov/tmd/mta/index.htm