The following is an article from Reuters:
Grain shippers are scrambling to load vessels from the largest U.S. wheat export gateway, the Pacific Northwest, before government work shuts down normal barge traffic on the Columbia and Snake Rivers on Dec. 10.
Those rivers feed the port of Portland, Oregon, which normally ships about half the wheat from the United States, the world’s largest wheat exporter. The Army Corps of Engineers is replacing gates at three lock-and-dam sites on the rivers, effectively shutting the rivers until March 18.
“There are going to be short-term logistical challenges but the long-term benefit for navigation and for structure are enormous,” said Kristin Meira of Pacific Northwest Waterways Association.
Grain merchants say that the industry has geared up for the long-planned closures fairly well, with many importing nations booking their grain needs — especially soft white wheat from the PNW region — well ahead of time. But as the countdown to the closure approaches, winter weather has brought an early reminder of how challenging keeping commitments will be.
“For the most part, people are prepared for it. What we were not prepared for are circumstances like weather, rain delays, vessel delays because of the weather. That’s having an impact,” said merchandiser Augusto Bassanini at United Harvest, a major grain exporter at Vancouver, Washington, near Portland.
“If it rains, we cannot load a vessel — the barges sit, trains sit. The problem only continues to compound itself as the program gets bigger and bigger. We are catching up on vessels that we were supposed to load a few weeks ago. Because of the rain we haven’t been able to load,” Bassanini added.
“We are working furiously day and night to unload barges and to get as many back up river before the end of the weekend so they can return,” said another Portland merchandiser.
U.S. Wheat Associates, the trade group for U.S. wheat exporters, estimates that up to 1.2 million tonnes of wheat will be displaced during winter closure, with most of slack taken up by rail to Portland and nearby Vancouver.
“We think probably we are close to 70 percent of the way to having that already taken care,” said Vince Peterson, vice president overseas operations, for U.S. Wheat Associates.
As of last week, export sales about soft white wheat to the core group of 10 importing countries in Asia were about 750,000 tonnes ahead of last year’s bookings, he said.
Those buyers include Japan, Taiwan, South Korea, Malaysia, Philippines, Singapore and Thailand. But buyers like Egypt have also been booking shipments to assure supplies.
“Now we have a circumstance where Egypt has bought 350,000 tonnes of soft white wheat which we probably didn’t have in the equation early on,” Peterson told Reuters, cautioning that higher costs due to PNW shipping delays the next 3-1/2 months would be passed to customers and could prompt switching of bookings to other ports or grains, like soft red wheat.
“There is a price effect, having to pay a higher price because of transportation, that will be reflected in the FOB price the exporter has to charge,” he said.
Steve Wirsching of U.S. Wheat Associates in Portland said about 75 percent of soft white wheat into Portland usually arrives by barge and the other 25 percent by rail. Typically, rail freight runs about 20 cents a bushel above barge. But he said rail tariffs so far have not signaled a spike in costs.
“At least not yet. That is an indication that the system is operating properly. There will be enough available capacity on rail to handle the wheat during the closure,” Wirsching said.
Shippers and traders say the lock-and-dam work, although long planned and needed, comes at a bad time. Demand for grain from the U.S., the largest single exporter of not just wheat but corn and soybeans, has been strong but getting stronger.
Russia’s sudden exit as a grain exporter due to drought has had a lasting effect. Australia’s wheat crop is now threatened by rain in the east and drought in the west. China’s record imports of soybeans have also taken valuable elevator space.
“It is still going to be a struggle because we have had a record number of soybean exports to China,” Bassanini said.
The result is that the Portland district’s massive terminal elevators are stuffed to capacity. So recent rains have slowed loadings, unloadings, and grain barge and railcar movement.
“The tightness will probably be the export capacity and the ability for elevators to unload rail cars. You can only get so many on the track,” Peterson said.
“The risks for the exporter is if you over-sell your capacity you get stuck with potential demurrage on two ends — not being able to unload the cars fast enough, where you have to pay demurrage to the railroad for detaining the cars, and on the other one is if you can’t load the vessels fast enough you pay demurrage on the vessel sitting at your elevator.”
Graphic of Columbia-Snake River water system compiled by Pacific Northwest Waterways: https://link.reuters.com/…
Graphic of Columbia-Snake River factsheet https://link.reuters.com/…
