In our weekly series From the Furrow, host Mike McGinnis and fellow grain geeks shed light on current market conditions and how grain producers can take action to manage their risk.

This week, Mike is joined Mike Steenhoek, Executive Director with the Soy Transportation Coalition. How might US agriculture be impacted by issues along Canadian railways? Could strikes at US East and Gulf coast ports disrupt soybean exports? And how are Mississippi River levels shaping up heading into harvest? Mike M. and Mike S. discuss those topics and a whole lot more.

Questions or comments? Topics you’d like to hear us discuss? Contact us at [email protected].

(Transcript auto-generated)

00;00;00;13 – 00;00;16;24

Futures trading involves risk and is not suitable for all investors. Content provided in the segment is not for educational purposes and is not a solicitation to buy or sell commodities. Opinions and statements of guests not affiliated with every egg of their own, and do not reflect the views of the brand. The accuracy of their statements can not be guaranteed by a Barack.

00;00;16;27 – 00;00;36;05

Hello and welcome to From the Furrow, brought to you by Ever AG Insights. Each week we talk with subject matter experts on news and topics affecting the grain markets. I’m your host, Mike McGinnis, and we get started with the review of the markets. Today is Tuesday, August 27th as we see some support in the markets today. Right now the horn market for September.

00;00;36;05 – 00;01;02;25

Any way up a nickel at 367. The new crop December contract up about the same at 392. Soybeans old crop at $0.05 higher 964 the new crop November contract up three and a half cents at 984 and Chicago wheat up the most right now for the September futures contract, up $0.11 at 509. So for those folks that are looking to price some grain, the markets are higher today.

00;01;02;25 – 00;01;22;13

So that’s not a bad story because we have had some marks of hitting the life of contract lows for the December contract for corn and the new crop, November soybean market as of late. Now, turning to our guest this week, it’s our privilege to have Mike Stein hook, executive director of the Soy Transportation Coalition. Topic today is supply chain concerns.

00;01;22;13 – 00;01;24;09

So we want to welcome Mike to the program.

00;01;24;10 – 00;01;26;20

Hey, Mike, it’s good to be with you. Thanks for having me. You bet.

00;01;26;20 – 00;01;51;16

And thank you for joining us. We’ve had some supply chain concerns in the headlines lately. And we’ll talk about three of them that we think are important. One is the Canadian rail strike. Now Canada’s rail companies are up and running today, Mike. However, the labor dispute between them and the Teamsters union is not quite over. So we’re off the front page of the newspaper, so to speak, but still being written about in the back pages.

00;01;51;18 – 00;02;12;26

After a short lockout, a labor relations board in Canada has ordered the two sides to get back to work while they negotiated a settlement. The Teamsters agreed, but are appealing the decision in federal court. Again, as we mentioned, commuter trains are rolling again today, but workers want additional safety measures, more time off, higher pay and rail companies say they have been negotiating in full faith.

00;02;12;26 – 00;02;18;21

What’s the threat to the U.S. agriculture industry if this dispute doesn’t get settled? Ultimately?

00;02;18;21 – 00;02;43;23

Well, Canada is an important market for US agriculture and U.S. soybean industry included. They’re our number four export destination for soybean meal at $614 million exported in 2023, they’re the number one export market for soybean oil at $106 million last year. And of course, Canada produces a lot of inputs, particularly fertilizer, that we do not produce here in the United States.

00;02;43;23 – 00;03;12;18

That gets produced in Canada, shipped over the border to the US. And the overwhelming majority of those deliveries occur by rail. Trucking just simply doesn’t have the capacity to move that kind of volume, long distances and economical manner. Trucking is very good at the initial mileage, the concluding mileage, but the long haul movement when it particularly when it’s heavy freight rail, is really the mode of transportation that’s well positioned to do that when it’s overland.

00;03;12;18 – 00;03;41;00

And so it’s really critical to have a reliable supply chain, that cross-border supply chain between the United States and Canada. You know, the two countries have prided ourselves, and rightfully so, of having the most economically dynamic, seamless border between two countries on the planet. And again, that reputation is well deserved. Well, if all of a sudden you allow these kind of disruptions to occur or even a threat of these disruptions, that reputation starts being called into question.

00;03;41;00 – 00;04;00;16

So it is a really big deal. And, you know, our perspective throughout has been we are not going to take a side between the railroad workers and the railroads, but we are clearly on the side of the American farmer. And what’s in the best interest of the American farmer is to have a rail system that connects the United States into Canada in a cost effective, reliable manner.

00;04;00;16 – 00;04;27;27

And so we are happy to see, given the fact that negotiations, you know, we think that they had more than sufficient time to come to an agreement. The current contract expired on December 31st of 2023. They’ve been negotiating ever since. We think that sufficient time and when the two parties do remain at an impasse and then the threat is that the entire nation of Canada and all of those industries like U.S. agriculture, that depends upon an efficient cross-border delivery system.

00;04;27;27 – 00;04;48;16

When they start getting threatened, then I think it’s time for intervention to occur. And so we were happy to see the Canadian federal government take that step. As you mentioned, the Teamsters Canada Rail Conference is disputing whether or not the Canada Industrial Relations Board can impose binding arbitration. So work is returning, the network is recovering from that brief disruption.

00;04;48;16 – 00;04;56;13

But then you need to put comma for now. And so that’s something that we’re obviously going to be mindful of and monitoring as the days and weeks progress.

00;04;56;19 – 00;05;09;14

And I know you’ve been following this issue from the beginning. What’s the projected timeline or what do you hear. Could be the timeline for a settlement or a ruling by the federal court. I mean, could this last for months or all year long or.

00;05;09;14 – 00;05;40;26

Yeah, I mean, the two sides are going to be meeting with the arbiters this upcoming Thursday. And so I think that process will be pretty expeditious. And whether that gets solved on Thursday or not. And so then what will likely occur is the arbitration process will render a ruling that will most likely result in a notable increase in salary and benefits for the workers, not as much as they would like, of course, but it will result in that, and the railroads will get kind of the predictability that they need, and then they’ll proceed.

00;05;41;00 – 00;06;02;00

Well, then concurrently, you’re going to have this court case that’s going to be proceeding. And what my question is, is, let’s say that the court rules in favor of the Union, that the Canada Industrial Relations Board cannot impose binding arbitration. Do they then say, well, this new contract that arbitration imposed upon us, yeah, we’re going to discard that, and then we’re going to return to a threat of a strike.

00;06;02;00 – 00;06;22;22

That’s hard for me to envision. But, you know, again, stranger things have occurred. But, you know, clearly there are these still kind of warning lights that are out there that we would like to see go away because we want a real forecast of predictability. We don’t have that perfectly right now. But again, we are happy that at least workers have returned to their jobs and we’re seeing a recovery of the network.

00;06;22;22 – 00;06;46;13

Now let’s move on. As this Canadian rail strike fades a little bit here in the U.S., there is uncertainty between dock workers and their employers at both the East and the Gulf Coast ports. As I understand it, the current six year contract expires September 30th. Again, not trying to be a scaremongering here or anything, but could this suffer some of the grain transportation here in the U.S. at a critical time of the year as we get set for harvest?

00;06;46;13 – 00;07;10;15

Yeah, it’s something that’s of clear concern for us within agriculture and obviously the broader economy. So you have the International Longshoremen’s Association, and that’s the union that represents dock workers along the entire East coast of the United States, as well as the Gulf Coast and the Great Lakes. And then the other party is the U.S. Maritime Alliance, and they are represented by the port authorities, the port operators and the ocean vessel companies.

00;07;10;15 – 00;07;41;12

And so the International Longshoremen’s Association has stated publicly that if a new contract is not agreed to by September 30th, they are prepared to strike starting on October 1st. They are not interested in extending the current contract to allow more breathing room for negotiations. So obviously that would be a huge concern to our economy and agriculture. Now for agriculture, it would not impact bulk exports of soybeans, of grain, of other agricultural products.

00;07;41;12 – 00;08;02;04

Those facilities that you commonly will see, say, in the New Orleans area, you have one on the Atlantic coast where you’re just loading vessels with bulk soybeans or bulk soybean meal or corn or whatever the product may be. Those facilities either have their own employees or they work with a different union. So those kind of exports are exempt from this whole negotiation that’s underway.

00;08;02;04 – 00;08;25;18

What would be impacted are agricultural exports via container. These 40ft long or 20ft long steel boxes that we see on truck chassis and rail cars and then ultimately are put on an ocean vessel. We do export soybean, soybean meal. A lot of chilled meats and poultry products are exported via containers. So those are the kind of things that would be impacted by that.

00;08;25;19 – 00;08;47;22

So that is something that is a real concern to agriculture and rightfully so. Moving forward, though, what my crystal ball says is that as we get closer and closer to September 30th, and if an agreement has not been reached, there will clearly be increased pressure being applied on our elected officials to make sure that they do anything possible to prevent a port stoppage.

00;08;47;22 – 00;09;09;13

And of course, we’re in a presidential election year. The current administration, the current Congress, no one wants a port stoppage on the eve of an election. So I fully anticipate this is on the radar screen of our elected officials. Clearly it is right now, but this is something that they will be increasingly pressured to intervene if an agreement has not been reached.

00;09;09;17 – 00;09;30;28

Another thing I wanted to ask you about was BNSF recently halted all grain shuttle trains to Mexico for one month. They say it’s due to the ongoing congestion and service interruptions. Could this hinder delivery of U.S. ag products? Mexico, as you just talked about a little bit ago, it’s a huge customer of the U.S. for the current marketing year, 2.3 million metric tons of UN shipped.

00;09;30;28 – 00;09;42;04

U.S. corn sales are destined to Mexico. That’s 80% more than this time last year. These sales will need to be shipped by another railroad or ocean vessel. So what do you know about that situation?

00;09;42;04 – 00;10;03;00

Yeah, it’s a real concern. So understandably, intuitively, a significant volume of our exports to Mexico, which is a huge market for us. Agriculture, including the soybean industry, occurs via rail. We do load some ocean vessels in the Mississippi Gulf area and they’ll go across the Gulf to some of the ports there, and that’s an important avenue to get to the Mexican market as well.

00;10;03;00 – 00;10;23;23

But the overwhelming is by rail. And so what BNSF has signaled is that they do not have confidence that once you hit the border between the US and Mexico, and they hand off this baton, if you will, where you’re handing it off to a Mexican rail company, that those shipments will not get to their ultimate customers in a efficient, predictable manner.

00;10;23;23 – 00;10;43;27

So what they’re saying is we cannot offer shuttle options and a shuttle train is essentially it’s usually a very long train, but it has an obligation associated with it. There’s a contract associated with that. And so when you sell that to a customer, you as the railroad are saying, we will make this delivery within this certain kind of parameter, the certain kind of timeline.

00;10;43;27 – 00;11;05;19

And because Mexican rail service is not reliable right now, BNSF says we are concerned that we cannot fulfill the obligations of these contracts because of service in Mexico. So therefore, we’re not going to be able to issue these shuttle auctions for sale. So it is a really huge deal. And the timing is really inopportune because, you know, all indications are that we’re going to have a significant harvest come online.

00;11;05;19 – 00;11;26;03

And so you want to make sure that our supply chain is firing on all cylinders across the modes of transportation to our major customers, Mexico being one of them. So obviously it’s something that’s a real issue. And it’s one of those things where, you know, you want to make sure that transportation is a facilitator of profitability, not an obstacle to profitability.

00;11;26;03 – 00;11;45;17

And transportation can be either way. And really, it’s just a function of the degree to which that transportation system is well maintained. It’s predictable, it’s reliable, and there’s a lot of that reliability that’s being called into question. We talked earlier about Canada, that certain issue and challenges manifesting itself when it comes to shipping to Mexico as well.

00;11;45;22 – 00;12;08;10

While the third supply chain concern is the low water levels on the Mississippi River, and recently barge rates in Saint Louis are up 42% higher than a year ago. Rates from Memphis, Tennessee, are up 81% versus a year ago. The question here is for farmers anyway, I guess won’t these higher rates just get passed on to the farmer in the way of wider basis prices?

00;12;08;10 – 00;12;18;28

And what other logistic issues transpire when you have this scenario of low water levels? And I think not to give you a loaded question, but I also understand that it’s mainly been from Memphis southward.

00;12;18;28 – 00;12;43;19

Yeah. And it’s kind of quite remarkable that because the message throughout most of 2024 has been a return to precipitation, you know, turning the tide on the drought conditions and having favorable moisture in the soil. And as a result, water levels on our navigable waterways like the Mississippi River have responded positively to that. Even at times we’ve had flooding conditions, but it really just shows how the pendulum can indeed swing.

00;12;43;19 – 00;13;04;24

Now, obviously, the drought conditions throughout the Midwest is much more favorable in 2024 than it was in 2023 or 2022, but you can see if you have a increasing period without rain that really does have an impact on water levels. And, you know, you’ve seen a seven foot drop at the River gauge at Saint Louis over the last week.

00;13;04;24 – 00;13;27;18

You’re seeing, you know, continued lower levels. You know, Memphis on South, as you mentioned, that’s a problem area. And so obviously it’s something that we’re going to be, you know, clearly monitoring. But you know, when you all of a sudden have lower water means that barge companies have to respond by either light loading their barges and or having fewer barges, that they can last together to form one single unit.

00;13;27;18 – 00;13;55;14

Well, now all of a sudden, you are constraining supply of barge capacity that will naturally put upward pressure on barge freight rates, as you mentioned. And then what happens is those additional costs overwhelmingly and disproportionately get passed on to farmers in the form of a more negative basis or a less favorable basis. So it’s one of those issues where it serves as a good reminder that to farmers that these transportation issues, it’s easy to regard them as more of the macro level.

00;13;55;15 – 00;14;16;18

Oh, that’s something that the industry has to deal with. Well, it’s something that has a real impact on their individual wallet. When you have supply chain disruptions or at least some kind of impediment that we’re seeing right now on the river. We obviously experienced that the last couple of years. And as of right now, it’s looks like we might encounter that once again this year, which is something that’s most unwelcome.

00;14;16;19 – 00;14;23;06

And finally, Mike, what are your thoughts about additional export capacity for U.S. soil and U.S. soy soil products?

00;14;23;06 – 00;14;44;04

Yeah, that’s something that the industry is continuing to pursue. And, you know, we were just in Grays Harbor. The Soy Transportation Coalition Board was just at the Port of Grays Harbor in Aberdeen, Washington, a few weeks ago for our summer meeting. We celebrated what will be the completion in about a year and a half now of an expanded capacity at the AGP facility for exporting soybean meal.

00;14;44;04 – 00;15;16;08

We’re seeing other facilities being planned and developed as well. And obviously this increased market for soybean oil for renewable fuel space is resulting in new opportunities to export soybean meal. And so that’s something that we want to facilitate as much as possible and encourage as much as possible. Obviously, the big kind of question mark can often remain to be U.S. federal policy as it comes to biofuels, and that can all of a sudden significantly curtail that activity just based on decisions made at the EPA or something by the California Air Resources Board.

00;15;16;08 – 00;15;24;05

So these are kind of things that obviously there’s momentum behind. But obviously a lot of it depends upon policy as well. So farmers need to remain engaged.

00;15;24;07 – 00;15;29;26

Mike Stein HUC executive director of the Soy Transportation Coalition, we thank you for your time today. We appreciate.

00;15;29;26 – 00;15;31;10

It. Thank you. Mike, good to be with you.

00;15;31;11 – 00;15;41;28

You too. And if you’ve enjoyed listening to From the Furrow, be sure to tell a friend or to and subscribe to us wherever you listen to your podcasts. Thank you to the Egg Insights Crew for their work on today’s show.

Disclaimer: TRADING FUTURES AND OPTIONS ON FUTURES INVOLVES SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THE INFORMATION AND COMMENTS CONTAINED HEREIN ARE PROVIDED BY EVER.AG AS GENERAL COMMENTARY OF MARKET CONDITIONS. THIS INFORMATION SHOULD NOT BE INTERPRETED AS TRADING ADVICE OR RECOMMENDATION WITHOUT FURTHER DISCUSSION WITH YOUR EVER.AG ADVISOR. THIS IS A MATTER OF SOLICITATION.
EVER.AG INSURANCE SERVICES IS A LICENSED INSURANCE AGENCY AND AN AFFILIATE OF EVER.AG. INFORMATION CONTAINED HEREIN IN THIS WEBSITE IS COMPILED FOR THE CONVENIENCE OF THE USER. INFORMATION IS OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE AND IS FURNISHED WITHOUT RESPONSIBILITY FOR ACCURACY OR CONTENT. MARKET DATA IS SUBJECT TO CHANGE AT ANY TIME. Ever.Ag is a licensed insurance agency in the following states: AZ, CA, CO, CT, FL, GA, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MO, MT, NE, NV, NH, NM, NY, NC, ND, OK, OH, OR, PA, RI, SD, TN, TX, UT, VT, VA, WA, WV, WI, WY.
—
The following music was used for this media project:
Music: Funky Intro 29 by TaigaSoundProd
Free download: https://filmmusic.io/song/9520-funky-intro-29
License (CC BY 4.0): https://filmmusic.io/standard-license
Artist website: https://linktr.ee/taigasoundprod
© Ever.Ag 2023, confidential and proprietary.

The post From the Furrow – Mike Steenhoek – August 27, 2024 appeared first on .