Mississippi River closures this spring bottlenecked corn and soybean shipments and sent export price premiums soaring. Corn export premiums have since plunged, but for soybeans, premiums remain 30% greater than normal for this time of year.
The price spread between major soybean production areas in Illinois and Gulf ports is currently around 102 cents per bushel, well above the 10-year norm of 70 cents per bushel for the month of August. For corn, the price spread between Iowa and the Gulf is 66 cents per bushel, below the norm, which is 72 cents, according to data from DTN and USDA AMS Grain Market News Service.
The chart above shows soybean and corn price at US Gulf export terminals minus the respective price in the Corn Belt. The soybean calculation (green line) uses soybean prices in the largest-producing state of Illinois, and the corn calculation (blue line) uses corn prices in the largest-producing state of Iowa. The price spreads show that corn markets have responded quickly to the Mississippi River reopening in late June while soybean markets have not yet returned to normal.
Flood-caused river closures lasted for about three weeks, and the US government resumed reporting data on barge movements on June 29. Corn’s price spread between the interior and the Gulf relaxed within a week, recovering relatively quickly because of the lightness of export demand. Indeed, barge movements of corn are well below those of previous years, according to data from USDA AMS AgTransport (see chart of barge movement data below).
So far this year, moving corn from the US heartland to the country’s main export location, New Orleans, has cost 93 cents a bushel, or 17% more than the trailing 10-year average. For soybeans, the comparable cost is 94 cents a bushel, which is also 17% above the norm. The long-lasting river congestion has driven away foreign buyers and hurt farmer revenues.
Data from the US Army Corps of Engineers underscores this year’s extraordinarily long high-water season. Four months of high water has been the cause of the difficulty in shipping crops via their largest export conduit, the Mississippi River. At river mile 103 near New Orleans, the river has spent 70% of its time since the beginning of March at over 16 feet; the river is considered at flood stage at 17 feet.
As a comparison, last year the Mississippi River’s depth near New Orleans exceeded 16 feet for two weeks in March, a period associated with high basis spreads between the interior US and New Orleans export terminals. Opposite to what we’re seeing today, the soybean market in 2018 recovered sooner than did the corn market. The export price premium last year exceeded $1.00 per bushel for six weeks in the soybean market and 2½ months in the corn market.
Soybeans’ continuing export premium has caused more soybeans to be pulled from their mid-American bins to the New Orleans’ transshipment facilities. That in turn has contributed to a faster recovery in soybean barge shipments than in corn barge shipments. But the persistence of the high price spreads indicates more soybean shipments will be needed to regain market equilibrium.
Soybean barge traffic (left chart) has returned to normal levels as soybeans’ high export premiums have persisted even weeks after the Mississippi River reopened. But corn barge traffic (right chart) lacks such price-spread incentives and still remains at the bottom of its normal range.