As Mississippi River Shipping Speeds Up, Farmers See Their Grain Prices Fall | Company

Farmers facing high fuel and fertilizer costs this growing season could at least seek solace in relatively high commodity prices. However, even this good spot can slip away as low water on the Mississippi River slows shipping and prevents grain from backing into local silos.

On Monday, the US Coast Guard reopened two stretches of the Mississippi River near Memphis, Tennessee, and Stack Island, Mississippi, to one-way commercial traffic after dredging the channel. The closures had stopped around 100 tugs and 2,000 barges last week. As of Tuesday morning, there were no more lines, the Coast Guard said.

“There’s not a lot of storage space in the elevators; only so much space,” said Hunter Biram, an extension economist at the University of Arkansas Division of Agriculture System. “Elevators will divert farmers when they have nowhere to put it.”

Harvesting is underway in Arkansas. According to the National Agricultural Statistics Service, 8% of the state’s soybeans have been harvested as of Oct. 11. This compared to 20% at the same time last year and the five-year average of 19%. Maize harvest was 97 percent and rice 90 percent.

On Monday, soybeans with nowhere to go were stacked at the Helena-West Helena terminal, with trucks lined up waiting to be unloaded. Forty-eight percent of Arkansas soybeans are exported.

The growing stock, coupled with uncertainty about when traffic will be able to descend the Mississippi via New Orleans, is beginning to erode the prices farmers would get at the elevator.

“In these cases, the base weakens when there is a lot of grain on hand,” Biram said. “With rising barge rates, it’s more expensive to ship grain downstream. Grain elevators will bid lower and bid less for grain to account for the higher cost of shipping grain down the river.

Biram said the basis last week was down $1.30 for soybeans and was about the same for corn. The basis is the difference between a local spot price and the futures market price. There was a bit of a rally when the river dredging started to free up traffic, but the base was still down 75 cents. Last year, the base was down 25 cents at the same time.

“With lower prices at the elevator, if farmers have storage they should store their rain and sell it later when they can get a better price,” he said.

Harvest aside, the other concern about the lower river is that while crops are heading to New Orleans for export, that’s when fertilizers typically come up river for the season’s crops. next.

WHAT’S AHEAD

“The biggest issue is planning for next year,” he said. With fertilizers, “this cost is already high and we don’t yet know how high it could go. There could be a big rain next week and alleviate all that.

The Climate Prediction Center is showing near-normal precipitation forecasts for the next eight to 14 days. The seasonal precipitation outlook is less optimistic, showing Arkansas with a below-average probability of precipitation through December.

RISK MANAGEMENT

Apart from storing grain and hoping for rain, there is little more farmers can do this year to protect themselves. However, now is the time for producers to take a closer look at their crop insurance options to improve risk management.

Farmers might consider taking out revenue insurance.

“Currently, the USDA’s Risk Management Agency assesses and administers a few revenue products that could provide protection against price volatility: Revenue Protection, or RP; and Income Protection Plan with Crop Price Exclusion, or RP-HPE,” Biram said.

“RP provides downside risk protection against loss of revenue caused by a change in price, loss of production or a combination of the two,” he said. “With RP, revenue guarantees are calculated with a farm-level yield history, the higher of a projected price or a harvest price determined by RMA, and a level of coverage.

“RP-HPE offers similar price and yield protection, but does not take the price of the crop into account when calculating revenue guarantees, which is not as useful if you anticipate crop prices to rise between planting and harvesting,” Biram said. “When choosing between RP and RP-HPE, the main question to ask is whether RP will provide greater revenue security than RP-HPE and will the net premium payout be higher if I choose PR?”

Biram said that with the deadline for producers to enroll in crop insurance being February 28, there are a few issues to consider before that date:

— Which level of coverage do you think is most likely to trigger the payment of a claim net of the premium paid? Your insurance agent can provide the cost of the appropriate level of coverage.

— Which unit structure is best for my operation? Should a producer group all his fields in the county? If you have fields that have very different returns and potentially face very different risks, consider base and operational units. If these fields in a county face the same risks and many similarities, enterprise units may be beneficial, especially since enterprise units are cheaper to insure.

— Would a zone product be useful to me? An additional coverage option, a county level product, is very popular – is this something to add to the protection offered by my income product decision?

Comments are closed.