Fertilizer Logistics 2016: All Clear, So Far

West Central Dome structure

One of the biggest concerns among ag retailers in 2016 regarding around fertilizer logistics is farmers’ hesitancy to purchase product beforehand due to falling markets. Photo credit: West Central Distribution

After a relatively hairy early start to the spring fertilizer movement season with flooding in Louisiana and St. Louis, things are looking good heading into #Plant16 for the men and women tasked with keeping retailers’ fertilizer sheds stocked for the season.

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“There haven’t been any systemic issues on the river for quite a while,” says Drew Post, CHS Procurement Manager, Agronomy. “In January we had some flooding in St. Louis on the lower Mississippi, and that seems to have mostly cleared up. From time to time we’ll have logistical issues that are kind of on the spot — there was a couple barges that sank about 40 miles north of Cairo (IL) when a tow (boat) hit the bridge. It’s just kind of little things like that at this point.”

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The railroads also are in fine shape, according to Brock Lautenschlager, CHS, Director, Rail Services, Grain Marketing North America.

“The Class 1 railroads in the Midwest have been performing very well over the past 12-plus months. Their velocity is up, I would say holistically probably by about 20%, so they’re able to move more product with fewer resources,” says Lautenschlager, who has been managing the U.S. retail giant’s grain and fertilizer rail shipments for the past two years after spending the previous 12 in the railroad industry.

“Number two, we have seen demand drop off for the Class 1 industry: coal volumes are down, grain volumes are down, crude oil volumes are down. Going into the spring we don’t expect coal or crude oil to come back, so we do feel the railroads are well positioned to meet the demands for the fertilizer side of our business.”

Future Prices Causing Fall Headaches?

Brian Peters, Crop Nutrient Regional Sales Director with West Central Distribution (Willmar, MN), also oversees fertilizer movements as part of his day-to-day. Peters (and others we’ve spoken with) says one of the biggest concerns currently around fertilizer logistics is farmers’ hesitancy to purchase product beforehand due to falling markets.

“At the latter end of the season, because of future month’s prices all being lower, everyone is going to be empty and that’s always a challenge for supply,” he explains. “They’ll have to do it (recharge dwindling inventories) before October, but the way the future pricing is, the later the better, which always puts everything tight.”

West Central Trucks

One solution to a late spring fertilizer rush could be shifting transport from rail and barge to more truck shipping than in past years. Photo Credit: West Central Distribution

One solution to a late spring fertilizer rush could be shifting transport from rail and barge to the highway. Peters agrees that we could see more truck shipping than in past years.

“The truck market has really expanded because the dealers just can’t fully rely on rail,” he adds. “Then you get into some of the issues with the logistics of the product from the supplier, if they have that many trucks coming out of the terminal, can they keep that terminal full? And we see that every year.”

Always Watching

Meanwhile, back at CHS up in St. Paul, MN, Post says that even with the sunny outlook his team is always monitoring the rivers because issues tend to pop up rather quickly.

“We’re always monitoring river levels, rain, and current strength as well. When you get high water (on the river) the current tends to be stronger and that can really affect transit times between the Gulf and upstream destinations.”

Another issue that could rear its ugly head quite suddenly is the dreaded “D” word: Drought.

“It could cause issues into the summer. If we have a dry season, we’ve got to watch water levels (on the river) because when levels go down, shipping prices go up. But also the warm, dry weather will have a pretty bullish effect on crop prices, too.”

And with crop prices depressed, slow international demand for U.S. grain has basically opened up the river for retailers looking to bring in crop nutrients by the barge load, according to Post.

“Southbound grain flow (on the river) has largely been curtailed, so on the river as a whole there are fewer barges under load at any one time than there used to be. That tells me that there are more barges available and that when you’ve got fewer barges under load, you’re going to see a depreciation in trade values. Simple supply and demand economics.”

Keep Your Supplier Close

Railroad-wise, CHS’ Lautenschlager admits “we were impacted some by the floods down around the Louisiana Gulf in mid-March, but I’d say the impact was nominal. We worked through it by shifting our logistics around to accommodate for the 48 hour delays in moving rail volumes through the region.”

“I would say that overall the railroads are well-positioned to deliver fertilizer this spring,” he adds when asked if he has any message for retailers. “However, at times when service is running well they should continue to be engaged with their wholesale provider around what their demand is to ensure that the supplier can get product delivered in a timely manner. In my mind, it’s all about the planning.”

Lautenschlager agrees that truck industry is becoming more competitive, but America’s first industry — rail — will continue to have its place in the fertilizer logistics ecosystem.

“The value that rail brings is, number one, the railroads have a cost advantage for moving long haul loads over trucks,” he says. “Number two, when you move shuttle trains of urea, for example, every rail car that you bring into a facility represents more than three trucks worth. We can bring in an 85-car train of urea into a facility and unload it within a day. That’s 8,500 tons. And on the flip side with trucks you would need more than 250 trucks in that same time period.”

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