Fertilizer Logistics: What To Expect This Spring

You’d think with all the modes of transportation available today, how could dealers ever end up in a shortage situation. It’s rare, but it does happen. Barges, trucks, rail — even international dry bulk ships sailing around the globe — are all intertwined at some level. A hiccup in one segment can sometimes affect another.

That’s most noticeable since last summer’s drought where major waterways saw levels drop like rocks, causing other transportation methods to kick in.

For example, throughout the late summer and fall last year, the usual 19- to 21-day trip for a grain barge to float from St. Paul, MN, to New Orleans, LA, increased by as much as 10 days.

Barge drafts, the amount of barge extending below the waterline, were at times reduced by two feet. According to the Soy Transportation Coalition (STC), every foot of draft reduction cuts cargo capacity by 5,500 to 6,500 bushels. Put another way, every inch of draft you can’t use reduces the cargo by about 30,000 pounds or roughly 500 bushels.

“The low river issue is a vibrant example of how the drought of 2012 not only hampered the ability of farmers to produce, but also the ability to deliver that crop,” says Mike Steenhoek, STC’s executive director.

About 80% of soybean exports occur between September and February, before the glut of South American beans hit the market.

“Given this six-month concentration of exports, a supply chain disruption then is analogous to a supply chain disruption for retailers prior to the Christmas season,” Steenhoek says.

To compensate for the reduced barge movement on the Mississippi River over the winter and spring, nearly half of CHS Inc. crop nutrient supplies shifted to rail using unit trains. According to Larry Cook, northwest regional supply manager for CHS crop nutrients, the per-ton cost for railing from Galveston, TX, into an Upper Midwest warehouse was comparable to barge transport.

“That’s the pricing benefit of dealing with greater rail volume in the form of 85-car unit trains,” Cook says.

This Year’s Outlook

So what does this spring look like from a transportation perspective and how might it affect you? Here’s what transportation specialists at CHS have to say.

Ocean Shipping. A record number of new dry bulk ships being brought into the global fleet are helping keep ocean freight rates low and fairly stable. That trend could last at least through the first half of the year, says Mike Klein, senior merchandiser of ocean freight for CHS.

He says the new dry bulk vessels arriving in 2013 should increase global shipping capacity by 8%. He adds that last fall, there wasn’t as much of a spike as usual due partly to the increase in new Panamax (60,000 to 80,000 deadweight tonnage) and Supramax (40,000 to 60,000 deadweight tonnage) vessels — ordered five years ago — hitting the water, plus a below-normal U.S. harvest.

“We’ve enjoyed fairly reasonable and stable freight rates for much of the past year, despite higher fuel prices. That could start to change later this year,” he says. “Typically, freight rates increase by fourth quarter, after the North American harvest is in.”

River Barge. Ben Doane, barge coordinator at CHS, has been encouraged by recent rains that have helped recharge the Corn Belt river system. “Those rains have added close to 10 feet of water on the stretch of the Mississippi River between St. Louis, MO, and Cairo, IL, where the Mississippi and Ohio Rivers converge,” he says. “This, along with good progress on rock removal in the channel at Thebes and Grand Tower, IL, is a plus for the entire river transportation system.

“This increases our confidence of navigable river north of Cairo over the next few months, which also provides some assurance we’ll be able to execute grain delivery on the river system into spring and summer,” he adds.

According to Doane, improved water levels on the Mississippi River also means:

  • Increased tow sizes.
  • Deeper drafts.
  • Faster transit times.
  • Less risk of groundings and dredge work.

“Still, the industry is hoping for widespread rains this spring to bail it out of what could be looked at as a long-term problem,” Doane says. “We need enough precipitation so we can maintain a deep enough channel between St. Louis and Cairo to maintain normal barge traffic. Usually, ice melts and the Mississippi River opens to the north the last part of March. That’s when we’ll know if there’s enough runoff to put water back into the system.”

Doane says inputs such as fertilizer, which is often imported, could get tighter if river levels are low and barges can’t be filled or transit times are slow. “You can’t just flip a switch and move to rail because most of the port facilities at the Gulf are set up to handle barge traffic.”

Rail. When it comes to moving commodities like grain and fertilizer via the rail system, it’s mostly good news. “Although the low river issues have added more demand for rail, the rail industry has enough capacity over the next few months to easily absorb that demand,” says Dan Mack, vice president of rail transportation and terminal operations at CHS.

However, he says the tank car market is a different story. “With the growth in demand for tanks inside the crude oil business, the tank car market is tight and values are reflecting that. However, tank cars used to transport UAN and ammonia fertilizer are different so we shouldn’t see major issues with their availability.”

Other Rail Issues

Longer term, Mack says rail issues will depend on several unknowns.

1. What will crop production look like this fall?

2. What will the export picture look like for grain?

3. Will crude oil by rail continue to grow?

4. Will coal come back into play? “Right now, electrical generation facilities have been switching to natural gas,” he says. “If that starts to ramp back up, it will fill the rail capacity quickly.”

Trucks. Last year’s short crop freed up a lot of trucks in the transportation system so the truck fleet is sufficient, says Scott Meyer, office manager, CHS grain marketing at Lincoln, NE.

But with low river issues on both the Missouri and Mississippi, he says it would be a “monumental task to move all the crop nutrients into place without them.

“The trend has been toward more just-in-time delivery for crop nutrients. So it’s important for dealers to have a plan. They’re going to want to have products in place well ahead of their customers’ needs,” Meyer says.

With an expected 98 to 99 million corn acres this year, Meyer believes there’s going to be a tremendous demand for crop nutrients. “Dealers need to get fertilizer into their warehouses so when Mr. Farmer comes calling, it’s in place,” he says.

Leave a Reply

Fertilizer Stories

Potash Corp Agrium
Crop InputsAgrium, Potash Corp To Merge To Create $36 Billion Company
September 12, 2016
Canada’s Agrium Inc. and Potash Corp of Saskatchewan Inc. have agreed to combine in a deal that would create a Read More
FertilizerBRANDT Specialty Fertilizers Help Grower Set Soybean Yield Record
September 12, 2016
BRANDT, a leading agriculture retailer and manufacturer of specialty Ag products, has announced that its new proprietary nutrition products were Read More
Corn Field
FertilizerBridging Crop Nutrition Science And Technology
September 7, 2016
The future seemed to draw nearer for the 1,600-plus attendees of the co-located InfoAg and International Precision Agriculture conferences in St. Read More
Fertilizer Bin
FertilizerState Of The Fertilizer Industry Report Highlights Environmental, Social Contributions
September 6, 2016
As consumers, we live in a world with access to more data than we could ever hope to mine through. Read More
Trending Articles
Corn Field
Eric SfiligojFacing Ag Industry Challenges
September 26, 2016
At the 2016 annual Mid America CropLife Association (MACA) meeting in September, a pair of crop protection company representatives discussed Read More
Bayer Monsanto
Crop InputsBayer-Monsanto Mega-Merger: 6 Things You Need To Know
September 14, 2016
Mega mergers have become almost routine in the agricultural industry. Right on the heels of Monday’s news that fertilizer giants Potash Read More
Potash Corp Agrium
Crop InputsAgrium, Potash Corp To Merge To Create $36 Billion Company
September 12, 2016
Canada’s Agrium Inc. and Potash Corp of Saskatchewan Inc. have agreed to combine in a deal that would create a Read More
Osage Co-op Elevator Osage, IA Finished Building
OpinionAre We Crazy?
September 8, 2016
At some point in the first few months of my employment here at CropLife® magazine, I started getting curious about Read More
ManagementMAGIE 2016 Highlights and Deere Anti-Trust
September 1, 2016
CropLife Editor Eric Sfiligoj discusses the recent Midwest AG Industries Exposition and the Department of Justice’s objection to John Deere Read More
ASMARK 2016 Retailers Live! Tour - CPS
CropLife 100CPS Acquires Texas Retail Operation
August 23, 2016
Crop Production Services (CPS) has acquired the assets of Larry’s Chemical and Spray, Inc., for an undisclosed amount in an Read More
Latest News
Young Corn Field
StewardshipStudy: Ohio Farmers Doing ‘A Good Job Of Managing…
September 27, 2016
Leaders from Ohio’s largest grain farming organizations announced today that Ohio farmers are doing their part in effectively managing phosphorus Read More
Growmark FS Outlet
Industry NewsGROWMARK To Purchase Suncor’s Share Of UPI
September 26, 2016
GROWMARK and Suncor have reached an agreement in which GROWMARK will purchase Suncor’s 50% interest in UPI, Inc. in Ontario, Read More
Corn Field
Eric SfiligojFacing Ag Industry Challenges
September 26, 2016
At the 2016 annual Mid America CropLife Association (MACA) meeting in September, a pair of crop protection company representatives discussed Read More
Syngenta Seedcare Institute
Seed/BiotechSyngenta Opens New North America Seedcare Institute In …
September 23, 2016
Syngenta unveiled its new Seedcare Institute in Stanton, MN, during a recent grand opening celebration. More than 150 industry leaders, Read More
StewardshipMonsanto Invests $1.6 Million In System To Quantify Gre…
September 23, 2016
The USDA – Natural Resources Conservation Service (USDA-NRCS) recently awarded the National Corn Growers Association (NCGA) and its Soil Health Read More
Pipe rack
LegislationCourt Sides With Ag Retailers On PSM
September 23, 2016
The D.C. Court of Appeals has ruled the Occupational Safety and Health Administration violated the Occupational Safety and Health Act when Read More
ManagementPacific Coast Fertilizer Announces Interest In Longview…
September 22, 2016
Pacific Coast Fertilizer LP (PCF) announced at the Cowlitz Economic Development Council board of directors meeting its interest in developing Read More
Young corn plants in soil
UncategorizedCool Planet Raises Additional $9 Million To Commerciali…
September 22, 2016
Cool Planet has announced the first close of a new financing round to commercialize the company’s Cool Terra Engineered Biocarbon Read More
Crop InputsJim Loar Promoted To President And CEO Of Cool Planet
September 22, 2016
In a move that reflects and reinforces the company’s commitment to the agricultural market, the Cool Planet board of directors Read More
BlendersNorth Dakota Coop Debuts Dry Fertilizer Plant
September 22, 2016
North Central Grain Cooperative has begun operations at a new dry fertilizer plant at its Rolla, ND, site. It is Read More
Crop InputsMonsanto, Bayer Officials Defend Proposed $66 Billion M…
September 21, 2016
Top officials for Monsanto and Bayer defended their proposed $66 billion merger before skeptical senators on Tuesday, insisting that the Read More
ManagementUpcoming Shows & Recent Events
September 19, 2016
Editors Paul Schrimpf and Eric Sfiligoj talk about upcoming trade shows and events and review the Mid America CropLife Association Read More
Industry NewsVerdesian Life Sciences Appoints New CEO
September 19, 2016
Verdesian Life Sciences, a plant health and nutrition company, today announced that its board of directors has named Kenneth M. Avery Read More
Corn
Crop InputsEPA Settles With Syngenta For Alleged Multi-Regional Pe…
September 19, 2016
The U.S. EPA has announced a multi-region settlement with Syngenta Crop Protection, LLC (Syngenta) in Greensboro, NC, for alleged violations of Read More
ManagementMerger Mania
September 16, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss this week’s mega-ag mergers of Bayer and Monsanto and Potash and Agrium. Read More
Monsanto sign
Crop InputsMonsanto Ends Up Being A Bargain For Bayer
September 16, 2016
History will say Bayer got a bargain in its $66 billion purchase of Monsanto, writes David Nicklaus, St. Louis Post-Dispatch. The Read More
Greg Musson, Gar Tootelian
CropLife 100California Ag Retailer Steps Up To Feed Families Affect…
September 16, 2016
GAR Tootelian, Inc. (GAR) in Reedley, CA, is challenging the Central Valley to help raise enough money and provide 525,000 meals Read More
Crop InputsBayer, Monsanto CEOs Discuss Merger
September 15, 2016
Werner Baumann, Bayer CEO, and Hugh Grant, Monsanto CEO, discuss why they decided to merge their companies. Read More