U.S. May Suffer Canada-type Grain Transport Squeeze

The U.S. could face the kind of infrastructure squeeze that hurt Canada’s grains industry last winter, the International Grains Council said.

While prices of grain futures have tumbled to less than $3 a bushel for corn in North Dakota, premiums being charged at U.S. ports have soared.

For wheat, the basis – the difference between cash and export values – is “close to give year highs,” the IGC said, attributing the level to higher prices needed to secure transport. Basis has been “lifted by tight inland transportation and limited port loading capacity,” the council said.

Bumper crops of corn and soybeans may strain rail logistics and export loading capacity further during the autumn, the council said. Also, railcar demand for petroleum and related products continues to rise. If barge and rail freight operators give priority to energy products, grains storage capacity might come under pressure during the peak harvest season, the IGC stated.

This would create a situation similar to that which occurred last winter in Canada, when cold weather forced trains to run slower and at shorter lengths, adding to the pressure on rail capacity. Canadian growers accused rail companies of favoring energy products over grains, a charge the operators denied, although the government introduced a system of fines to guarantee crop transport capacity.

In the U.S., the transport squeeze may trigger additional gains in basis levels for grains and negatively impact export competitiveness for U.S. crop shipments, the IGC warned. S