The late harvest of this year’s forecast record large soybean crop and second largest ever corn crop may congest rail and barge traffic, and squeeze the time period for barges to move grain south before northern stretches of rivers freeze over for the winter. The good news is the cost of shipping grain and oilseeds in most cases has held below year-ago levels, mostly due to lower fuel prices.

In its Oct. 8 Grain Transportation Report, the U.S. Department of Agriculture reported unshipped grain export balances as of Sept. 24 were 35.3 million tonnes, up 34% from a year earlier, with the amount of unshipped soybeans up 95% and of corn up 15%.

"The higher level of unshipped balances may be due to corn and soybean harvests that are delayed by rainy weather throughout the Midwest," the U.S.D.A. said. "Harvest pace is expected to quicken over the next month, however, compressing demand for transportation services across all modes into a shorter time period."

The aggregate soybean harvest as of Oct. 11 in the 18 largest producing states was 23% completed, 26 percentage points behind a year ago and 34 points behind the 2004-08 average for the date, the U.S.D.A. said in its weekly Crop Progress report. On Oct. 9 the department forecast 2009 U.S. soybean production at a record 3,250 million bus, up 10% from last year.

Corn in the 18 major growing states as of Oct. 11 was 13% harvested, 7 percentage points behind last year’s late crop and 22 points behind the five-year average, the U.S.D.A. said. U.S. corn production was forecast at 13,018 million bus this year, up 8% from 2008 and only slightly smaller than the record 2007 crop of 13,038 million bus.

Although U.S. wheat outturn was down 11% from 2008, the harvest of winter wheat was long past and of spring wheat was finally over, the crop still may impact fall grain movement. Because wheat prices have been well below year-ago levels, producers have been slow to sell their 2009 crop. The slow sales allowed the railroads to stay current during and after wheat harvest, but the result has been limited storage space for fall row crops, especially in the Southwest. Farmers now are faced with piling some of their fall grain on the ground, marketing it or selling wheat to create storage space, of which both latter options would add to rail demand at an already heavy time of year.

Currently there were few if any major concerns about transportation expressed by grain traders. One merchandiser said rail rates were up "about what you would expect" from a year ago but total shipping costs were down because of lower fuel surcharges. He noted that in some cases the railroads would "work with people" because "they’ve been hungry" due to reduced tonnage the past several months. But he also suggested those opportunities were likely to decrease as rail car demand increases going into fall harvest. He added that railroads had preplaced cars in anticipation of increased demand.

"We are definitely seeing a pickup in our loading as we are beginning to finally feel the harvest," Kevin Kaufman, group vice-president of agricultural products for Burlington Northern Santa Fe Railway Co., said in a webcast last week. Rates for October shuttle trains were trading as high as $600 over tariff in the secondary market, he said.

B.N.S.F. shuttle trains were averaging three turns a month, Mr. Kaufman said, and the 90 shuttles currently running were moving as much grain as 111 shuttles moved last year.

"System-wide velocity has never been higher," he said. The railroad still had 3,000 cars in storage, was "totally current" on orders and would offer more shuttles this week, he said. He also noted wheat movement east to the "head of the lakes" was strong and there was a large lineup of ships waiting to load soybeans in the Pacific Northwest.

The U.S.D.A.’s grain transport cost indicators showed significant declines from a year ago for most shipping modes. For the week ended Oct. 7, ocean rates for grain going to Japan from the Gulf were 250% of the base (year 2000 equal to 100), even with last year, and from the Pacific Northwest were 209%, down 16%. The barge cost indicator stood at 259% of the base, down 39% from a year ago, and the truck indicator was at 173%, down 33%.

Lower shipping costs are mainly the result of lower fuel prices. Other factors are reduced tonnage, due in part to the domestic and global economic downturn, and larger world grain supplies, which reduced global export demand.

U.S. weekly retail on-highway diesel fuel prices averaged $2.60 a gallon the week of Oct. 12, up about 2c from a week earlier but down 29% from a year ago, according to the Energy Information Administration of the U.S. Department of Energy. The latest average was up 29% from the low set in March 2009 but was down 45% from the high set in July 2008, the E.I.A. data showed.

Lower fuel costs offset rail rates

Because of lower diesel prices, railroad fuel surcharges are well below year-ago levels, although up slightly from summer lows. The rail surcharge is based on the E.I.A. average retail highway diesel price, but lags by two months. Most railroads have both mileage-based and rate-based fuel surcharges.

The B.N.S.F. mileage-based surcharge for October and November was set at 35c per mile per car, up from 33c in September and up from the 52-week low of 22c in May but below the high of 87c in September 2008. The B.N.S.F. adds a surcharge when the average diesel price exceeds $1.25 a gallon.

The Union Pacific Railroad mileage-based surcharge was 11c a mile in October and November, up from 9c in September and August but well below the high of 53c in September 2008. Since the U.P. adds the surcharge only when the average diesel price exceeds $2.30 a gallon, the railroad did not have a surcharge from March through July of 2009.

Total rail costs for shipping soybeans, corn and wheat from various interior points to U.S. ports were unchanged to as much as 21% lower from a year ago for unit trains and 7% to 17% lower for shuttle trains in early September, according to the U.S.D.A. Costs were down 10% to 15% in most cases. Modestly higher rates per car were more than offset by sharply lower fuel surcharges.

Overall tonnage — grain, freight and other products — moved by rail and truck is down sharply from a year ago but has shown improvement the past couple of months.

U.S. rail tonnage in August was down 16% from August 2008, but the percentage of decline was the smallest since February, according to the Association of American Railroads.

"August was another month where we are seeing traffic data moving in the right direction, but we are still in a wait-and-see mode," said John Gray, senior vice-president of policy and economics at the A.A.R. "Railroads are beginning to bring cars out of storage, a promising sign there is growing demand to move more things by rail. However, to date, the improvements remain too small to judge whether they are the result of seasonal factors or indicators of an emerging recovery."

In the first seven months of 2009, total U.S. rail carloadings were down 19% from the same period a year earlier, the A.A.R. said, with grain car loadings down 23%. The U.S. fared slightly better than Canada, where total loadings were down 24% in the January-July period, but worse than Mexico, where loadings were down 15%.

Grain car loadings for the year to date through Oct. 3 were down 21% from the same 39 weeks a year earlier, according to the A.A.R. Canadian rail carloadings of grain were down only 0.6% through Oct. 3, and Mexican loadings were up 15%. U.S. grain mill product loadings were down 8% with "food and kindred products" down 13%. Total U.S. carloadings were down 18% through Oct. 3, the A.A.R. said.

Exports keep ocean freight down

Although soybean exports have been strong, lower U.S. corn and wheat exports have contributed to reduced demand for ocean freight. In its Oct. 9 World Agricultural Supply and Demand Estimates, the U.S.D.A. said U.S. wheat exports in the 2008-09 marketing year ended May 31 totaled 1,015 million bus, down 20% from 2007-08. And the U.S.D.A. lowered its projected 2009-10 wheat exports to 900 million bus, down 11% from the prior year.

Corn exports in 2008-09, ended Aug. 31, were estimated at 1,858 million bus, down 24% from 2007-08. But corn shipments were forecast to increase by 16% in 2009-10, to 2,150 million bus, as lower corn prices and the continued weakening dollar made corn more attractive to foreign buyers.

Due to strong demand from China, soybeans have been the only grain or oilseed showing higher export levels the past two years. Soybean exports in 2008-09 were estimated by the U.S.D.A. at 1,280 million bus, up 10% from 2007-08, and for 2009-10 were projected at 1,305 million bus, up another 2% from the previous year.

Total marketing-year-to-date export inspections as of Oct. 1 for the nine grains and oilseeds tracked weekly by the U.S.D.A. were 766,570,000 bus, down 22% from the same date last year, with wheat inspections down 35%, corn up 7% and soybeans up 3%.

Some pickup was expected in grain exports, with 65 vessels in U.S. Gulf ports waiting to be loaded within 10 days of Oct. 1, the U.S.D.A. said, noting it was the first time since early March that more than 60 ships were lined up.

"The rising vessel activity may be due to the near completion of the fall harvest in the Delta states, moderate ocean freight rates, the looming Midwest harvest and recent strong export sales of corn to the top five major destinations and soybeans to China," the U.S.D.A. said.

The cost of shipping grain to Japan from the U.S. Gulf was $56 a tonne as of Oct. 1, unchanged from a year earlier, and from the Pacific Northwest was $29.50, down 16%, according to the U.S.D.A.

Ocean vessel rates for shipping grain to Japan peaked just before midyear 2008 and then fell sharply through the end of last year. Rates have since risen gradually but remain well under year-ago levels. Rates for shipping to Japan from the Gulf in September were down 35% from September 2008 and from the Pacific Northwest were down 42%, according to data from Drewry Shipping Consultants Ltd and O’Neil Commodity Consulting.

London’s Baltic Exchange dry freight index, which includes grain, fertilizer, coal and iron ore, was at a seven-week high last week, although reduced demand for iron ore from China, the addition of several new ships to the global fleet and ongoing moderate fuel prices, were expected to keep ocean freight rates in check.

Barge grain movement stays strong

Despite the slump in grain exports, movement of grain by barge has been strong. For the calendar year through Oct. 6, a total of 26,283,000 tons of grain had been shipped on the Mississippi, Illinois, Ohio and Arkansas river systems, up 25% from the same period last year, according to the U.S.D.A. and the Army Corps of Engineers. But barge grain movement in the week ended Oct. 3 was 28% below the same week last year, likely indicating the late start to corn and soybean harvest in the Midwest.

Barge freight rates were well below year-ago levels. For the week ended Oct. 6, rates for southbound barges to the Gulf from points north ranged from 28% to 65% below the same week last year, according to the U.S.D.A., although rates had all increased from the prior week.

Both barge and rail transportation disruptions have been relatively minimal this year. Currently there were delays due to repairs at Markland Locks and Dam on the Ohio river, which were expected to continue for 90 days. Most railway problems were flood related earlier in the year.

Truck tonnage improves sporadically

The American Trucking Associations’ seasonally adjusted For-Hire Truck Tonnage Index in August was up 2.1% from July, equal to the gain in July from June.

"The gains in tonnage during July and August reflect a growing economy and less of an overhang in inventories," said Bob Costello, chief economist for the A.T.A. "While I am optimistic that the worst is behind us, most economic indicators, including industrial output and household spending, suggest freight tonnage will exhibit moderate, and probably inconsistent, growth in the months ahead."

The August 2009 index was down 8% from the same month last year, but it still was the best showing since November 2008, the A.T.A. said. Except for a 9% decrease from a year earlier in February, monthly tonnage had been down more than 10% from the same month in the prior year in each of the first seven months of 2009, A.T.A. data showed.

The trucking index hit a multi-year low in April, rose slightly from the prior month in May and fell again in June before posting gains the next two months. Still, all levels were well below those of the previous year. Since about 70% of U.S. tonnage is moved by truck, the A.T.A. index may give an indication of the nation’s economic health.

RailAmerica shares ease after i.p.o.

JACKSONVILLE, FLA. — In what some saw as an indication of the public’s attitude toward railroad "health," RailAmerica, Inc., which owns 40 regional and short line railroads that operate in 27 states and Canada, including the Kyle Railroad Co. in Kansas, raised $330 million in an initial public offering last week of 22 million primary and secondary shares at $15 a share, which came in below the initial target of $16@18.

On Oct. 13, the first day of trading the shares on the New York Stock Exchange, the stock opened at $14.35, about 4% below the $15 offering price, and closed at $13.75, down 8% for the day. But press reports indicated the decline likely was an indication of weak interest in i.p.o.s in general, which has been the case the past couple of months. The Jacksonville-based company was taken private in February 2007 in a $1.1-billion buyout by Fortress Investment Group L.L.C., which will own more than half of RailAmerica’s stock. RailAmerica was expected to net about $160 million from the i.p.o., which it indicated would be used in part for paying down debt, funding working capital, and making strategic investments and acquisitions.