[Charts] USDA Weekly Grain Transportation: Transportation Implications of USDA's September WASDE and Crop Production Reports

<div><b><font face="arial">[Charts] USDA Weekly Grain Transportation: Transportation Implications of USDA?s September WASDE and Crop Production Reports</font></b></div><div><font face="arial"><br></font></div><div><font face="arial">Released at the end of the growing period, USDA?s September World Agricultural Supply and Demand Estimates (WASDE) report includes projections of production and use for corn, soybeans, and wheat. These projections provide broad indicators of transportation demand in the upcoming marketing year (MY). For MY 2021/22, USDA?s World Agricultural Outlook Board (WAOB), which publishes WASDE, projects the United States will produce 546 million metric tons (mmt) of corn, soybeans, and wheat?up 23.6 mmt from last year. However, WAOB also projects the United States will export 143.6 mmt of corn, soybeans, and wheat?down 14.7 mmt, or 9 percent, from MY 2020/21. Domestic use of corn, soybeans, and wheat is estimated to be 407.9 mmt, 6.5 mmt higher than MY 2020/21 (a 1.6-percent increase). Despite the increase in production, the decline in total use of U.S. corn, soybean, and wheat in MY 2021/22 will likely put downward pressure on total grain transportation demand. <br>&nbsp; <br>For a more close-up, regional perspective than WASDE, USDA?s National Agricultural Statistics Service?s (NASS) Crop Production report provides State-level production estimates. This article takes a look at both reports and the implications they hold nationally (WASDE) and regionally (Crop Production) for future grain transportation. <br></font></div><div><font face="arial"><br></font></div><div><font face="arial"><i>NASS Shows Increased Crop Production in Eastern States</i><br><br>While total transportation demand is likely down because of lower use, State-level changes in production may signal regional shifts in transportation demand. The recent severe drought in parts of the Corn Belt has hampered production of corn and soybeans in some States. NASS?s projections of corn and soybean production are significantly lower than last year in Minnesota, Kansas, and Wisconsin (fig. 1). In contrast, several eastern Corn Belt States?Illinois, Indiana, and Ohio?show corn and soybean production that is either at or close to record-high levels. According to Department of Transportation data, key grain corridors in these States include the following: intra-state and interstate truck flows; barge traffic from Illinois and Indiana to Louisiana; rail from Indiana to Georgia; and rail from Ohio to North Carolina. Unlike other western Corn Belt States, Iowa and North Dakota are projected to produce significantly more corn and soybeans than last year. Corn and soybean production in Missouri and Nebraska is forecast at normal to above-normal levels.</font></div><div><font face="arial"><br></font></div><div align="center"><font face="arial"><img src="https://download.qtmarketcenter.com/jay/USGT-Sept16-1.JPG"></font></div><font face="arial"><br></font><div><font face="arial">NASS also projects hard red spring (HRS) wheat production at 305 million bushels (mbu), 43 percent lower than the previous crop year and the lowest on record. From MY 2020/21 to MY 2021/22 (year to year), production in North Dakota and Montana?the largest and second largest domestic producers?is down 53 and 59 percent, respectively. Production in Minnesota and South Dakota is forecast at the lowest levels since 1988. With this drop in production, WAOB estimates HRS use will contract by 128 mbu (or 21 percent) year to year, which will lower regional demand for HRS transportation, such as truck and rail, as well as rail shipments out of the Pacific Northwest (PNW). <br></font></div><div><font face="arial"><br></font></div><div><font face="arial"><i>Total U.S. Corn, Soybean, and Wheat Use Down 8.1 MMT Year to Year &nbsp;</i><br>&nbsp;<br>Transportation demand derives from the various uses of grain, such as exports, feed, and fuel. On the domestic side of use, WASDE estimates production of ethanol?a domestic-use category for corn?to increase by 3.3 mmt year to year. Also, year to year, domestic wheat demand is projected to rise by 1.8 mmt, and increased soybean crush is projected to help soybean use rise by 1.5 mmt. Such increases in domestic use will offset some transportation demand that was lost because of reduced export volumes. Such increases may also result in less demand for barge services, which primarily serve export movements, but more demand for trucks and railroads, which support most domestic grain movements.<br><br>For a global perspective on use, the September WASDE projects corn, soybean, and wheat imports worldwide. Year to year, total global use for these commodities will increase, while U.S. exports will decline. WAOB expects export volumes of all commodities, except hard red winter wheat, to decline. More specifically, WAOB estimates year-to-year corn exports will decline by 6.9 mmt, soybeans by 4.7 mmt, and all wheat by 3.2 mmt. Lower U.S. corn, soybean, and wheat exports in MY 2021/22 can be attributed to a few primary factors, including relatively high domestic cash prices, a strong U.S. dollar, increased domestic use, and record-high grain production (and hence, rising exports) in key, U.S.-competing countries.<br><br>In MY 2021/22, WAOB estimates corn will represent 45 percent of total grain export volumes, followed by soybeans (39 percent) and wheat (16 percent). According to Federal Grain Inspection Service (FGIS) data, over the last 5 marketing years, an overwhelming majority of corn, soybean, and wheat exports are shipped through export terminals in the U.S. Gulf (Mississippi River and north Texas) and ports in PNW (Oregon and Washington). Annually, over the last 5 years, at least 95 percent of corn exports, 90 percent of soybean exports, and 93 percent of wheat exports originated from the U.S. Gulf and PNW. According to FGIS (GTR table 16), over the last 3 years, an annual average 83 percent of HRS exports by ocean vessel originated from terminals in PNW, and 9 percent originated from terminals on the Mississippi River. Reduced HRS exports will lead to lower rail demand, as well as somewhat reduced demand for Great Lakes ships (lakers) in the Great Plains. Therefore, given WAOB?s reduced year-to-year export estimates, lower barge, rail, and ocean vessel demand could emerge at the ports in the U.S. Gulf and PNW. If the estimated extra production in the eastern Corn Belt States materializes into exports, that could increase rail and ocean-vessel volumes at ports on the Great Lakes (e.g., Toledo, Chicago, and Duluth) and the Atlantic Ocean.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;<br>&nbsp;<br><i>Different Transportation Patterns May Emerge in MY 2021/22 </i><br><br>NASS?s State-level production estimates show the potential for record-high corn and soybean production in the eastern Corn Belt, and WAOB projects a decline in total use. These estimates suggest different transportation patterns this year, in terms of location and mode. If USDA?s projections are realized, eastern carriers could see more originations, and with an increase in domestic use, trucks could see more traffic. Also, if exports decline as expected, railroads, barges, and ocean vessels could see less traffic. Factors affecting corn, soybean, and wheat exports are diverse, and ambiguity about how much countries may import from the United States further complicates the picture. For example, Chinese demand for U.S. agricultural commodities helped support U.S. row crop exports and pushed the demand for agricultural transportation to record levels in MY 2020/21. However, changes to Chinese demand could impact overall transportation patterns in MY 2021/22.<br></font></div><div><font face="arial"><br></font></div><div><font face="arial"><br></font></div><div><font face="arial">LJ<br></font></div>