CHICAGO Aug 19 The long reach of last summer's
devastating U.S. drought has reversed the flow of the mighty
Mississippi River - for corn, at least, with grain-laden barges
beginning the rare movement north to Midwest ethanol plants from
The shipments come as the U.S. faces a 17-year low in corn
supplies by the end of the month due to the historic drought,
which slashed harvests and sent grain prices to record highs a
The tight supply is upending the country's tradition-bound
agricultural economy, which is holding its breath in the weeks
before an expected record harvest begins some time next month
following a wet spring and summer.
Grain, which typically flows south on the river to export
markets, is heading north from states like Louisiana and
Arkansas, where farmers begin harvesting earlier than their
Midwestern counterparts. Normally, much of that grain would ship
overseas, but after prices climbed following the drought,
exports are set to drop to a 41-year low.
Ocean-going vessels are reversing course too, with record
U.S. grain imports expected from countries like Brazil and
Canada as U.S. processors like Ingredion and Pilgrim's
Pride seek cheaper corn.
"What's really changing here is the flow of corn," said
Brent Baker, a vice president for John Stewart & Associates, a
trading firm. "This is unprecedented."
The 2013 corn crop is expected to come in at a record 13.8
billion bushels, up 28 percent from last year. If that happens,
supplies will build to an eight-year high, making the
famine-to-feast reversal the largest annual swing in more than
half a century.
But even with a big harvest coming, Mother Nature has added
a unique twist: A historically wet spring delayed planting by
weeks, and cool wet weather that followed means farmers expect a
Instead of drought, this year farmers are worried about an
early frost that could wipe out their crops--a new anomaly that
would delay a return to normalcy for the farm economy.
"A lot of strange things happen after a drought that has a
severity to be the worst one in 80 years," said Rodney
Weinzierl, executive director for the Illinois Corn Marketing
Roughly 1,000 barges carrying newly harvested southern corn
will likely travel north by mid September, according to Baker. A
barge trader interviewed by Reuters confirmed that estimate,
which would be up about ten-fold from last year.
Demand is intense as Midwest ethanol producers and
processors do not expect local farmers to harvest much corn
until early October, weeks later than usual.
"As fast as you can move it from the south to the north,
we're shipping it north," said Ryan McClanahan, a merchandiser
for Commodity Specialists Company, a grain trading and marketing
company. "It's the big thing right now."
Jeff Duckworth, a corn buyer for ethanol maker Aventine
Renewable Energy in Pekin, Ill., said harvest cannot come soon
enough. There is "just barely" any old-crop corn left in local
markets, Duckworth said.
Help is on the way. In Louisiana, for example, the harvest
was 14 percent complete as of mid-August and is expected to
total 122 million bushels, up a third from last year, according
to the U.S. Department of Agriculture.
The reverse flow northward is being primed by high bids for
corn in the Midwest cash markets. A grain elevator in Lake
Village, Ark., along the Mississippi River, was bidding $4.41
for first-week August delivery, while a processor in Cedar
Rapids, Iowa, was offering $6.01 - a difference that is more
than enough to cover transportation costs form south to north.
Demand on the Mississippi for corn is pushing prices to a
point that poultry feeders are switching to wheat, which is less
expensive. Corn prices spiked more than wheat prices did after
last summer's drought.
"Usually our poultry feeders would be hollering for corn,
just clamoring for the stuff, but we just aren't seeing that,"
said Shep Bickley, owner of a Cain Agra grain elevator in
Despite the high corn price, demand on the river in the Deep
South remains strong. "Our local river terminal was bidding up
everybody by far - blowing the door off the (poultry) feeders,"
American Commercial Lines, an Indiana-based barge company,
has orders to ship southern corn through the end of August to
locations on the Ohio, Illinois and upper Mississippi rivers,
and into St. Louis, spokeswoman Kim Durbin said.
Barge companies are equipped to carry grain north because
they usually ship fertilizer from the south to Midwest farms.
Grain elevators, which are more accustomed to loading corn than
unloading it, are having to adapt.
The Illinois and Ohio rivers, which flow through the areas
worst hit by last summer's drought, have already seen increases
in upriver barge shipments of food and food products.
Northbound traffic passing through the LaGrange lock, the
southernmost on the Illinois River, was up 9.5 percent from a
year ago through the end of July.
The U.S. Army Corps of Engineers, which manages the lock
system, said the volume moving upriver through the JT Meyers
lock on the lower Ohio River, the lock nearest its confluence
with the Mississippi, was up 4 percent from a year ago as of the
end of July.
Coastal markets are adjusting to their own sense of
Hog and poultry operations in the Southeast and along the
East Coast have found foreign supplies cheaper than
rail-delivered grain from the Midwest. Over all, the United
States is set to import a record 165 million bushels in the year
ending Aug. 31, a nearly six-fold increase from the previous
year, according to USDA.
Wilmington Bulk LLC, a feed buying consortium of hog and
poultry producers, has brought in more than 350,000 tonnes of
mostly Brazilian corn over the past year, according PIERS, a
company that provides trading data.
Pilgrim's Pride imported more than 175,000 tonnes through
the port of Mobile, Alabama, between Feb. 8 and June 3. Rival
producer Perdue Farms has imported smaller volumes into Norfolk,
Virginia, the PIERS data showed.
The surge of grain imports led to record profits for the
North Carolina State Ports Authority, which handled nearly 1
million tons of grain coming into the country at the Port of
Wilmington in the fiscal year that ended July 30, said Laura
Blair, senior director of external affairs. She was not able to
provide data for prior years.
"The drought in the Midwest forced people to look at the
supply chain and experiment with different ways to get grain
where it's needed," she said.
The window is shutting quickly for South American exporters.
With the southern U.S. harvest well underway, further import
purchases are unlikely. Before the ships can make the two- to
three-week sail from South American ports to the United States,
cheaper new-crop prices will begin setting in.
Some yet-to-arrive cargoes will help bridge the gap to
The vessel Pos Aragonit is currently steaming toward the
Port of Wilmington after loading grain in southern Brazil. The
vessel Trans Pacific is at anchor off the Brazilian port of
Paranagua and is scheduled to arrive at Wilmington by October.
Opportunity will dry up quickly for northbound shipments on
the Mississippi River too. Once the Midwest harvest is in full
swing, the agricultural industry will resume buying local corn.
"We're trying to bridge the gap," Baker said.