| CHICAGO, July 11
CHICAGO, July 11 An upcoming river lock repair
project in south Chicago has attracted the attention of exchange
operator CME Group because the lock's closure could disrupt
deliveries against its Chicago Board of Trade grain and soybean
The U.S. Army Corps of Engineers will close the 64-year-old
T.J. O'Brien lock and dam on the Cal-Sag Channel for two phases
of repairs beginning on Nov. 3 and again on Jan. 19. It is the
northernmost of eight locks on the Illinois Waterway system,
near the entrance to Lake Michigan.
Each closure will halt traffic there for 47 days and could
make it more difficult or costly for buyers of futures contracts
to take delivery of grain housed in Chicago since the lock lies
within the contracts' delivery zone 1.
The exchange has no plans in place yet to revise its
delivery rules but is monitoring the situation, said David
Lehman, CME's managing director of commodity research and
Grain analysts said the closure is not likely to trigger a
force majeure declaration by the exchange because grain housed
in Chicago could feasibly be moved by truck or rail or shipped
around the closure via Lake Michigan and the Chicago River via
the smaller Chicago Lock.
But CME action cannot be ruled out, particularly if low cash
market prices due to heavy post-harvest supplies spur
deliveries, they said.
"This comes at a time when I think basis levels are going to
be extremely depressed and deliveries may be the best sale for
some guys. But I don't see shutting off the northern part of the
river as being that important because the biggest share of the
crop's going to be south of Chicago," said Roy Huckabay, analyst
with The Linn Group.
The delivery period for November soybeans starts Nov.
3 and December corn and wheat deliveries begin on
Difficulties taking delivery could widen spreads, analysts
said. Full carry on the December/March corn spread, for example,
is around 18 cents, and the spread itself was near 11 cents on
There have been no major objections to the timing of the
lock project, which was announced this spring, said the Army
Corps' Illinois River operations manager, Mike Zerbonia.
A month-long break between the project's two phases will
allow cargo backed up by the closure to pass.
Repair work is needed to replace several worn components of
the lock, which opened in 1960 and continues to operate with
many original components.
If a part of the lock and dam structure known as a sheet
pile cell were to rupture, navigation would be halted for at
least 60 days, resulting in economic losses of $18.3 million, an
Army Corps evaluation found.
While the vast majority of cargo passing through T.J.
O'Brien is manufactured goods and energy products, as much as 15
percent of cargo can be food and farm products, according to
Army Corps data.
(Additional reporting by Jo Winterbottom; Editing by Jonathan