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On Jan. 30, 2024, Casey Chumrau, CEO of the Washington Grain Commission, offered compelling testimony supporting the crucial infrastructure of dams and locks on the Columbia Snake River System (CSRS) at a U.S. House Energy, Climate, and Grid Security Subcommittee hearing. U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) sent separate letters with their observations of the essential nature of the CSRS for U.S. wheat export competitiveness.

Following are excerpts from Chumrau’s testimony.

Grain growers in the Pacific Northwest (PNW) rely on the Columbia Snake River System, and the Lower Snake River Dams (LSRD) in particular, for their livelihoods. More than 55 percent of all U.S. wheat exports move through the PNW by barge or rail. Specifically, 10 percent of wheat that is exported from the United States passes through the four locks and dams along the Lower Snake River. This is especially important for our state because Washington is the fourth largest wheat exporter in the nation, exporting 90% of the wheat produced in the state. Across the agriculture industry, the Columbia Snake River System is the second largest gateway for soybean and corn exports coming from as far as the Midwest. The river system also serves as an important channel to bring crop inputs, like potash, to farmers in the region who need fertilizer to produce the safe and affordable food supply that is found on every American’s table.

Casey Chumrau, CEO, Washington Grain Commission, giving testimony on Columbia Snake River System Jan. 30, 2024, to a U.S. House subcommittee hearing.

Casey Chumrau, CEO, Washington Grain Commission, giving testimony on Columbia Snake River System Jan. 30, 2024, to a U.S. House Energy, Climate, and Grid Security Subcommittee hearing.

Economic Impact

Washington’s agriculture industry, and its ability to produce and export products globally, are critical to the state and region’s economy. The total value of wheat exported through the PNW is nearly $4 billion per year.

For Washington, the state is among the top 20 states for agricultural exports in the nation, with over $8 billion in Washington-grown or processed food and agriculture exports in 2022. A significant volume of food and agriculture products from other states including soybeans, wheat, and corn are exported through Washington state ports each year. Once these pass-through exports are combined with Washington-grown or processed exports, the total value reaches over $23 billion.

The Washington wheat industry alone contributed over $3.1 billion to the state’s economy in 2022, with a heightened impact in rural areas. In the same year, total direct employment associated with Washington wheat production amounted to 3,672 jobs in 2022. Indirect and induced employment also grew and supported another 11,676 jobs.

The impact that Washington farmers have on their local and regional economy is similar in communities across the country. In addition to direct sales of farm goods and commodities, farmers contribute to the economy and support other rural businesses through purchases of farm business inputs – everything from seed and fertilizer to business services. Additionally, the personal purchases of both farmers and their employees help to stimulate local economies and keep small businesses ruining.

Locks and dams on the Lower Snake River and the Columbia River provide essential infrastructure for moving U.S.-grown wheat to high-value markets around the world. We cannot overstate the positive value they create for U.S. farms, [the] economy of the Pacific Northwest and far beyond. – From USW letter to House subcommittee hearing on the Columbia Snake River System

Supply Chain and Transportation

Over the last seventy years, growers and their federal government partners at the U.S. Department of Agriculture have invested billions of dollars and countless hours to build strong relationships with our trading partners. The U.S. wheat industry differentiates itself by providing high-quality wheat and reliable delivery. The United States is a reliable trading partner in large part because of our world class, multi-modal infrastructure, which allow us to safely and efficiently ship products around the world. Any disruption to that system would hurt our ability to consistently provide abundant, high-value food products and remain competitive with other agricultural exporters in the world and weaken the competitiveness of U.S. producers in global markets.

Grain growers in PNW states are at the tip of the spear of those who would feel the disruption of having to divert export goods to trucking and rail because there is insufficient alternative transportation infrastructure to replace the barge shipments of grain along the Columbia Snake River System to export markets. For example, one loaded covered hopper barge carries over 58,000 bushels of wheat. It would take 113,187 semi-trailers each year carrying 910 bushels of wheat to replace the 103 million bushels shipped on the Snake River via barge annually. That is 310 more trucks each day, making round trips to the Tri-Cities, 365 days per year. To that end, barging is the most fuel-efficient mode of transportation when compared to railroads and trucking. Each barge that must be replaced by a truck means more pollution, more traffic, increased costs and increased wear and tear on our roads – and that’s if we could even hire the drivers needed to drive these trucks in the increasingly tight labor market for drivers.

Path Forward

We strongly believe that dams and salmon can and do co-exist. With a myriad of challenges facing the salmon population, we are committed to building upon current investments and technological advancements. Currently, the Lower Snake River Dams have world-class fish passage and juvenile survival rates upwards of 95 percent. We believe any work moving forward should build off the fish passages, instead of eliminating them. We also support investments made at the federal and state level for culvert removal, fish habitat restoration, toxin reduction, and predator abatement.

Conclusion

The opportunities to ensure salmon populations continue to grow do not have to come at the cost of destroying the integrity of the Columbia Snake River System and the livelihood of farmers. The importance of the river system for the agriculture industry, and particularly for grain growers across Washington, cannot be overstated. I look forward to discussing the importance of the four Lower Snake River Dams with you today. Thank you.

To read more about this issue, see these previous “Wheat Letter” posts:

Exports Depend on Snake River Dams

USW Expresses Support for Maintaining Lower Snake River Dams

Wheat Leaders: Protect Lower Snake River Dams

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As we continue a series of articles on U.S. supply chain logistics, rail is arguably the most important mode of transporting wheat for export.

According to a recent USDA Modal Share Analysis Study, rail accounted for an average of 59% of inland transportation for wheat exports between 2016 and 2020, or an average annual total of 17.0 million metric tons. This article will focus on the importance of rail freight in wheat exports and address current trends in rail performance.

Two vertical bar charts showing the volume of U.S. wheat shipped domestically and to export locations by truck, rail and barge between 2004 and 2020.

Rail and barging are the main modes of transportation for wheat exports, as they can handle large volumes of grain over long distances. Together, they transport 89% of the total wheat export shipments. Source: USDA Modal Share Analysis Study.

An Interesting Year

In 2022, increased demand for railcars and performance issues sent U.S. rail rates soaring, with Secondary Railcar Auction Market Bids hitting their highest since 2014. Since then, rail rates have eased drastically. From March 2023 to July 2023 secondary bids for railcars have been negative, indicating that the current supply of railcars is sufficient for meeting the needs of shippers.

Decreased volumes and the subsequent decrease in rail tariff rates and Secondary Railcar Market Auction Bids have added additional pressure to already low basis levels, helping boost the competitiveness of U.S. wheat to importers. However, as the 2023 soy and corn harvest progresses, we can expect rail rates to rise due to increased demand and a higher volume of grain moving via rail.

This vertical bar and line chart show a comparison of grain carloads average from previous years to the current 4 week period up to 8/25/23.

According to the latest Grain Transportation Report, grain carloads (corn, soybeans, and wheat) moved by Class I railroads were down 3% from the previous week and are sitting 22% below the three-year average. The current decreased volume alleviates pressure on basis as rail companies have a sufficient supply of cars to meet the current demand. Source: September 3, 2023 USDA Grain Transportation Report.

Even so, the outlook for fall logistics appears positive. In a recent interview with “Freightwaves,” transportation export Jay O’Neil indicated that “Weather is always a question mark that makes it [performance] impossible to predict. But overall, I think the railroads… have some excess capacity because of [reduced grain export volumes]. I think [railroads] are very much looking forward to the harvest season … So, I don’t see any particular influences right now that should get in their way and prevent them from providing a decent service for harvest.”

Part of a Reliable System

U.S. Wheat Associates (USW) is committed to sharing transparent and pertinent information to customers about inland logistics issues. It is beneficial for U.S. wheat importers to be aware of transportation trends, as seasonal shifts and potential issues have a direct influence on export basis and the Free-on-Board export price.

Encompassing the largest share of inland logistics, the railroads are a critical component for moving U.S. wheat to export. After last years’ service disruptions, steps have been taken to help address the root issues such as hiring additional crew and investing in infrastructure. U.S. railroads are committed to moving U.S.-grown commodities. With diverse origination options and numerous modes of transportation, regardless of the class or export point, rail helps U.S. wheat remain the most reliable choice for world importers.

This article is part of a series outlining the inland logistics for U.S. wheat, highlighting barge freight, the railroads, infrastructure investments, and maritime transportation trends.

By USW Market Analyst Tyllor Ledford

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According to the U.S. Department of Agriculture, approximately 31% of U.S. exported wheat is moved by barge to export points in the Gulf of Mexico and the Pacific Northwest (PNW). Barging is an extremely safe, efficient, and competitive mode of transporting grain for export, contributing to our robust grain marketing system.

As key gateways for wheat exports, this article will explore recent barge freight trends on the Mississippi River (photo above) and Colombia Snake River System (CSRS), highlighting their effectiveness and providing updates about current issues.

Map of the U.S. shows the Mississippi River system, and the Columbia Snake River System to show where barging is important for U.S. wheat export logistics.

The Mississippi and the Columbia-Snake River systems are major transportation routes facilitating exports from the Gulf of Mexico and the PNW. Source: USDA/Agricultural Marketing Service/Transportation and Marketing Program/Transportation Economics Division.

Mississippi River Update

About 8% of all U.S. wheat moves on the Mississippi River system, bringing primarily soft red winter wheat (SRW) from growing regions in the eastern U.S. to export in the Gulf of Mexico via the Mississippi, Missouri, Illinois, and Ohio rivers. The Mississippi River system spans an immense geographic area, originating grain from as far north as Minnesota and as far east as Ohio and Illinois. Barges on the Mississippi River can carry 1,750 MT of grain, and a 15 barge tow can transport over 26,000 MT, the equivalent of 2 unit trains. Exports from the Gulf of Mexico account for 33% of U.S. wheat exports. Though wheat only accounts for 3% of Mississippi River barge movements, it is still an essential and efficient mode of transportation for U.S. wheat.

In the fall of 2022, low water levels on the lower Mississippi River slowed exports at ports on the Louisiana Gulf to their lowest level in 9 years. As a result, barge rates skyrocketed, and grain flows were restricted.

Monthly Downbound Grain Barge Rates

In October 2022, Mississippi River barge rates spiked to a record high of $2,092.83, 150% above the next highest price, due to low water levels and restricted barge flows Source: USDA Monthly Downbound Grain Barge Rates.

Since last fall, Mississippi River barge tariffs have normalized. However, according to the latest Grain Transportation Report, barge movements on the Mississippi River (Lock 27- Granite City, IL) are down 46% from last year and 72% below the three-year average. This decrease is attributed primarily to lower exports for all commodities (wheat, corn, and soybeans). Looking ahead, draft reductions in the lower Mississippi River may be a recurring issue as dryness in the Midwest persists.

this chart of barge movement on the Mississippi River show the downward trend in volumes seasonally and over the past several years.

Barge movements vary by season on the Mississippi River, but are down 46% from last year and 72% from the three-year average, driven primarily by a sharp decrease in grain exports. Weekly inspections for exported grain (wheat, corn, and soybeans) are down 47% from last year and 45% below the three-year average. Source: USDA Grain Transportation Report.

Columbia Snake River System

Shifting our focus to the PNW, the Columbia Snake River System (CSRS) accounts for 60% of all U.S. wheat exports via the deep-water draft ports on the Lower Columbia River. By barge alone, over 10% of all U.S. wheat exports move on the CSRS from as far inland as Lewiston, Idaho (360 miles). From an efficiency standpoint, according to the Pacific Northwest Waterway Association, barges on the CSRS can carry 3,500 MT of grain, and a four barge tow can transport over 14,000 MT, the equivalent of 1.5 unit trains and over 580 trucks.

From January 14 to March 29, 2024, an extended closure of the CSRS is scheduled to replace components at the John Day and McNary dams on the Columbia River and at the Lower Monumental, Little Goose, and Lower Granite dams on the Snake River. Routine maintenance assures the waterway remains a reliable mode of grain transportation and helps maintain the competitiveness of U.S. wheat. Similar to the Gulf of Mexico, grain exports from the PNW are down 71% from last year and 65% below the three-year average, subsequently impacting demand for barges.

Due to low export demand, grain exports from the PNW are down 71% from last year and 65% below the three-year average. Source: USDA FGIS Export Grain Inspections Data.

A Reliable System

U.S. Wheat Associates is committed to sharing transparent and pertinent information to customers about inland logistics issues, as domestic transportation makes up a significant portion of U.S. wheat export basis. Though barges only make up a small portion of U.S. inland logistics, barging helps ensure the U.S. remains the most reliable choice for world importers by complementing the use of Class I railroads and trucks. With diverse origination options and numerous modes of transportation, regardless of the class or export point, U.S. wheat is always available.

This is the first in a series of three articles about the efficient and reliable U.S. grain export transportation system. Future articles will focus on rail and ocean freight logistics.

By USW Market Analyst Tyllor Ledford.