Milling & Baking News - June 14, 2011 - (Page 23)

High fuel prices push shipping costs up; weather slows Upper Midwest rail traffic KANSAS CITY — Soaring fuel prices coupled with increased demand have pushed shipping costs higher in most cases for freight and bulk commodities, including grains and oilseeds, moved by all modes of transportation, especially for products largely delivered by trucks. But some relief appears likely as the result of smaller hard wheat crops and reduced U.S. exports as Russia re-enters the market, and as fuel prices have begun to moderate. The key national average retail diesel fuel price from the U.S. Department of Energy’s Energy Information Administration peaked in early May at $4.124 a gallon, up $1 from a year earlier and the highest since late August 2008. The price has dropped five consecutive weeks since, falling to $3.94 a gallon on June 6, but was still 99c, or 34%, above the yearago price of $2.95 a gallon. “The industry, and the economy at large, should benefit from the recent declines in oil and diesel prices,” said Bob Costello, chief economist of the American Trucking Associations. “Lower fuel costs will help freight volumes and motor carrier bottom lines going forward.” For the year, the E.I.A. in its June Short-Term Energy Outlook forecast retail diesel fuel prices will average $3.87 a gallon, up 29% from $2.99 in 2010. The E.I.A. forecast diesel would average $3.95 for 2012. In addition to higher crude oil costs, the agency projected U.S. refinery margins for diesel fuel at 59c a gallon in 2011, up 21c, or 55%, from 38c in 2010, and at 53c in 2012, down 6c but still well above the 2010 level. The E.I.A. forecast the West Texas Intermediate crude oil price to average $102 a barrel in 2011, down $1 from its May forecast but up $23, or 29%, from $79 in 2010. Crude oil was forecast to average $107 a barrel for 2012. “E.I.A. still expects oil markets to tighten through 2012 given projected world oil demand growth and slowing growth in supply from countries that are not members of the Organization of the Petroleum Exporting Countries,” the agency recently said. In its June outlook the E.I.A. especially noted growing liquid fuels demand in the emerging economies. But last week OPEC’s decision to / keep crude oil production at current levels sent crude oil futures higher with nearby values again pushing above $100 a barrel but holding below the early May high near $115. Still, OPEC prefers to keep crude oil prices from getting too high, Tim Statts, vice-president of risk management at Summit Energy Services, told participants at the 34th annual Sosland Publishing Purchasing Seminar last week. It’s in their best interest to keep prices at a level that promotes economic growth, and thus increased energy demand, rather than at levels so high as to stymie economic recovery, he said. The E.I.A.’s average retail diesel price directly affects shipping costs because it is used by railroads to calculate fuel surcharges, which are adjusted monthly. Although surcharges vary by railroad and have begun to moderate, they remain about double year-ago levels. The Burlington Northern Santa Fe Railway posted its July 2011 fuel surcharge at 70c per rail mile based on the E.I.A.’s average diesel price of $4.047 a gallon in May and using the original strike price of $1.25 per gallon, and at 39c a mile based on the new strike price of $2.50 a gallon that took effect in January 2011, for mileage based and per cent of revenue based programs. Both fuel surcharges were down 1c from June, but the surcharge was up 52% from 46c a year ago when only the $1.25 strike price was offered by B.N.S.F. But a Kansas City merchandiser noted it doesn’t cost less to ship grain on B.N.S.F. because the underlying tariff was increased, offsetting the lower fuel surcharge. The Union Pacific Railroad uses $2.30 per gallon as its “strike” price, with a July surcharge of 39c per mile and June at 40c, the same as B.N.S.F. A year ago the U.P. surcharge was 20c per mile. In U.P. data going back to April 2007, the only time there was no surcharge was March to July 2009. The highest was 53c in September 2008, based on record high July 2008 diesel prices. The Association of American Railroads’ monthly Index of Average U.S. Railroad Fuel Prices stood at 661.6 (July 15, 1990=100) in April, up 33% from December 2010 and up 42% from 466.4 in April 2010. Grain shipping costs vary by mode Grain merchandisers indicated Source: Association of American Railroads 2011 2010 2009  Transportation and Distribution Index of average U.S. railroad fuel prices April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March April 0 100 200 300 400 500 600 700 800 Milling & Baking News June 14, 2011 / 23

Table of Contents for the Digital Edition of Milling & Baking News - June 14, 2011

‘Grain chain’ gives unanimous support for MyPlate
Canadian government targets C.W.B. monopoly on wheat marketing
MacLennan named president of Cargill
Celebrations may be premature for bakery fl our buyers
Editorial - Last hope for Doha Round not becoming non-Round
Wayne Turnbull reopens New Orleans bakery
General Mills adds Fiber One 90-Calorie Brownies
Packaged snacks sales reach $64 billion
Nestle joins project of food, genes
G.F.F.: One-ounce servings key to balanced meals
Oldways director offers mixed review of MyPlate
Stimulus boost for SNAP helps avert diminished food security
Smucker full-year profi t falls 3% on restructuring, acquisition costs
Debate likely to rage on, but HFCS demand seen stabilizing in U.S.
Kellogg sets 2010 to the side, looks forward to better 2011
Analyst: Nestle ‘unlikely’ to acquire General Mills
Grain Processing investing $100 million in emission reduction projects
Winter wheat crop forecast for 2011 up 2% from May
Wheat carryover forecast for 2012 lowered to 687 million bus
High fuel prices push shipping costs up; weather slows Upper Midwest rail traffi c
Canadian government targets C.W.B. monopoly on wheat marketing
Irish Pride launches bread with omega-3 fatty acids
Acquisitions help drive revenue gains at Aryzta in quarter
F.A.O. sees no respite from grain price strength and volatility
Gonnella offering scholarship to attend AIB
Paul Ridder named president of Tasty; Charles Pizzi to remain as adviser to Flowers
Chris Delaney named c.e.o. of Goodman Fielder
Bob Klima joins Caravan as business development manager
Fruit powder provides vitamins, fiber
Non-dairy ingredient achieves pareve certification
Products focus on noodle production
Trademark signifi es sustainable palm oil
Enzyme concentrate enhances baking properties of flour
U.S.D.A. raises forecast for 2011-12 world wheat ending stocks
Ingredient Market Trends
Ingredient Week
Marketplace Business Network
Ad Index

Milling & Baking News - June 14, 2011