Milling & Baking News - October 20, 2009 - 21

Lower fuel costs offset rail rates
Because of lower diesel prices, railroad fuel surcharges are well below
year-ago levels, although up slightly
from summer lows. The rail surcharge is based on the E.I.A. average
retail highway diesel price, but lags
by two months. Most railroads have
both mileage-based and rate-based
fuel surcharges.
The B.N.S.F. mileage-based surcharge for October and November
was set at 35c per mile per car, up
from 33c in September and up from
the 52-week low of 22c in May but
below the high of 87c in September
2008. The B.N.S.F. adds a surcharge
when the average diesel price exceeds $1.25 a gallon.
The Union Pacific Railroad mileagebased surcharge was 11c a mile in
October and November, up from 9c
in September and August but well below the high of 53c in September 2008.
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Diesel fuel prices
(U.S. average, retail, on-highway)
$5

per gallon

"totally current" on orders and would
offer more shuttles this week, he said.
He also noted wheat movement east
to the "head of the lakes" was strong
and there was a large lineup of ships
waiting to load soybeans in the Pacific
Northwest.
The U.S.D.A.'s grain transport cost
indicators showed significant declines
from a year ago for most shipping
modes. For the week ended Oct. 7, ocean
rates for grain going to Japan from the
Gulf were 250% of the base (year 2000
equal to 100), even with last year, and
from the Pacific Northwest were 209%,
down 16%. The barge cost indicator
stood at 259% of the base, down 39%
from a year ago, and the truck indicator
was at 173%, down 33%.
Lower shipping costs are mainly
the result of lower fuel prices. Other
factors are reduced tonnage, due in
part to the domestic and global economic downturn, and larger world
grain supplies, which reduced global
export demand.
U.S. weekly retail on-highway diesel fuel prices averaged $2.60 a gallon the week of Oct. 12, up about 2c
from a week earlier but down 29%
from a year ago, according to the Energy Information Administration of
the U.S. Department of Energy. The
latest average was up 29% from the
low set in March 2009 but was down
45% from the high set in July 2008,
the E.I.A. data showed.

Jan.
2008

March May

July

Sept.

Nov.

Jan.
2009

March May

July

Sept.

Source: Energy Information Administration

Since the U.P. adds the surcharge only
when the average diesel price exceeds
$2.30 a gallon, the railroad did not
have a surcharge from March through
July of 2009.
Total rail costs for shipping soybeans, corn and wheat from various interior points to U.S. ports were
unchanged to as much as 21% lower
from a year ago for unit trains and 7%
to 17% lower for shuttle trains in early
September, according to the U.S.D.A.
Costs were down 10% to 15% in most
cases. Modestly higher rates per car
were more than offset by sharply lower fuel surcharges.
Overall tonnage - grain, freight
and other products - moved by rail
and truck is down sharply from a year
ago but has shown improvement the
past couple of months.
U.S. rail tonnage in August was
down 16% from August 2008, but the
percentage of decline was the smallest
since February, according to the Association of American Railroads.
"August was another month where
we are seeing traffic data moving in
the right direction, but we are still in
a wait-and-see mode," said John Gray,
senior vice-president of policy and
economics at the A.A.R. "Railroads
are beginning to bring cars out of storage, a promising sign there is growing
demand to move more things by rail.
However, to date, the improvements
remain too small to judge whether
they are the result of seasonal factors
or indicators of an emerging recovery."
In the first seven months of 2009,
total U.S. rail carloadings were down
19% from the same period a year earlier, the A.A.R. said, with grain car loadings down 23%. The U.S. fared slightly
better than Canada, where total loadings were down 24% in the January-

July period, but worse than Mexico,
where loadings were down 15%.
Grain car loadings for the year to
date through Oct. 3 were down 21%
from the same 39 weeks a year earlier,
according to the A.A.R. Canadian rail
carloadings of grain were down only
0.6% through Oct. 3, and Mexican loadings were up 15%. U.S. grain mill product loadings were down 8% with "food
and kindred products" down 13%. Total U.S. carloadings were down 18%
through Oct. 3, the A.A.R. said.
Exports keep ocean freight down
Although soybean exports have
been strong, lower U.S. corn and wheat
exports have contributed to reduced
demand for ocean freight. In its Oct.
9 World Agricultural Supply and Demand Estimates, the U.S.D.A. said U.S.
wheat exports in the 2008-09 marketing year ended May 31 totaled 1,015
million bus, down 20% from 2007-08.
And the U.S.D.A. lowered its projected
2009-10 wheat exports to 900 million
bus, down 11% from the prior year.
Corn exports in 2008-09, ended Aug.
31, were estimated at 1,858 million
bus, down 24% from 2007-08. But corn
shipments were forecast to increase by
16% in 2009-10, to 2,150 million bus, as
lower corn prices and the continued
weakening dollar made corn more attractive to foreign buyers.
Due to strong demand from China,
soybeans have been the only grain or
oilseed showing higher export levels
the past two years. Soybean exports
in 2008-09 were estimated by the
U.S.D.A. at 1,280 million bus, up 10%
from 2007-08, and for 2009-10 were
projected at 1,305 million bus, up another 2% from the previous year.
Total marketing-year-to-date export
inspections as of Oct. 1 for the nine
Milling & Baking News October 20, 2009 / 21

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Milling & Baking News - October 20, 2009

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