Milling & Baking News - April 19, 2022 - 22

TUES | 04 19 2022
Logistics remain major challenge
for grain and ingredient shippers
Improvements noted in some sectors, including trucking
A
mong many daunting challenges
currently facing the grain industry
and food ingredient buyers
and sellers, logistics remain at the top of
the list for many, and it's been going on for
more than two years. Just as it seemed the
impact from COVID was winding down in
most countries, Russia invaded Ukraine
and another round of challenges emerged,
not the least of which is soaring fuel prices,
and COVID is back in the picture especially
affecting shipments from China.
Conditions in the trucking industry
" We don't need more
container ships; we need
better logistics. "
- Jay O'Neil, HJ O'Neil
Commodity Consulting
are showing signs of improvement since
the onslaught of COVID, which is critical
since trucks transport more than 70% of
US freight and are responsible for nearly
all " last mile " deliveries. Railroads have
been challenged by labor shortages and
other factors that have seriously hurt performance
with grain deliveries running
weeks behind schedule in the Southwest
hard red winter wheat region. The rail
industry has experienced a major merger
in the past year and averted a prolonged
strike in Canada with government intervention.
Conditions in the ocean freight
market are mixed. Rates have come down
from 2020-21 highs but remain well
above pre-COVID levels. Fewer ships are
waiting at West Coast ports, but port congestion
remains a major problem despite
government attempts to improve it. Port
situations in China are deteriorating due
to new COVID-related shutdowns. And a
major union contract is nearing expiration
on the US West Coast.
One key fundamental affecting all
22
modes of transportation is fuel prices. The
Russia-Ukraine war has had a dramatic
impact on crude oil and petroleum product
prices globally and in the United States,
even if the United States received only
about 3% of its crude from Russia. Spot
prices of West Texas Intermediate crude
oil in Cushing, Okla., as reported by the
Energy Information Administration of
the US Department of Energy peaked at
$123.64 per barrel on March 8, up more
than 100% from a year earlier. Prices have
since dropped as low as $94.85 on March
16 before climbing back above $100 in early
April. The March 31 announcement by
President Joe Biden that an average of 1 million
additional barrels per day would be
released from US oil reserves for the next
six months was welcomed by fuel users.
Weekly average on-highway diesel prices
reported by the EIA peaked at $5.25 per
gallon the week of March 14, up 67% from a
year earlier. Prices in the week of April 11
had pulled back to an average of $5.07 per
gallon, still up 62% from a year ago.
Higher fuel costs are passed on to shippers
by carriers. In the trucking industry,
the surcharges are set by individual carriers
and can vary widely. In the rail industry,
the surcharges are based on the EIA
weekly average on-highway diesel price
and are more formalized but still vary
and are adjusted monthly. Railroad fuel
surcharges in April are zero for Norfolk
Southern, 39¢ per car per mile for Burlington
Northern and Union Pacific, 45.45¢
for Canadian National, 48¢ for Kansas
City Southern, 51¢ for CSXT, and 54¢ for
Canadian Pacific. The Union Pacific Railway
posted fuel surcharge for April at 39¢
per mile per car, for example, compared
with 15¢ in April 2021, and will be 61¢ in
May compared with 22¢ in May 2021.
Fuel surcharges in April ranged from
zero to $529 per car for unit train shipments
of wheat and from zero to $624
per car for shuttle trains depending on
route, the US Department of Agriculture
said in its April 7 Grain Transportation
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Milling & Baking News - April 19, 2022

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