US corn barge levels capped as poor demand balances river woes

3 Oct 2022 | Tim Worledge

Prices for US CIF corn barges delivered into the US Gulf export hub have failed to respond to the restriction in supply stemming from low water levels along the key Mississippi waterway, trade sources have told Agricensus Monday.

Bids and offer levels for physical barges for delivery in to the primary US export hub at the start of the week remained unchanged on previous levels despite mounting fears that barges will not be able to navigate the waterway.

Normally such a restriction would prompt barge premiums to rise, particularly as FOB cargo offer levels have pushed markedly higher, but the barge market has shown little interest in moving higher.

“Rates are high, the water is low, the capacity is down, all are supportive,” one trade source told Agricensus, before describing the situation as one of “mixed messages.”

“We’re priced out of everywhere, so there’s not much trading. The barge market could go screaming higher, or it could collapse,” the source said, referring to a lack of competitiveness on international markets.

Barge values were largely unchanged in bids and offers, with prompt October and November values heard unchanged at levels around the 140-145 cents for October, and around 117 cents for November loading – both over the December corn futures contract.

While that was unchanged on levels heard at the end of last week, October FOB cargo levels were heard offered at 275 cents over the December contract – up 125 cents from the levels heard at the end of last week.

Costs of move barges along the Mississippi have surged in recent weeks as water levels restrict the amount of volume a barge can carry – or risk grounding on the river bed.

That in turn places extra strain on the barge supply, forcing up costs as more vessels are required to carry the same volume and limiting the supply of barges.

Since the beginning of September, barge freight has jumped 80% – a dynamic that would typically drive basis premiums for cash commodities higher as the market absorbs the increased freight cost.

However, in this instance, the lack of strong buying activity for US corn – given the more competitive pricing of South American and Ukrainian corn – means that the higher freight and logistics issues are negated by a lack of demand.

The US Gulf is dependent upon the Mississippi River for supply, with the river network the key element connecting the fields of the Midwest to the global export market.   

While US Gulf CIF barges have spiked in recent weeks, they remain some way off the year-to-date high of 180 cents over, set back in early July according to Agricensus data.