Supply Chain

United States Eases Port Fees On China-Built Ships After Industry Backlash

Fri, 18 Apr 2025 16:04:10 GMT

The Trump administration shielded on Thursday domestic exporters and vessel owners servicing the Great Lakes, the Caribbean and U.S. territories from port fees to be levied on China-built vessels, aiming to revive U.S. shipbuilding .

The Federal Register notice posted by the U.S. Trade Representative was watered down from a February proposal for fees on China-built ship s of up to $1.5 million per port call that sent a chill through the global shipping industry.

Ocean shipping transports about 80% of global trade — from food and furniture to cement and coal. Industry executives feared virtually every cargo carrier could face steep, stacking fees that would make U.S. export prices unattractive and foist annual import costs of $30 billion on American consumers.

“Ships and shipping are vital to American economic security and the free flow of commerce,” U.S. Trade Representative Jamieson Greer said in a statement. “The Trump administration’s actions will begin to reverse Chinese dominance, address threats to the U.S. supply chain, and send a demand signal for U.S.-built ships.”

Still, the fees on Chinese-built ships add another irritant to swiftly rising trade tensions between the world’s two largest economies as President Donald Trump seeks to draw China into talks on his new tariffs of 145% on many of its goods.

The revisions tackle major concerns voiced in a tsunami of opposition from the global maritime industry, including domestic port and vessel operators as well as U.S. shippers of everything from coal and corn to bananas and cement.

They grant some requested carve-outs, while phasing in fees that reflect the fact U.S. shipbuilders, which turn out about five vessels annually, will need years to compete with China’s output of more than 1,700 a year.

The USTR exempted ships that ferry goods between domestic ports as well as from those ports to Caribbean islands and U.S. territories. Both American and Canadian vessels that call at Great Lakes ports have also won a reprieve.

As a result, companies such as U.S.-based carriers Matson and Seaboard Marine would dodge the fees. Also exempt are empty ships arriving at U.S. ports to load up with exports such as wheat and soybeans.

Foreign roll-on/roll-off auto carriers, known as ro-ros, are eligible for refunds of fees if they order or take delivery of a U.S.-built vessel of equivalent capacity in the next three years.

The USTR set a long timeline for liquefied natural gas (LNG) carriers. They are required to move 1% of U.S. LNG exports on U.S.-built, operated and flagged vessels within four years. That percentage would rise to 4% by 2035 and to 15% by 2047.

The agency, which will implement the levies in 180 days, also declined to impose fees based on the percentage of Chinese-built ships in a fleet or on prospective orders of Chinese ships, as originally proposed.

The fees will be applied once each voyage on affected ships a maximum of six times a year.

Executives of global container ship operators, such as MSC and Maersk MAERSKb.CO, which visit multiple ports during each sailing to the United States, had warned the fees would quickly pile up.

Instead of a flat individual fee on large vessels, the USTR instead opted to levy fees based on net tonnage or each container unloaded, as was called for by operators of small ships and transporters of heavy commodities such as iron ore.

From October 14, Chinese-built and owned ships will be charged $50 a net ton, a rate that will increase by $30 a year over the next three years.

That will apply if the fee is higher than an alternative calculation method that charges $120 for each container discharged, rising to $250 after three years.

Chinese-built ships owned by non-Chinese firms will be charged $18 a net ton, with annual fee increases of $5 over the same period.

It was not immediately clear how high the maximum fees would run for large container vessels, but the new rules give non-Chinese shipping companies a clear edge over operators such as China’s COSCO 600428.SS.

The notice comes on the one-year anniversary of the launch of the USTR’s investigation into China’s maritime activities.

In January, the agency concluded that China uses unfair policies and practices to dominate global shipping.

The actions by both the Biden and Trump administrations reflect rare bipartisan consensus on the need to revive U.S. shipbuilding and strengthen naval readiness.

Leaders of the United Steelworkers and the International Association of Machinists and Aerospace Workers, two of five unions that called for the investigation that led to Thursday’s announcement, applauded the plan and said they were ready to work with the USTR and Congress to reinvigorate domestic shipbuilding and create high-quality jobs.

The American Apparel & Footwear Association reiterated its opposition, saying port fees and proposed tariffs equipment will reduce trade and lead to higher prices for shoppers.

At a May 19 hearing, the USTR will discuss proposed tariffs on ship-to-shore cranes, chassis that carry containers and chassis parts. China dominates the manufacture of port cranes, which the USTR plans to hit with a tariff of 100%.

The Federal Register did not say if the funds raised by the fees and proposed crane and container tariffs would be dedicated to fund a revival of U.S. shipbuilding.

(Reporting by Lisa Baertlein in Los Angeles, David Lawder and Andrea Shalal in Washington and Jonathan Saul in London; Editing by Jamie Freed, Clarence Fernandez and Gerry Doyle)

USDA Prepares to Protect Farmers in a Trade War

Wed, 05 Mar 2025 01:44:43 GMT

As the clock struck midnight on March 4, President Donald Trump’s new tariffs on imports from Canada, Mexico and China went into effect. Almost immediately, global markets started to react, and trading partners retaliated.

While the full economic consequences of the trade war remain to be seen, Secretary of Agriculture Brooke Rollins has promised to have a plan, such as the Market Facilitation Program (MFP), ready for farmers, if needed. In 2019, MFP provided direct payments to producers impacted by retaliatory tariffs, resulting in the loss of traditional exports.

“Everything is on the table right now. Everything. I know that President Trump, whom I speak with regularly, realizes the state of the farm economy in this country,” Rollins said on Sunday at Commodity Classic . “The last time, I know, he pushed Secretary Perdue to ensure we were able to make whole–as best as we could–some of those, and hopefully most of those, if not all, who had been hurt. We’re building the team at USDA to ensure we have the structure and the plan in place to allow us to move very quickly.”

In an interview with Farm Journal at Commodity Classic, USDA Economist Seth Meyer says he has been instructed by Secretary Rollins to be ready for a relief program, and he’s started calculating what possible relief could look like.

“Calculating something right today would not be helpful because we don’t know where we’re going to be, but absolutely, the Secretary instructs: ‘You need to be ready, have your pencil sharpened and have your tools available. Think about how you would proceed,’” Meyer says. “We are ready in that backstop. It won’t be easy. We’ve talked a lot about different countries. We’ve talked about reciprocal trade, but we are indeed sharpening our pencils to be able to do what she’s asked us to do.”

Here are the key details of the U.S. tariffs and retaliation from Canada, Mexico and China.

(Farm Journal)

Canada responded swiftly with plans to impose 25% tariffs on nearly $100 billion of U.S. imports over two tranches. Mexican President Claudia Sheinbaum plans to announce retaliatory tariff and non-tariff measures against the U.S. at an upcoming rally in Mexico City’s central square.

Meyer’s question is, “Can Mexico afford to retaliate?”

(Farm Journal)

As President Trump’s tariffs drew swift retaliation from trading partners, the ag industry was quick to react.

Impact on Farm Machinery
Equipment makers are concerned about the additional duties, especially after a rough year for the industry.

“We have spent decades laying down supply chains across the world. Our industry is global — 30% of all equipment made in the U.S. is destined for export. Canada is our largest market outside of the U.S.,” says Johan “Kip” Eideberg, senior vice president – government and industry relations, Association of Equipment Manufacturers (AEM). “If we want to create more jobs here in America, we need to sell more equipment and that means selling to customers outside of the U.S.”

As detailed in From the Factory to Your Fields: Where Farm Equipment Is Made , the ag equipment manufacturing industry is fully integrated across the three North American allies involved in the so-called “trade wars.”

“Anytime you disrupt those tightly connected supply chains — and tariffs would be a direct disruption — it’s going to have a serious impact on equipment manufacturers and on our farmers,” Eineberg says. “Given that Canada is our largest export market, we’re sending almost $10 billion worth of goods to Canada every year, there’s a lot at stake here.”

In 2018, Eineberg estimates, tariffs on steel, aluminum and farm inputs from China drove up the cost of making equipment in the U.S. by about 9 percentage points.

“Obviously, manufacturers will try to absorb as much of that as they can, but inevitably some of it will be passed down to the consumer, which in this case is our farmers and ranchers,” he adds.

AEM is also sounding the alarm on the compounding effect of tariffs, specifically due to the tight integration of manufacturing cycles on both sides of the border. There are often cases, Eineberg says, where components and raw materials are shuttled three to five times across the border between different factories in the manufacturing process. That means each time a piece of steel or other raw material being manufactured into a component for a tractor crosses the border, the tariffs multiply.

An example of the cross-border journey of one piece of agriculture equipment from raw material to delivery on the farm.

(AEM)

Impact on Rural America and Fertilizer
American Farm Bureau President Zippy Duvall expressed alarm about potential harm to farmers resulting from imposing stiff tariffs on the top three agricultural markets by value for the U.S.

“Farm Bureau members support the goals of security and ensuring fair trade with our North American neighbors and China, but, unfortunately, we know from experience that farmers and rural communities will bear the brunt of retaliation.” Duvall says.

Of note, more than 80% of the U.S. supply of potash , a key fertilizer product, comes from Canada.

“Tariffs that increase fertilizer prices threaten to deliver another blow to the finances of farm families already grappling with inflation and high supply costs,” Duvall adds. “The uncertainty hits just as operating loans are being secured and spring planting approaches, leaving farmers in a tough spot.”

(Farm Journal)

Read: Fertilizer Manufacturers and Retailers React to Trade Tariffs

Impact on Soybeans
During the 2018 trade war with China, U.S. agriculture experienced more than $27 billion in losses, with soybeans accounting for 71% of those losses, according to the American Soybean Association (ASA). Unlike in 2018, farmers are in a more tentative financial situation in 2025. Commodity prices are down nearly 50% from three years ago, while the costs for land and inputs, such as seed, pesticides and fertilizer, are high.

In an ASA statement, it says for years the organization’s farmer-members have consistently maintained their position that they do not support the use of tariffs, which threaten important markets and raise input costs for farmers, as a negotiation tactic.

“Farmers are frustrated. Tariffs are not something to take lightly and ‘have fun’ with. Not only do they hit our family businesses squarely in the wallet, but they rock a core tenet on which our trading relationships are built, and that is reliability. Being able to reliably supply a quality product to them consistently,” says Caleb Ragland, ASA president and soybean farmer from Magnolia, Ky.

Soybeans by far make up the largest volume of ag products exported to China. In 2024, U.S. exporters sent 27 million metric tons of soybeans to China valued at $12.76 billion, according to USDA. Mexico is the second-largest customer for whole soybeans, soybean meal and soybean oil. Canada is the fourth-largest customer for soybean meal.

“Soybean producers face huge, disproportionate impacts from trade flow disruptions, particularly to China,” Ragland says. “And we know foreign soybean producers in Brazil and other countries are expecting abundant crops this year and are primed to meet any demand stemming from a renewed U.S.-China trade war.”

Impact on Corn and Ethanol Demand
Market analysis shows tariffs won’t solve the U.S. trade deficit and instead will just shift business to other countries, says Neil Caskey, CEO, National Corn Growers Association (NCGA).

“We issued a study back in the fall that documented the implications of tariffs and specifically retaliation in a trade war — it’s not good for corn farmers, farmers in general,” he says. “We did that in conjunction with the American Soybean Association, and it concluded a trade war is really only good for Brazil, and we hope to avoid that.”

The top two destinations for corn and ethanol are Mexico and Canada. According to Krista Swanson, chief economist, NCGA, 40% of U.S. corn exports go to Mexico and more than 40% of U.S. ethanol exports are shipped to Canada.

“[Corn] is a commodity [those countries] consume way more than what they produce, so they’re going to have to get it from somewhere,” she says. “There’s definitely some concern about losing corn [exports], but how much is lost is left to be seen because it depends on what happens with shifting trade flows.”

Impact on Beef and Pork Sectors
U.S. meat export could be impacted by the tariff war as well, with China singling out pork and beef for a 10% counter tariff. Mexico, China and Canada accounted for 8.4 billion in U.S. red meat exports last year, according to the U.S. Meat Export Federation (USMEF).

USMEF is disappointed no agreements were reached to avoid or postpone the tariffs, but president and CEO Dan Halstrom says just because there are tariffs, doesn’t mean trade will stop.

“I do think the thing that we have definitely in our favor is that demand for our products globally is record breaking. I mean, it’s as good as I’ve ever seen it in 40-plus years,” he says. “I think that we have a very unique product. We got to keep that in mind because that’s a big leverage point.”

Halstrom says it could be a bumpy ride for a while, but it’s not something exporters can’t overcome.

Read: Industry Comments on Retaliatory Tariffs on U.S. Pork and Beef

Second U.S. Port Strike Averted as Union, Employers Reach Deal

Thu, 09 Jan 2025 15:11:20 GMT

The union representing 45,000 dock workers on the U.S. East and Gulf Coasts and their employers on Wednesday said they reached a tentative deal on a new six-year contract, averting a strike that could have snarled supply chains and taken a toll on the U.S. economy.

The United States Maritime Alliance employer group and the International Longshoremen’s Association, in a joint statement, called the agreement a “win-win.” The deal includes a resolution in automation, which had been the thorniest issue on the table.

“This agreement protects current ILA jobs and establishes a framework for implementing technologies that will create more jobs while modernizing East and Gulf coast ports — making them safer and more efficient, and creating the capacity they need to keep our supply chains strong,” the groups said.

Terms of the deal were not disclosed.

The talks had been extended until Jan. 15 to hammer a deal on automation. Shipping industry executives had been concerned that the parties would not be able to overcome their impasse, leading to a second ILA strike just days before President-elect Donald Trump’s Jan. 20 inauguration.

A three-day ILA strike in October triggered a surge in shipping prices and cargo backlogs at the 36 affected ports. Longshoremen returned to work after employers agreed to a 62% wage increase over the next six years.

ILA and USMX have agreed to continue operating under the current contract until the union can meet with its full Wage Scale Committee and schedule a ratification vote, and USMX members can ratify the terms of the final contract.

(Reporting by Gnaneshwar Rajan in Bengaluru; Editing by Alan Barona and Leslie Adler)

Trade Associations Urge Biden Administration To Act Now To End Port Strike

Thu, 03 Oct 2024 18:11:32 GMT

A coalition of over 270 local, state and federal trade associations have signed a letter urging President Biden and his administration to use all of its authorities to end the port strike, get the ports open and get the parties back to the negotiating table.

Click here to read the full letter.

The associations involved represent:

American manufacturers
Farmers and agribusinesses
Wholesalers
Retailers
Restaurants
Importers
Exporters
Distributors
Transportation and logistics providers
Additional supply chain stakeholders

The Ag Retailers Association (ARA) is among the groups who sent the letter and is encouraging members to let them know how the strike will impact their businesses.

Background:
A port strike along the East and Gulf coasts began on Oct. 1 and will halt the flow of a wide range of goods, potentially leading to shortages and higher costs. According to an estimate from the Anderson Economic Group, a one week strike would cost the U.S. economy about $2.1 billion.

Your Next Read: East and Gulf Coast Dockworkers Now on Strike Over Wage Demands, Halting Key U.S. Cargo Shipments

How Important is U.S. Ag and Food to the Economy?

Fri, 27 Sep 2024 01:31:09 GMT

As the saying goes, “numbers don’t lie,” and this rings especially true in the 2023 Feeding the Economy report, showing the economic importance of U.S. food and agriculture to communities throughout the nation.

Sponsored by 25 food and agriculture groups across all areas of the food supply chain, the report illustrates the food and agricultural impact on local and nationwide economic activity, underscoring the sector’s resilience and reliability amid a number of global and domestic disruptions.

“Feeding the Economy demonstrates how agriculture is connected to each stage of the supply chain, every item in the grocery store and relied upon by multiple other indispensable industries. The report provides insightful data and research on how the food and agriculture industry consistently generates a positive trade balance as well as millions of jobs while boosting economic vitality in rural and urban areas,” says Mike Seyfert, president and CEO of the National Grain and Feed Association.

Economic Output

Showing an increased economic output in all 50 states compared to the 2022 report, the industries contributed to over $8.6 trillion, nearly 20%, of the country’s economic activity. In addition, the industries accounted for over $202 trillion in export value.

Reflecting a rebound in national economic activity, the largest total output gains were from Hawaii (31%), North Dakota (26%), New York (23%), Nevada (22%) and Florida (21%), according to the report.

Agriculture and food businesses also contribute over $947 trillion to federal and state taxes, including $565.3 trillion and $382.5 trillion, respectively.

Jobs and Wages

Despite the economic challenges and disruptions associated with the COVID-19 pandemic, in 2023, a total of 22,924,189 million jobs are tied directly to the food and agriculture sector, claiming $927.4 billion in wages. This contributes to a total of over 46.2 million jobs and $2.6 trillion in wages supported across the whole supply chain, increasing nearly 2% since 2019.

Productivity

“The strength and growth highlighted in this year’s report reinforce that agriculture is evolving and innovating to meet the demands of the 21st century,” the report says.

USDA notes that between 1948 and 2019, land use for agriculture decreased by 28% while land productivity grew nearly four times and labor productivity grew more than 10 times, the report adds, with agriculture’s total factor productivity growth rate among the highest of U.S. sectors.

While producers raise crops, produce and livestock on two of every five acres of U.S. soil, millions of other U.S. workers fulfill jobs in over 200,000 food manufacturing, processing and storage facilities to strengthen the food supply chain across the world. Additionally, approximately 200,000 retail food stores and over 1 million restaurant locations provide food for communities from coast to coast.

The sheer number of jobs and total of wages, taxes and export values highlight the vitality of the industry to our nation. However, for many Americans, both rural and urban, agriculture and food are more than simply a paycheck.

“American agriculture is really the foundation of our lives and our economy. This study reveals the numbers, and maybe some of the spirit, of this one indispensable sector,” says Roger Cryan, chief economist at the American Farm Bureau Federation.

The full report can be found on the Feeding the Economy website .

John Phipps: Is There Really a Shortage of Truck Drivers?

Mon, 14 Aug 2023 16:07:06 GMT

Cast your mind back to early 2022 and the headline-grabbing Trucker Shortage . My conclusion then was there wasn’t much hard data to substantiate that alarm. There has always been a need for truckers and perversely there seems to have always been ample qualified workers to fill it.

It didn’t take an economics degree to figure out the problem: truckers simply weren’t being compensated enough to entice and keep workers. Now a year and a half later the headline is the demise of one of America’s largest trucking companies – Yellow Trucking – and the end of 30,000 jobs they represent.

(Farm Journal)

Freight companies are struggling now with reduced demand, which threatens even more trucking jobs. At some point most of us begin to wonder about these alleged shortages. Adding to the muddled picture of jobs and pay is the historically low unemployment rate which emphatically illustrates how small the pool of potential employees is.

Related Story: Walmart Will Now Pay Starting Truck Drivers $110,000, Could It Backfire and Make the Nationwide Trucker Shortage Even Worse?

For trucking, which is often a career step up from entry wage employment, increases in the minimum wage by many states has helped low-wage employees keep up.

Since the pandemic, the surprising strength of low wage compensation compared to skilled or managerial wages removes some motivation for workers to consider a trucking job. Note the inversion after the pandemic of which income quintile is seeing greater wage increases.

Trucking companies have long dealt with astonishing turnover rates since the prospective employee pool was large and already qualified. New CDL licenses are issued to about half the current trucker numbers each year. Short-lived shortages are not limited to employees either.

Related Story: SHIP IT Act Could Save Truck Drivers Up to $10,000 and Cover CDL Costs

I started looking back at the numerous “shortages” and dire predictions of the last few years. At least some semiconductor chips, for example, are in now surplus, even a glut. We’ve discovered more new sources for lithium than anyone imagined. Ditto for copper, cobalt, and phosphates.

It appears markets can remedy shortages faster than we have imagined, and the few stubborn scarcities are sidestepped with alternative solutions. Not always, but certainly more than the hysterical headlines suggest.

There will always be warnings about trucker shortages, I suspect, but not from truckers.

What Ag Equipment Parts Are In the Shortest Supply Right Now?

Tue, 28 Feb 2023 17:44:02 GMT

The National Farm Machinery Show (NFMS) earlier this month revealed one major theme: the supply chain is still posing major problems for ag equipment manufacturers. Leaders within the ag equipment sector say the supply chain issues have been a major hurdle in bringing some new equipment to market, and the issue could persist throughout 2023.

“The supply chain challenges that we experienced in 2021 and 2022 are with us for a little bit longer,” says Curt Blades, senior vice president of agriculture services for the Association of Equipment Manufacturers (AEM) .

From Case IH to Deere and Company, the equipment manufacturers admit issues sourcing parts has been a constant headache.

“Absolutely, it’s been an issue. Supply chains have been highly disruptive in the last 12, 18 to 24 months,” says Jahmy Hindman, Deere and Company chief technology officer (CTO).

Hindman says in the constant conversations Deere is having with their supply chain base, suppliers are telling them the situation looks to improve the second half of the year.

“It’s progressively getting better,” Hindman adds. “Our third quarter and fourth quarter of last year showed us the improvement in our ability to deliver the products that are being ordered to the marketplace. I expect that to continue in the first quarter of this fiscal year for us.”

AEM also sees improvement coming later this year, which means farmers could still face months of supply chain constraints.

“Maybe by the end of the year, we’ll begin to see some return to normalcy, whatever normalcy looks like,” says Blades.

Parts in Shortest Supply

Today, equipment manufacturers across the world are grappling with the same problem. The supply chain issues are not only ongoing, but hard to predict.

“We had this level of challenge, maybe now it’s a little bit less, but we’re not out of the woods,” says Kurt Coffey, head of Case IH for North America . “It could be tracks one day, it could be tires the next day. We have a lot of very unique, high-value, custom castings, a heat-treated custom casting, that you can’t just go get, and it’s a very unique supplier.”

Castings are the latest supply chain headwind to hit. No matter the type of equipment, manufacturers are saying castings are a major hurdle right now.

“It’s a little bit of a whack-a-mole strategy when it comes to the supply chain,” says James Shurts, president of the ag division for Great Plains . “It’s always something new, and it just happens to be that castings are our current issue and the current challenges. But it’s always something different.”

AEM recently conducted a survey of its members, showing:

The most sought-after component are tracks (and their included components):
Only 27% of optimal inventory is available.
In both agriculture and construction sectors, semiconductors and chips are in short supply.
44% optimal inventory is available across both sectors.

“The other things that are interesting are like wiring harnesses, which oftentimes are made in the Ukraine, or seat cushions, which are made in Texas in areas that were destroyed by floods. It’s not one thing, it’s a collection of things,” says Blades.

Case IH says as the parts in short supply continue to vary, the company is finding unconventional ways to address the issues.

“The last year or two has been custom castings, chips, tracks, tires,” says Coffey. “We actually pulled strategic sourcing in and went on third-party markets to go buy chips from third parties, millions of dollars of chips from a third party, bring them in, ship them to our partner suppliers so we can keep our lines going.”

The Biggest Issue? Labor

No matter what item is in scarce supply, the problem is bigger than one part or company.

“The underlying issue with all supply chain challenges are labor,” says Blades.

AEM also surveyed 179 equipment manufacturer executives about the supply chain late last year and found:

98% still face supply chain issues.
58% are experiencing continuously worsening supply-chain conditions.

The AEM survey showed equipment manufacturers of all size are getting creative to address the challenges, which includes increasing their inventory and supplier base, creating a more vertical integration of supply chains, certifying alternative suppliers, as well as focusing more on supply chain reliability than price.

Growing Optimism

Despite the constant supply chain obstacles, leaders at both John Deere and Case IH are optimistic.

“We’re not just hearing that it’s progressively getting better, we’re sensing it; we’re feeling it,” says Hindman. “We’re also seeing it come through in our delivery. So, as long as things continue on that trajectory, I feel pretty good about next year.”

“We’re not out of the woods, but we’re certainly in a better place than where we were, let’s say, a year, year and a half ago,” adds Coffey. “But we’re just going to keep fighting to make sure that we’re ready for whatever the customers need from us.”

Optimism is growing in the supply chain, even with some bumps still ahead, as agricultural equipment manufacturers continue to navigate uncharted waters with the supply chain.

Related Story:

John Phipps: Is it Even Feasible to Bring the Production of Chips and NH3 Back to the U.S.?

What's The Biggest Supply Chain Headache Crippling Equipment Manufacturers Right Now?

Wed, 22 Feb 2023 16:53:02 GMT

Supply chain challenges consistently hit agriculture in 2022. While 2023 has brought improvement with fertilizer availability, a sector still fragile to supply chain issues is the farm equipment sector.

From tires and tracks, to a new problem with castings, leading equipment manufacturers like Case IH, John Deere and Great Plains all say the supply chain is still an issue.

“We’re conditioned to expect the black swans to the point where they’re no longer black swans, they’re just kind of inevitable disruptions,” says Sam Taylor, farm inputs analyst for Rabo AgriFinance, RaboResearch .

“The supply chain challenges that we experienced in 2021 and 2022 are with us for a little bit longer,” says Curt Blades, senior vice president of agriculture services for the Association of Equipment Manufacturers (AEM) .

Supply Chain Issues Projected Through 2023

During National Farm Machinery Show (NFMS) last week, booth after booth displayed the latest in technology and equipment, but leaders within the ag equipment sector say the supply chain issues are a hurdle in bringing new products to market.

“Absolutely, it’s been an issue. Supply chains have been highly disruptive in the last 12, 18 to 24 months,” says Jahmy Hindman, Deere and Company chief technology officer (CTO).

Hindman says in the constant conversations Deere is having with their supply chain base, suppliers are telling them the situation looks to improve the second half of the year.

“It’s progressively getting better,” Hindman adds. “Our third quarter and fourth quarter of last year showed us the improvement in our ability to deliver the products that are being ordered to the marketplace. I expect that to continue in the first quarter of this fiscal year for us.”

AEM also sees improvement coming later this year, which means farmers could still face months of supply chain constraints.

“Maybe by the end of the year, we’ll begin to see some return to normalcy, whatever normalcy looks like,” says Blades.

Parts In Shortest Supply

The most sought-after component are tracks (and their included components):
Only 27% of optimal inventory is available.
In both agriculture and construction sectors, semiconductors and chips are in short supply.
44% optimal inventory is available across both sectors.

The Biggest Issue? Labor

98% still face supply chain issues.
58% are experiencing continuously worsening supply-chain conditions.

Growing Optimism

Signs Growing that the Global Supply Chain Crisis is Over

Fri, 23 Dec 2022 18:32:27 GMT

From the docks of Southern California and Europe to the parcel hubs in the Midwest and the store shelves in New York, signs are growing that the global supply-chain crisis is over, according to the Wall Street Journal (WSJ).

The COVID-19 pandemic that spawned product shortages, shipping bottlenecks and soaring transport costs may not be gone, but the WSJ reports goods are moving around the world again, reaching companies and consumers.

Despite widespread government and industry attempts to unwind the bottlenecks, the real break may have come in the demand slowdown that has eased the pressure on strained operations.

“As some of commodity prices and transportation costs begin to come down, we’re revisiting these costs with our suppliers,” says Bill Bolts of Lowe’s, on easing supply chain pressures.

On the Water

According to Drewry Shipping Consultants’ index for spot prices, to ship a 40-ft. container from Shanghai to Los Angeles the week of Dec. 22 was $1,992, down from $2,000 the week before and 82.2% below the 2022 high set in Jan.

U.S. container imports reached their lowest level in November since early 2020, and shipping heavyweight Maersk Line projects demand will decline next year from 2% to 4%. Freight rates that busted shipper budgets last year are sliding and broader costs for suppliers heading into 2023 are also retreating.

Shippers Note ‘Notoriously Difficult’ Railroads During Latest Hearing

Wed, 14 Dec 2022 15:00:00 GMT

Shippers urged the U.S. railroad regulator to create more competition in the industry during hearings in which Union Pacific was called to explain a spike in service restrictions.

Shippers used the public forum to air grievances about an industry structure that they say gives railroads the power to boost prices and pad their profit even as service suffers.

Companies, including Cargill Inc. and Ag Processing Inc., pointed to reduced workforces as one of the main culprits for railcar curtailments.

Lance Fritz, the chief executive officer of Union Pacific, said service has suffered because the railroad didn’t have enough train crews at the beginning of the year and has hired 1,400 train and yard workers to address the problem. As service deteriorated, customers added railcars to the network to move goods. That exacerbated the congestion and forced the railroad to use embargoes to clear out railcars from switching yards and tracks, Fritz said.

“Excess freight-car inventory disrupts the alignment of our network resources,” he said. “It requires us to use more crews and more locomotives to handle the same amount of business, and it produces congestion on our lines of road and in our terminals.”

More on rail:

Rail Strike Derailed as Biden Signs Labor Bill
Rail Strike Averted Until Dec. 4, Saving U.S. $2 Billion Per Day

Rail Strike Derailed as Biden Signs Labor Bill

Mon, 05 Dec 2022 14:09:51 GMT

The Senate swiftly moved to pass a tentative rail agreement on Thursday with a landslide 80-15. This move followed the House’s favorable vote of 290 to 137 on Wednesday. President Biden signed the bill Friday morning, further derailing the looming labor strike.

Congress also voted on a paid sick leave bill, which the House moved to pass but the Senate chose to deny. The odds were close, however, with a vote of 52-43 .

Zippy Duvall, Farm Bureau president, says producers’ reliance on rail is what pushed AFBF to support and celebrate averting the rail strike.

“High diesel prices, a truck driver shortage, and low water levels on the Mississippi River have already made shipping conditions difficult,” Duvall said in an AFBF press release . “A rail strike would have had a devastating effect on the American economy, especially as families grapple with higher prices caused by inflation.”

“There was an industry-wide sigh of relief today after both Congressional chambers voted in favor of implementing the September TAs,” said The Fertilizer Institute’s Corey Rosenbusch. “Rail is critical to the movement of fertilizer year-round. Averting embargoes and production delays were crucial to not only ensuring we’re able to provide the fertilizers our nation’s farmers need, but also avoiding additional disruptions to a global market already constrained by geopolitical events and volatile energy prices.”

While some groups are applauding the outcomes, others are outraged.

The Brotherhood of Railroad Signalmen (BRS) spoke out on the votes in a press release :

“What took place in the United States Senate today is a symptom, and further illustration, of a larger issue in our country. Almost every elected member of Congress campaigns on being “for the working class”; the actions of many today demonstrated they are for the corporate class,” BRS said. “The dereliction of duty and inability to hold corporations accountable for a lack of good faith to their employees will not be forgotten.”

BRS says their work on the matter will continue, and they will “not be silenced.”

Tom Vilsack, USDA secretary, echoed each response, saying the rail system and workers both deserve protections.

“Our work doesn’t stop here. This Administration will continue to make progress on fostering economic growth and strengthening supply chains, and supporting workers who deserve protections in the workplace.”

According to Biden’s economic advisors, as many as 765,000 Americans — many union workers themselves — would have been put out of work in the first two weeks of shutdowns.

More on rail:

Congress “Likely” to Pass a Rail Deal this Week, According to Soy Transportation Coalition’s Steenhoek
Rail Strike Averted Until Dec. 4, Saving U.S. $2 Billion Per Day

Congress “Likely” to Pass a Rail Deal this Week, According to Soy Transportation Coalition’s Steenhoek

Wed, 30 Nov 2022 12:30:53 GMT

President Joe Biden late Monday called on Congress to pass legislation immediately to adopt the tentative agreement between railroad workers and operators that was approved by labor and management negotiators in September “without any modifications or delay — to avert a potentially crippling national rail shutdown.”

Biden noted the deal “provides a historic 24% pay raise for rail workers. It provides improved health care benefits. And it provides the ability of operating craft workers to take unscheduled leave for medical needs,” adding that “since that time, the majority of the unions in the industry have voted to approve the deal.

Biden said a rail shutdown “would devastate our economy. Without freight rail, many U.S. industries would shut down.”

According to Biden’s economic advisors, as many as 765,000 Americans — many union workers themselves — could be put out of work in the first two weeks alone.

Meanwhile, the advisors say communities could lose access to chemicals necessary to ensure clean drinking water. Farms and ranches across the country could be unable to feed their livestock.

“As a proud pro-labor president,” Biden said he is “reluctant to override the ratification procedures and the views of those who voted against the agreement. But in this case — where the economic impact of a shutdown would hurt millions of other working people and families — I believe Congress must use its powers to adopt this deal.”

Next Steps in Congress

House Speaker Nancy Pelosi (D-Calif.) said in a statement that the House this week would “take up a bill adopting the tentative agreement — with no poison pills or changes to the negotiated terms — and send it to the Senate.”

Mike Steenhoek, executive director at the Soy Transportation Coalition, feels this action will lead to a solution.

“I think the [odds Pelosi will reach an agreement] is really high because the republicans will support it,” Steenhoek says. “There may be some on the democratic side that say they need to hold out on concessions for workers. But with the President urging it, along with the board recommendations, I think there will be quick passage.”

If an agreement isn’t made by the cooling-off deadline of Dec. 5 (Brotherhood of Railroad Signalmen), Steenhoek says there will likely be a reduction in rail service as early as the end of this week.

More on the rail strike:

Rail Strike Update: Labor Deal Deadline Shortened to Dec. 5
A Possible Rail Strike is Quickly Approaching Unless Congress Steps In

Rail Strike Averted Until Dec. 4, Saving U.S. $2 Billion Per Day

Thu, 10 Nov 2022 22:05:45 GMT

A tentative rail labor deal showed promise at the beginning of October, but was rejected by the third largest rail union, amplifying concerns of a strike. However, the strike threat has been held off until Dec. 4.

The National Carriers’ Conference Committee (NCCC) and the Brotherhood of Maintenance of Way Employees Division of the International Brotherhood of Teamsters (BMWED) have agreed to extend the current cooling off period until at least Dec. 4, according to an announcement Wednesday.

The current period had been set to expire Nov. 19, and the statement issued indicated it “is subject to further extension to maintain alignment, if necessary, with other labor organizations. This extension eliminates the threat of a near-term freight rail service disruption.”

Union leaders are arguing the railroads haven’t done enough to address worker concerns, largely surrounding working conditions and paid time off. Specifically, in the last attempted deal, unions opposed a potential five-year contract that already included:

A 24% raise in wages
$5,000 in bonuses

The Association of American Railroads (AAR) has issued analysis that indicated a rail strike and nationwide freight railroad shutdown could cost $2 billion per day.

Seven of nine unions have ratified the proposed pact and two, including the BMWED and the Brotherhood of Railroad Signalmen, have not. The next votes are scheduled for Nov. 14 and Nov. 21.

More on rail:

Possible U.S. Rail Strike Now Back On the Table
New Demands by One Labor Union Renews Concerns about Possible Railroad Strike in November

Is the U.S. Now Officially in a Recession?

Fri, 28 Oct 2022 20:19:07 GMT

Friday brought mixed news for the economy. While data from the Commerce Department inflation pressures remained high last month, the Labor Department’s Employment Cost Index indicated a slowdown in private-sector wage growth for the third quarter.

Even with a glimmer of hope, the Federal Reserve is still widely expected to bump interest rates another 75 basis points as the Fed works to get inflation under control. And with a recession looming, consumers are already adjusting their spending habits at the meat counter.

“The short answer is yes, we’re seeing consumer behavior change,” says Glynn Tonsor, professor of Ag Economics at Kansas State University who also tracks consumers buying habits through the Meat Demand Monitor.

So, are we in a recession? Tonsor says that’s something you can continue to debate, but it’s more important to watch changes in behaviors versus debating the definition.

“It’s easy to get caught up in the discussion and definition of a recession,” says Tonsor. “I encourage us to hone in on his consumer behavior changing the way you phrase the question and it gets the right way. And price sensitivity, consumers are responding to price stronger than they were a year or two ago. And I think that’s because real wages have declined, and when I say real wages, the cost of living has gone up more than what people are making. So there’s a price squeeze or the financial belt has been tightened in a lot of households.”

Tonsor says meat protein is one of several categories there’s evidence consumers are tightening their belt in their buying decisions.

“We’re seeing some trading down within the protein complex,” adds Tonsor. “Think about going from a bacon product to a ham product, or from a ribeye steaks to a sirloin steak. There’s a lot of examples like that. But the meat demand monitor project at K-State gives us a lot of points on that. And the short answer is yes.”

There’s also a debate on what’s fueling inflation, a factor in the recession debate. The supply chain issues are one, but some also think excessive government spending is fueling the higher prices consumer are seeing.

While the debate on why inflation is so high will continue, Lonnie Hobbs, Jr., a PhD candidate in Ag Economics at Kansas State University says it’s not just one thing aiding the higher costs.

“In terms of the supply chain, we’re seeing these rise in prices because of a variety of factors such as rising transportation costs, rising cost of ingredients, rising costs of the processing that goes along with a lot of these products,” says Hobbs. “We are seeing rising prices in all areas that can at times be good for the farmer [prices they receive], but in terms of consumers, it may alter some of their purchasing decisions.”

The transportation issues aren’t going away either. Low river levels and a looming rail strike in mid-November are two transportation issues that could fuel higher transportation costs. So, will the supply chain transportation issues go away anytime soon?

“In the short term? I will say no, I would see this going on into the next year,” says Hobbs. “I think over time, things will get better, especially as the labor force begins to pick up. But I do think that this is something that farmers should be aware of moving into the new year.”

Possible U.S. Rail Strike Now Back On the Table

Tue, 11 Oct 2022 13:54:35 GMT

A labor strike along U.S. railroads is still a possibility after the third-largest railroad union rejected a tentative labor agreement this week. The agreement had the support of the White House, but without all unions voting in favor of the agreement, a labor strike could still occur in mid-November.

Union leaders are arguing the railroads didn’t do enough to address worker concerns, largely surrounding working conditions and paid time off. Now, both sides will need to return to the bargaining table to avoid a possible strike once again.

The last close call happened just before the September 16th deadline, when a last-minute tentative agreement was struck, preventing a rail strike from taking place on that same date. Now, those labor conversations are back on as the Brotherhood of Maintenance of Way Employes Division Union opposed a potential five-year contract that already included a 24% raise in wages, as well as $5,000 in bonuses.

“The majority of the BMWED membership rejected the tentative national agreement and we recognize and understand that result,” said BMWED president Tony D. Cardwell in a statement. “I trust that railroad management understands that sentiment as well. Railroaders are discouraged and upset with working conditions and compensation and hold their employer in low regard. Railroaders do not feel valued. They resent the fact that management holds no regard for their quality of life, illustrated by their stubborn reluctance to provide a higher quantity of paid time off, especially for sickness. The result of this vote indicates that there is a lot of work to do to establish goodwill and improve the morale that has been broken by the railroads’ executives and Wall Street hedge fund managers.”

Transportation Nightmare

Strike or no strike, one veteran market analyst says rail issues are still severe, and now backlogs on the nation’s rivers due to low river levels mean even more emphasis will be placed on rail at a time when transportation logistics have been dubbed a “nightmare.”

“Well, even if we don’t have a rail strike, the rail is so congested and so problematic,” says Dan Basse of AgResource Company. “Today, it’s not going to make much difference. Rail prices are rising. If you look at the barge market heading to the Mississippi today, it costs one-and-a-half times to get beans to the Gulf as it would to load it and get it to China. It’s crazy what’s going on.”

Sourcing feed was already a problem for livestock producers and grain buyers in the western U.S. Issues nationwide mean everyone is paying more to get the essential grain.

“If you’re in Kansas or the Western Plains, you’re paying $2-over-plus for corn, if you can find it. It’s a problem,” says Basse.

While the third-largest rail labor union rejected the tentative agreement, all 12 unions, which represent nearly 115,000 workers, must ratify their contracts to prevent a rail strike. Four other rail unions approved their agreements with freight railroads.

By Monday midafternoon, the U.S. rail industry had yet to comment on the latest union development.

History of Ongoing Rail Strike Threat

As AgWeb first reported in July, a possible strike has been brewing all summer , with NGFA fearful a strike would occur in the middle of harvest. Fisher says even though a strike is prohibited by law ahead of Friday’s deadline, rail companies are shutting down shipments in advance in order to mitigate potential damages.

“The railroads don’t want to have the cars and equipment out in areas of the country where they can’t protect them very well,” Fisher adds. “So, they’re taking steps to mitigate damages. For our members, they’re looking at essentially not receiving their grain on time and not being able to then ship out the finished products such as ethanol, flour, things of that nature.”

Impact on Farmers

What will it mean for farmers? Max Fisher, NGFA chief economist, says a potential rail strike will have a severe economic impact on agriculture.

“From what I’m being told, we really cannot have the railroad stop even for a minute,” Fisher says. “With the railroads, there’s so much planning involved in every shipment that if we get them off plan, like have all the workers at home and so forth, it’s very hard to get things started again.”

Another potential problem is grain processing facilities and the backlog it could create. Fisher fears some NGFA members will be forced to shut down.

“I think there’s a very good chance we’re going to have shutdowns in the grain industry and at our processing facilities, not to mention the impact on our exports also,” Fisher says.

USDA Is Now Sending Out $500 Million to Fight High Fertilizer Prices in the U.S.

Tue, 27 Sep 2022 19:56:30 GMT

USDA unveiled additional plans to help boost domestic fertilizer production including $500 million in grants. In an announcement Monday, the plan aims to bring more of the critical input sourcing stateside, and therefore reduce the risk of a series of black swans that have flown into the fertilizer market in the past two years.

Farmers are currently looking at fertilizer prices that are trending higher for fall, aiding economic concerns and anxiety about potential farm income for 2023. However, some in the fertilizer industry warn adding fertilizer production in the U.S. will take time and could ultimately lead to higher fertilizer costs.

Tuesday’s announcement marks the second time for USDA to unveil a plan on this issue this year. In March, USDA announced plans to make $250 million available toward pushing more American-made fertilizer. At the time, USDA said it intended to use funds from the Commodity Credit Corporation (CCC) to develop a grant program to provide ‘gap’ financing to bring new, independent domestic production capacity on-line.

Details of USDA’s Fertilizer Production Expansion Program

Six months later, that plan is now coming to fruition. On Tuesday, USDA announced details around what it’s calling the Fertilizer Production Expansion Program , saying the funding is double what the agency originally set aside with $ 500 million now available in grants.

“Under the leadership of President Biden and Vice President Harris, USDA is creating a resilient, secure and sustainable economy, and this support to provide domestic, independent choices for fertilizer supplies is part of that effort,” says U.S. Agriculture Secretary Tom Vilsack. “USDA believes in the growth of innovative, local businesses owned and shared by people who can best serve their own unique community’s needs, fill gaps, and build opportunities. Recent supply chain disruptions have shown just how critical it is to invest in the agricultural supply chain here at home. The Fertilizer Production Expansion Program is one example of many Biden-Harris Administration initiatives to bring production and jobs back to the United States, promote competition and support American goods and services.”

The Biden administration says the grants are geared toward independent producers who are working toward sustainable American fertilizer production for farmers.

The maximum grant amount is $100 million
Thee minimum is $1 million.
Each grant term is five years.

The White House says the funds can be used to help expand manufacturing of fertilizer as well as alternatives, through:

Independent, and outside the orbit of dominant fertilizer suppliers. Because the program’s goal is to increase competition, market share restrictions apply.
Made in America. Products must be produced by companies operating in the U.S. or its territories, to create good-paying jobs at home, and reduce the reliance on potentially unstable, inconsistent foreign supplies.
Innovative. Techniques will improve fertilizer production methods and efficient-use technologies to jumpstart the next generation of fertilizers and nutrient alternatives.
Sustainable. Ideally, products will reduce the greenhouse gas impact of transportation, production and use through renewable energy sources, feedstocks and formulations, incentivizing greater precision in fertilizer use.
Farmer-focused. Like other Commodity Credit Corporation investments, a driving factor is providing support and opportunities for U.S. agricultural commodity producers.

The Fertilizer Institute President and CEO Corey Rosenbusch said: “The U.S. fertilizer industry consists of large international corporations, small regional producers, and everything in between. They all play a critical role in suppling farmers with the nutrients required to grow the food that feeds the world. While a nitrogen plant can cost between $2-$4 billion to construct, anything that helps strengthen domestic fertilizer production is a win for the industry, growers, and consumers.”

What’s Causing High Fertilizer Prices Today?

The U.S. currently ranks in the top three for fertilizer imports. Most of those products, or components of fertilizer, come from countries including China, Russia, Canada and Morocco. Supply chain issues led to soaring fertilizer prices last fall. Those prices crept even higher ahead of spring planting this year. It wasn’t just price that was a concern, but also availability of fertilizer.

A year ago, n ews that about black swans hitting the fertilizer industry was a trending story . From the impacts of Hurricane Ida to political and climate issues entangled in a cobweb of production slowdowns in Europe and China, the Black Swan events continued to stack up.

A year later, the issues are still prevalent as farmers face rising fertilizer prices again. From corn prices, transportation issues to even energy prices, there are several factors driving the resurgence of fertilizer prices leading into fall.

Nitrogen prices averted a major disaster two weeks ago when rail companies and rail unions reached a tentative agreement and avoided a possible strike. Even with the positive news, this chart from StoneX Group shows prices are climbing back toward the highs producers saw last spring.

Concerns About Farm Income in 2023

USDA Chief economist Seth Meyer spoke at the Ag Outlook Forum in Kansas City this week. He described the financial outlook for farmers in 2023 as one that comes with more anxiety, and the main reason is over concerns commodity prices won’t rise at the same rate as input prices. One of those pricey inputs causing concern is the increasing price of fertilizer.

“I think for U.S. producers, it’s all going to be about price,” Meyer told AgWeb. “You’ll be able to get what you want, but it’s going to be about price. I’s not going to be at the price you want to pay. I think that part of what we’re seeing on costs for this crop that folks are harvesting now was some folks bought ahead and didn’t face the full brunt of those rising fertilizer prices.”

Meyer says he doesn’t see fertilizer prices trending back down toward pre-pandemic levels in the short-run.

How High Are Fertilizer Prices Today?

Just how high are nitrogen prices today? One ag retailer in Missouri told AgWeb anhydrous prices for falls needs were:

$800 per ton during the fall of 2021
$1500 during the spring of 2022
Farmers booking fall anhydrous today are paying $1325

A retailer located in Iowa also reported a fertilizer price increase this fall. The location reported:

Prices started around $700 during the fall of 2021 and jumped to $1500 by the end of last fall
Prices jumped to $1,700 during the spring of 2022
Farmers looking to book for fall of 2022 saw prices that started at $1000 per ton, but now it’s more than $1400 per ton

“Historically we might have thought fertilizer is primarily an energy cost input,” says Brad Lubben, agricultural economist with the University of Nebraska-Lincoln. “Energy drives the cost of fertilizer, but so does output so does the price of corn. So do the supply shocks overseas in terms of foreign suppliers. So do the current energy shocks in Europe, which leaves all kinds of questions about the winter natural gas supply and availability, as well as transportation and everything else that we see going on here with the challenges we’re seeing today. Volatility is something producers are going to have to manage.”

Can the Push to Domesticate Fertilizer Production Solve the Issues?

While the short-term price issues are causing concern for farmers today, economists also say moving production domestically will take time. The reason fertilizer production moved to countries like China, Russia and others was due to a lower cost of energy, as well as not as many regulatory hurdles to jump through.

As the Biden administration works toward adding fertilizer capacity in the future, there will be 45-day application window for applicants to receive priority for projects that increase the availability of fertilizer (nitrogen, phosphate or potash) and nutrient alternatives for agricultural producers to use in crop years 2023 or 2024. An additional 45 days will be available for an extended application window to receive applications for financial assistance.

U.S., China Container Shipping Rates Plummet 50%, Backlog of Unfilled Orders Grows

Fri, 23 Sep 2022 18:05:17 GMT

As backlogs at U.S. ports and climbing shipping rates plague the supply chain, new data shows shipping rates between the U.S and China are dropping by more than 50% in just a month.

Data provided by digital freight forwarding company Shifl shows China/U.S. spot freight rates, for shipping a 40-foot container from China to Los Angeles, dropped by $9,000. That’s a 51-percent drop between September and October.

Experts say China is slowing production due to a power crisis and the off-season coming into view, but issues remain due to a growing backlog of unfulfilled orders.

Earlier this week, AgDay reported that Port officials say strong American consumer demand has continued unabated for more than a year, as the Port of Los Angeles has seen a 30% increase in cargo volume so far this year. That’s as exports from the Port of Los Angeles dropped 23% in August.

It’s impacting agriculture in the U.S. because of record-high shipping rates. That’s coupled with the fact that some shipping lines are working to get empty containers back to factories in Asia as quick as possible.

Nitrogen Prices Now Seeing a Resurgence For Fall, and Natural Gas Isn't the Only Driver

Wed, 21 Sep 2022 14:03:20 GMT

High input prices continue to be a pain point for farmers planning their 2023 crop needs, and nitrogen prices are now seeing a resurgence heading into fall. Experts say the price of natural gas isn’t the only driver fueling the market as farmers look to book their fall needs.

Nitrogen prices averted a major disaster on Friday when rail companies and rail unions reached a tentative agreement and avoided a possible strike. Even with the positive news, this chart from StoneX Group shows prices are climbing back toward the highs producers saw last spring.

(Farm Journal)

One ag retailer in Missouri told AgWeb anhydrous prices for falls needs were:

$800 per ton during the fall of 2021
$1500 during the spring of 2022
Farmers booking fall anhydrous today are paying $1325

A retailer located in Iowa also reported a fertilizer price increase this fall. The location reported:

Prices started around $700 during the fall of 2021 and jumped to $1500 by the end of last fall
Prices jumped to $1,700 during the spring of 2022
Farmers looking to book for fall of 2022 saw prices that started at $1000 per ton, but now it’s more than $1400 per ton

What’s Behind the Price Increase for Fall?

What’s fueling the price increases now? Ag Economists say natural gas used to be the main indicator, but that’s not the case anymore.

“Historically we might have thought fertilizer is primarily an energy cost input,” says Brad Lubben, agricultural economist with the University of Nebraska-Lincoln. “Energy drives the cost of fertilizer, but so does output so does the price of corn. So do the supply shocks overseas in terms of foreign suppliers. So do the current energy shocks in Europe, which leaves all kinds of questions about the winter natural gas supply and availability, as well as transportation and everything else that we see going on here with the challenges we’re seeing today. Volatility is something producers are going to have to manage.”

Outside of the global energy battle, some economists and analysts argue the larger driver of nitrogen prices today is the price of corn.

“You have a lot of factors at play there,” says Cory Walters , an agricultural economist with University of Nebraska- Lincoln. “You have corn prices heading back up. You have issues over in Europe, you have tariffs, you have you have transportation costs, it’s everything across the board is leading to this price level and this level of volatility. And I’d expect more of that going forward, as we as we move into the fall and winter.”

Josh Linville of StoneX Group says there were reports Friday that two European nitrogen plants are planning to come back online. He says that will likely be with the help of government assistance in an effort to beat the cold temperatures this winter. As a result, NOLA January futures were down $30 from the highs on Thursday.

The U.S. is Now 30 Days Away From a Possible Railroad Labor Strike

Thu, 18 Aug 2022 01:50:01 GMT

Delays on U.S. railroads have been a growing problem for shipping agricultural goods all year. Labor discussions are ongoing and with the grain industry concerned about a possible labor stoppage in mid-September , which would be the height of Midwest harvest.

Just this week, the White House-appointed Presidential Emergency Board (PEB) released a recommendation as part of the ongoing collective bargaining process. Both sides have 30 days to accept those recommendations. If the two parties don’t agree, then rail workers are allowed to go on strike as of Sept. 16.

Max Fisher, Chief Economist, National Grain and Feed Association (NGFA) has been watching the situation closely. He says the biggest takeaway from the Emergency Board’s recommendation is a 24% wage increase over five years for rail labor.

“You may be asking, ‘Where does that stand with respect to where the two sides were at?’ The rail carriers were at 17% for what they were offering, and rail labor, what they were requesting, was 31%. So, 24% is right in between those two figures,” says Fisher.

Congress Holds the Power to Intervene

While workers can legally go on strike starting Sept. 16 if they don’t choose to adopt the board’s recommendations, Congress can intervene if workers decide to strike Sept. 16.

“If history repeats itself, the last time we had a stoppage was in the early 1990s,” he says. “And I believe it lasted one day, maybe two days, before Congress passed a bill prohibiting a lockout or strike. Essentially, the two sides had to then go back to work on reaching agreement. So, Congress has a lot of power here. We would like to think they’re going to exercise it, and we’re certainly going to encourage them to exercise it because stopping the railroads would be very, very bad for the agricultural economy.”

Fisher says the railroads have been working to hire more workers, but considering the current labor shortage and shipping delays, he expects rail delays to last another year. The rail delays have been so bad, some feed users report being just days away from running out of feed . Those delays could be inevitable even if a strike is averted in September.

Trouble Shipping Grain And Feed Via Rail Far From Over, Concerns Now Growing About Possible Worker Strike At Harvest

“Obviously, it could get worse if the trains were just to completely stop. But the service right now, even without a stop, is just not the best,” says Fisher. “There’s still a lot of delays as far as bringing rail cars to facilities, pulling them and delivering them. So, now the grain industry is still not in a good spot with respect to rail transportation.”

Tense Labor Negotiations

The April hearing in front of the STB gave a hint to how tense those labor negotiations could continue to be. Rail carriers pointed out how severely impacted they’ve been from what’s been dubbed the “Great Resignation,” and the issues getting labor back up to speed. Certain rail carriers also outlined the plans in place to get labor back to necessary levels to operate efficiently and smoothly.

However, rail workers place blame on the railroads, saying there’s more to the story. Mark Wallace, locomotive engineer, and vice president of Brotherhood of Locomotive Engineers and Trainmen (BLET), North America’s oldest rail labor union, testified during the STB hearing in April.

“Since 1984, 40 railroads have been reduced to seven class one carriers, now largely controlled by speculators and hedge fund investors,” he stated. “This culture of profits over safety, customer service and the lives of railroad workers, is now exposed as this network fails on a daily basis.”

Union Pacific, which is also part of the labor negotiations between rail workers and freight railroads over a new labor contract, signaled in July that the two sides were still far from reaching an agreement.

“I wish we could have gotten an agreement earlier in the process,” Union Pacific’s Lance Fritz said. “But the railroads and the union leadership are pretty far apart right now in terms of what we think is an appropriate settlement on wages.”

The talks involve nearly 115,000 union rail workers and more than 30 railroads and started in 2020.

BNSF Train Derails This Week

A BNSF train derailed between Hereford, Texas, and Dawn, Texas, early Wednesday morning. While the cause is still unknown, on-the-ground reports say pieces of the track were scattered around where the rail cars derailed and piled up.

Photos showed the aftermath of the accident. Sources from around the Hereford area describe that part of the rail line as extremely busy, with a train passing through that spot nearly every 15 minutes.

“BNSF can confirm that at approximately 5 a.m. CT, an eastbound intermodal freight train derailed 17 cars northeast of Hereford, Texas,” a BNSF communications spokesperson told Farm Journal. “There were no injuries to the train crew. Our teams are on site with equipment to clear the area and restore the track. The estimated time to reopen our first main train is mid-afternoon. The cause of the derailment is under investigation.”

@tyne_agtv Train derailment outside of Hereford, Texas early this morning. BNSF confirmed 17 cars derailed and says cause is under investigation. #train #derailment #railroad #agriculture #supplychainissues ♬ Oh No - Kreepa

Maps of BNSF routes shows that specific line runs as far west as California, evening leading the Port of Los Angeles, a port known as one of the world’s busiest seaports and a leading gateway for international trade in the Western Hemisphere.

Derailments have been a concern for grain shipping industry experts, especially considering the high heat in the South and Southwest this year. The triple digit heat could cause railways to buckle.

Trouble Shipping Grain And Feed Via Rail Far From Over, Concerns Now Growing About Possible Worker Strike At Harvest

Mon, 18 Jul 2022 20:00:15 GMT

Rail retains a vital role in the transportation of goods across the U.S., but this year, the 140,000- miles worth of railroad tracks across the country haven’t been immune to the supply chain chaos plaguing U.S. transportation sectors.

Now, a potential stoppage on the nation’s railways this fall is spurring concern, even after President Joe Biden signed an executive order Sunday to keep the nation’s rail traffic on track.

“What I’m hearing from our members is fewer equipment issues,” says Mike Seyfert, president and CEO of the National Feed and Grain Association (NFGA) . “The equipment and engines don’t seem to be breaking down, but the amount of time it’s taken to get the trains and the reliability of receiving them have.”

With more than 1,000 members today, NFGA represents everything from grain buyers and handlers to transportation companies who ship the grain.

“It seems to be most severe right now in the West, or for those who are trying to ship west on those lines that are going into the western part of the country,” says Seyfert. “Either for feed purposes, processing purposes, or export purposes to the western side.”

What’s Driving the Issues Shipping Via Rail?

Today’s rail issue centers around labor and the amount of time it’s taking to receive shipments via rail.

“The velocity to deliver trains is getting more and more difficult. You’re having challenges with having enough locomotives in different locations,” says Ken Erikson, senior vice president at S&P Global Fuels, Chemicals and Resource Solutions Group . “You have challenges with crews who may have been hit by weather, who may be hit by diversions, some of the rail crews timeout or they don’t have enough locomotive engineers in the right position.”

Eric Wilkey of Arizona Grain, Inc . is seeing the issue firsthand. Area farmers were in the middle of harvest, and Wilkey still hadn’t received the rail cars he needed.

“We’ve got a whole harvest that’s basically been received, and we haven’t been able to ship anything,” Wilkey told U.S. Farm Report at the end of June.

Wilkey says rail cars that were supposed to arrive in early May started to finally trickle in during the first part of July, but that was two months behind schedule.

“We never stopped the farmers from harvesting, so we have created some really large inventories and that has significant cash-flow impacts on us,” adds Wilkey.

Hearing Hints at Complexity of Issue

In April, the Surface Transportation Board (STB) stepped in, holding a hearing to get to the root of the rail issues. The hearing was full of differing opinions and pointed questions.

Just prior to the hearing, Landus Coop, which represents 7,000 farmer-owners in Iowa, submitted testimony saying rail issues meant they were only able to load half the number of shipments necessary, and the backlog meant farmers trying to haul grain to the coop were being turned away. The letter stated:

Landus is only able to load half the rate of shipments necessary today. With 450,000 bushels loaded in each train, this impact multiplies daily.
Farmers trying to haul grain to us today are getting turned away because we cannot make the inventory space for them. This is an important and optimal window of time when farmers must haul remaining old-crop inventory in preparation for harvest.
Disruption to inventory flow has led to increased handling costs and reduced customer service throughout Landus. We are experiencing lost business daily due to the disruption.
Grain bushels are getting “trapped” in pockets of surplus supply, while shipping destinations are experiencing a growing deficit in access to supply.
Our soy processing facility has experienced a 10% decrease in production over the past six months due to rail performance alone. This is in turn further impacting profitability and our ability to access markets where soybean meal is in highest demand.
Trucking is not a viable alternative transportation mode today due to labor shortages.

The letter went on to say “If this situation is not resolved quickly, we risk the potential for livestock producers in California and other states potentially running out of feed.”

Concerns About Labor Issues Growing Worse at Harvest

Rail carriers and unions are in the middle of labor negotiations right now. The collective bargaining process made headlines last week, as Biden had until Sunday, July 17, to create a Presidential Emergency Board (PEB). The move was an essential step in keeping the collective bargaining process on track, as well as keeping the nation’s railways operating.

“We are pleased that President Biden has taken an important step by creating a PEB to help all parties find a reasonable path forward,” says Association of American Railroads (AAR) president and CEO Ian Jefferies. “An agreement that allows both our hardworking employees and the industry to thrive into the future remains possible.”

AAR points out the Railway Labor Act governs collective bargaining for the rail industry, which aims to help parties reach an agreement without work stoppages or disruptions to U.S. freight rail movements.

While a crisis was averted with the president’s executive order, the collective bargaining process is far from over. Now, there are fresh concerns the ongoing labor dispute could come to a head just as harvest arrives in the Midwest this fall.

“Once we get into mid-September, there’s also a risk of some labor issues, even labor stoppage on some of the rail lines,” says Seyfert. “And so getting these things addressed now, and all of us working together before we get particularly into that fall harvest timeframe is essential. We’ve really never been in a situation where a reliable and resilient rail service is more important than it is now.”

Tense Labor Negotiations?

The April hearing in front of the STB gave a hint to just how tense those labor negotiations could continue to be. Rail carriers pointed out just how severely impacted they’ve been from what’s been dubbed the “Great Resignation,” and the issues getting labor back up to speed. Certain rail carriers also outlined the plans in place to get labor back to necessary levels to operate efficiently and smoothly.

However, rail workers place blame on the railroads, saying there’s more to the story. Mark Wallace, locomotive engineer, and vice president of Brotherhood Of Locomotive Engineers and Trainmen (BLET), which is North America’s oldest rail labor union, testified during the STB hearing in April.

“Since 1984, 40 railroads have been reduced to seven class one carriers, now largely controlled by speculators and hedge fund investors,” he stated. “This culture of profits over safety, customer service and the lives of railroad workers is now exposed as this industry is network fails on a daily basis.”

“Now, they signaled to us in meetings publicly and otherwise they are having some success in hiring again and getting crews successfully through training,” says Wilkey. “For the Midwest, there’s a little bit of time, but for us, there’s no time. We’re in harvest right now. And I don’t have time to wait another three months for crews to be trained.”

It’s not just the hearing that hinted toward prolonged trouble with train transportation. Grain handlers like Wilkey says current rail bids point to problems persisting into fall.

“These car values would be somewhere north of $1,000 per car this fall,” says Wilkey. “And so that’s the market sending signals that there’s going to be tightness, there’s going to be concerns.”

Typically, Wilkey says those bids would be around $100 per car.

Congress Urges STB to Take Action

In late June, 51 members of the U.S. House of Representatives signed a letter and sent to the STB regarding issues with the rail system in the U.S.. The letter asked STB to continue to work through the current rail issues with all stakeholders in order to address short-term challenges and find a resolution.

“On behalf of our constituents and farmers around the country, we write regarding poor rail service, which has limited fertilizer shipments, among other essential agricultural inputs and commodities, including grain and feed,” the letter stated.

“At a time when global fertilizer supplies and global crop production are highly disrupted, imposing shipping curtailments on fertilizer inputs and grain, as recently proposed by Union Pacific, will cause major supply chain disruptions, hurt American farmers, and exacerbate the food crisis considerably. We must ensure critical commodities reach essential industries and workers, such as America’s farmers, who are essential to feeding our nation and the world. Food is a national security issue, and we must treat it as such,” the 51 members wrote in the letter.

The Senate sent a similar letter to the STB in May.

Wait Times Cause Economic Pain

As the labor battle plays out, the short-term issues are causing grain handlers economic pain.

“There have been significant economic impacts,” says Wikley. “I would estimate since the first of the year, today, there’s been in the order of $100 million paid out by the industry to solve this logistics problem that’s developed. And that’s just outside of the bounds of normal.”

The battle over labor seems to have a long tail, as those in the grain industry try to work together to make sure this major shipping vein doesn’t buckle.

Livestock Producers Report Being Just Days Away From Running Out of Feed Due to Shipping Rail Issues

Tue, 12 Jul 2022 20:46:53 GMT

Rail bottlenecks in the U.S. are not improving, and in some cases, growing more severe. Feed users in California and the Southwest are having issues sourcing grain, with some reporting they are paying $3 over the CBOT price to secure grain by truck. Not only are feed users on the brink of running out of grain, but there are also concerns the rail issues could grow worse during harvest this fall.

The National Grain and Feed Association (NGFA) says their members have been seeing issues since late winter and early spring, which then caused the Surface Transportation Board (STB) to hold a hearing in August. While the industry thought the issues would improve by summer, labor issues are not getting better.

“What I’m hearing from our members is fewer equipment issues and that the equipment and engines seem to be not breaking down, but the train times - the amount of time it’s taking to get the trains - and the reliability of receiving them is still quite a problem in in quite a few areas of the country,” says Mike Seyfert, President and CEO of NGFA.

Fears of Running Out of Feed

According to Trains.com , Foster Farms, the largest chicken producer in the western U.S., asked federal regulators to issue an emergency service order last week that would direct Union Pacific to prioritize corn shipments that thousands of dairy cattle and millions of chickens and turkeys depend upon.

”The point has been reached when millions of chickens will be killed and other livestock will suffer because of UP’s service failures,” Foster Farms wrote in its request to the Surface Transportation Board this week .

Seyfert says the emergency order shows the seriousness of the issue.

“At times in in the past several months, we have heard from more than one member that has had severe difficulty getting feed, sometimes being within several hours of being short,” says Seyfert.

While a combination of weather, supply chain issues and other factors are creating the severe scenario, the main issue seems to revolve around labor. According to NGFA, railroads were already down about 25% in staffing prior to the COVID-19 pandemic. Then, problems during the pandemic only exacerbated the labor issue.

Ken Erikson, senior vice president at S&P Global Fuels, Chemicals and Resource Solutions Group, says the training required to bring employees back on the railroad is something that takes time, similar to what airlines are experiencing with pilots and other staff.

“The railroads had on a mandated requirement, instituted position railroad systems out there for precision scheduled railroads, part of the requirements to meet for the federal government,” says Erkison. “So, they thought they didn’t need as much crews if they can automate some things or be able to have greater visibility and trains. Well, the reality is they got so far behind they had furloughed a lot of crew members. And you just can’t bring crews back overnight without adequate training and to bring equipment back that’s offline to get a condition again. These things take long lead times.”

Congress Urges STB to Take Action

This week, 51 members of the U.S. House of Representatives signed a letter and sent to the STB regarding issues with the rail system in the U.S.. The letter asked STB to continue to work through the current rail issues with all stakeholders in order to address short-term challenges and find a resolution.

“On behalf of our constituents and farmers around the country, we write regarding poor rail service, which has limited fertilizer shipments, among other essential agricultural inputs and commodities, including grain and feed,” the letter stated.

“At a time when global fertilizer supplies and global crop production are highly disrupted, imposing shipping curtailments on fertilizer inputs and grain, as recently proposed by Union Pacific, will cause major supply chain disruptions, hurt American farmers, and exacerbate the food crisis considerably. We must ensure critical commodities reach essential industries and workers, such as America’s farmers, who are essential to feeding our nation and the world. Food is a national security issue, and we must treat it as such,” the 51 members wrote in the letter.

The Senate sent a similar letter to the STB in May.

More Issues Due to Labor Discussions/Disputes?

Another issue with labor are union and other labor discussions and disputes. Erikson points out the International Longshore and Warehouse Contract with Pacific Maritime Association expires Friday, July 1. Erikson says the two parties have been negotiating and committed to stay working, there could be other ripple effects.

“They’ve committed to stay working, but what we’ve seen as the diversion of cargo moving to the West Coast or to the U.S. Center Gulf, areas that move a lot of cargo, but also you have requirements and equipment demand to other regions that hasn’t been there. So now you move the problem elsewhere,” says Erikson.

Ahead of Friday’s expiration, the L.A. port chief sees no disruptions on eve of contract lapsing. Farm Journal Washington correspondent Jim Wiesemeyer reports the head of the US’ busiest port said he doesn’t foresee strikes at about 30 West Coast maritime hubs even as the labor contract for 22,000 dockworkers is about to lapse without a new deal. “Anything’s possible, but it will not happen,” Port of Los Angeles Executive Director Gene Seroka said Wednesday.

The labor issues could be far from over, as the four major rail lines are in the middle of a labor dispute with the unions. With the timeline on the table today, there are concerns those issue could grow more severe and possibly cause even more rail issues during the fall months, which is a busy time with harvest.

“They’re currently in a 30 day cooling off period, where they’re no longer working on arbitration,” Seyfert explains. “There’s some actions the President can take in mid-July to appoint a board, which can then make some recommendations that can be acted on. There’s 30 days there. Then, there’s 30 days for the railroads and in the labor to work together to determine to accept or not accept that.

Once we get into mid-September, there’s also a risk of some labor issues, even labor stoppage on some of the rail lines. And so getting these things addressed now and all of us working together before we get particularly into that fall harvest, where we’ve really never been in a situation where a reliable and resilient rail service is more important than it is.”

Seyfert says there have been recommendations made to the Surface Transportation Board (STB) regarding more transparent reporting by the railroad, as well as a request for railroads to submit service plans. There are also additional steps Congress could take to help resolve a portion of the rail bottlenecks.

Are Surprisingly Strong Cash Grain Bids Exposing Reality of U.S. Corn Supplies?

Wed, 29 Jun 2022 11:25:54 GMT

Commodity markets continue to see wild swings to finish out the month of June, but a story that’s catching the eye of many farmers is basis. Strong cash grain bids are sparking questions about not only how tight corn supplies actually sit today, but severity of the issues getting the grain to feed users located in areas of the country that need it.

Joe Vaclavik of Standard Grain says the cash market is creating opportunities for farmers still holding on to old crop grain.

“It’s not everywhere, but there’s a lot of areas with positive corn basis, in particular, and I think we’ll find out a little bit more on June 30 about that situation,” says Vaclavik. “What are the grain stocks? Where are they located? Why is it so tough for, say, an ethanol plant to procure corn, even when cash is $8 or better?”

Have Grain to Sell? Check Your Local Basis Bids Now

Could USDA’s Report This Week Reveal Answers?

Thursday, June 30, is when USDA will release its updated look at planted acre s, as well as a more current snapshot of grain stocks in the U.S. and around the world. He says with current cash basis levels, it will be a major focus of Thursday’s reports.

“It’s really a phenomenal situation,” says Vaclavik. “And it is an underlying positive in regard to the markets. Now, that doesn’t mean that the board has to rally from here, but I’d say it’s a supportive factor.”

Mike North of ever.ag works with livestock producers across the country. He says for feed users in the western half of the country, specifically California and the Southwest, sourcing grain is becoming more difficult. He says there are feed users even paying as much as $3 over the board just to get the grain they need.

Railroad Issues Make California Dairy Producer Worry About Growing Corn Shortages

“Basis absolutely suggests that corn supply is tight; there is no way around that fact when basis moves to the extremes that it is,” says North. “Even with high prices on the board, it is suggestive that it is hard to find, source and move corn from point A to point B. And as a consequence, you do start to question what the yield was last year, the stocks numbers that have been reported previously, or is it that we have enough corn just kind of sitting there that producers are unwilling to sell because they’re comfortable? It’s hard to fully answer that question.”

Issues Sourcing Feed Farther West

The other issue for producers in drought-stricken areas of the West is the fact feed is becoming more scarce, according to North.

“Water is already scarce,” he says. “There are allocations in California for usage, it’s a difficult situation. And it’s only getting worse, because as these allocations for water continue to shrink so does the capacity to grow crops. We’re taking a feed pile that has already been running light and making it lighter.”

North says in order to keep these operations running, and to keep the animals fed, feed users are paying more.

“When we talk about the road ahead, what’s going on in the Midwest will have big ripple effects as you work further out into the West and the South,” says North. “That becomes further complicated by railcar shortages and labor shortages and all of the other peripheral things that wrap themselves around just pure supply discussions.”

The Price Risk in Both Directions

Vaclavik says even with the updated look at acreage and stocks later this week, he thinks there’s a tremendous amount of risk in both directions for grain prices.

“Weather forecasts can turn on a dime and bring the markets along with them” he says. “At the same time, I think you’ve got a Federal Reserve and central banks that are essentially trying to induce a recession. They won’t say that, but that’s what they’re trying to do. They need to reduce economic activity in order to reduce inflation. They don’t even care if unemployment rises by 1% or 2%, I don’t think at this point in time, so that you’ve got so many risks.”

From recession, to the reality of reduced grain flows due to the war in Ukraine, Vaclavik reminds producers the markets are wading through a combination of unknowns.

“I’ve never seen anything like this before,” says Vaclavik. “Just try to have an idea of your risk profile, know where you stand. If things work, lock them up. Because you know, these markets can move dollars, dollars per bushel and grains in the course of a week. It’s possible and it’s in both directions.”

Farmers Are Now Paying Above $5 For Off-Road Diesel, And It's More Than Just Russia to Blame

Tue, 14 Jun 2022 14:04:57 GMT

Gas prices keep crushing records in the U.S., but diesel prices are posting even more sticker shock as fears of a possible diesel shortage this year are also causing concerns. It’s not just retail diesel prices that are rapidly rising. There are now reports of farmers booking off-road diesel for farm use trending above the $5 mark, too.

(Farm Journal)

It’s an issue facing the trucking industry from coast to coast. AAA reports the national average diesel price is now $5.77 a gallon. A year ago, it was $3.21.

“It’s almost like every five minutes, I see the little live indicator tick up on our GasBuddy data,” Patrick De Haan, head of petroleum analysis, GasBuddy , told U.S. Farm Report two weeks ago.

GasBuddy tracks both diesel and gas prices in real time. And while the pain at the pump is something drivers are seeing across the country, it’s also an issue plaguing agricultural producers across the U.S.

“We had some farm diesel delivered yesterday, and it cost us $4.85 or $4.89 a gallon delivered. Two years ago, we bought fuel for just over $1,” Craig Moss, a farmer in Hull, Iowa, told Farm Journal’s Michelle Rook.

The rapid rise in input prices is eating into outlooks this year, even with high livestock and grain prices.

“It’s a challenging market, no doubt, buying $8 corn and $5.50 diesel; it’s a tremendous challenge for producers,” says David Newman, a pork producer in Myrtle, Mo.

While prices at the pump for both gas and diesel climbed this week, it’s a similar story for off-road diesel prices. A survey of farmers on Twitter drew a wide range of responses regarding the prices they are currently seeing. Farmers reported off-road diesel at $4.13 in the northern Corn Belt, while off-road diesel is now above $5 for those further east and in western states like Montana.

Research by Texas A&M Agricultural and Food Policy Center (AFPC) shows farmers are seeing nearly every input cost on their farm rise this year. Nitrogen prices produced the biggest increase, up more than 133% per acre year-over-year. Phosphorus and potassium fertilizer were up nearly 93% during that time. That was followed by fuel and lube, which jumped more than 86% compared to last year.

(Farm Journal)

The latest baseline projections from the University of Missouri Food and Policy Research Institute (FAPRI) also shows the sharp rise in fuels costs today.

“A 57% increase may or may not capture what’s happening right now throughout the whole calendar year of 2022, but it is capturing at least the part that we’re seeing right now,” says Bob Maltsbarger, a senior research economist with FAPRI.

FAPRI’s baseline projection shows even if fuel prices retreat the second half of this year, higher overall production costs will continue to sway balance sheets. Maltsbarger points out diesel prices vary by not only geography, but also by farm, especially considering crops like corn typically require more fuel use.

“It will vary quite a bit on the dollars-per-acre impact, but if you have about an equal increase on a percentage change basis, you will see those dollars per acre be more expensive in this calendar year,” he says.

Why Are Diesel Prices So High?

Why have diesel prices raced higher this year? It’s largely due to a shortage of refining capacity, not a shortage of oil, but the prices started to climb higher long before Russia invaded Ukraine.

“The nation is dealing with about a million barrels a day less of capacity than we had just three years ago. That’s the equivalent of about 5%,” De Haan explains. “So, not only is oil a problem with sanctions on Russia’s oil, but turning that oil into something like gasoline and diesel is also now a choke point.”

“Refineries have less capacity; we have about 1.2 million barrels a day of less capacity because of shutdowns that occurred prior to the pandemic,” says Debnil Chowdhury, vice president, head of Americas Refining, S&P Global Commodity Insights. “Also during the pandemic, we’ve had some convergence to biofuels’ facilities as well as a refinery that was hit by a hurricane and damaged to the point where it can’t really be run anymore.”

S&P Global Commodities is also watching the situation. At a time when the U.S. is typically building inventory, the opposite is occurring, which is also heightening concerns about a possible shortage.

“This is the year we’re running very low on inventory entering the summertime, and any type of impact on refining capacity is really going to increase the chance of the shortage,” says Chowdhury.

One Hurricane Away from a Diesel Shortage?

With supplies already tight, De Haan says the U.S. can’t afford to lose any refining capacity, which is a major risk considering NOAA is projecting an above-normal hurricane season.

“We’re probably one Category 3 storm away [from a shortage], and that Category 3 storm would have to take aim for an area roughly from the Mississippi River to Houston,” says De Haan. “That’s the really sensitive area. Not only could it affect refining, but it could affect offshore oil production.”

One of the reasons inventories are already tight is due to Hurricane Ida making a direct hit along the Gulf Coast. Refineries located near New Orleans went offline last fall, with some still not back online today. That major hurricane, and the devastation it caused, was one of the initial dominoes to fall for diesel prices.

“This all actually started before the war. It began in October of last year, when natural gas prices in Europe started to rise,” Chowdhury says. “The cost of natural gas increased substantially in Europe, and why that’s important to a Midwest farmer is because the cost of producing that diesel increased with it.”

Searching for Solutions

While the financial incentive is there today to pump more oil and increase refining capacity, one worker in the oil industry told U.S. Farm Report that the push to electric has investors concerned about the risk of such an investment. And considering it takes years for refining capacity to come online, that’s also not a solution today.

There’s talk of the Biden administration tapping into diesel reserves to help ease supply concerns, but De Haan says not only will that move have a minimal impact, it’s also a question of timing.

“It’s only a million barrels, so it’s not a infinite amount of supply,” he says. “The worry is that if we release those barrels of diesel now from areas in the Northeast, we’re also in the start of hurricane season. Now we do have some tropical activity. So when do you use the inventories? Do you use them now because of high prices? Or, do you wait for a bigger potential issue later this summer?”

(Farm Journal)

In order to relieve the tight diesel supply situation, Chowdhury points out the other option is for the government to wave the Merchant Marine Act of 1920, otherwise known as the Jones Act.

“The U.S. refiner now has to decide do we send product to Europe? We can send it via pipeline easily, but because of the Jones Act, which is a regulation that mandates U.S. flagged vessels from port to port, it’s not something that we could do now. And that’s something that the government could look at waving if we do face a shortage,” says Chowdhury.

The Jones Act is a federal statute that was established more than 100 years ago. It requires all vessels carrying good between two U.S. points be American-built, owned, crewed and flagged. The policy was created to help sustain American jobs, and in turn, generate economic benefits each year. Proponents claim the Jones Act has secured critical movement of goods over the years.

How Long Could the Diesel Price Pain Last?

While the industry searches for possible solutions, those who follow and track refineries don’t see a dramatic drop in diesel prices anytime soon.

“These prices are not going to go back to the levels we had at the beginning of 2021. It’s more likely that we’ll see maybe, you know, a $5 to $10 decline in crude price, and that would equate to maybe 50¢ to 60¢ on the diesel price itself. We’re not talking about a major relief,” Chowdhury says.

On the heels of diesel prices climbing higher again this week, anyone hoping for relief might have to look out beyond this year.

“It could take a couple of years. Keep in mind the longer we go down this road, and that demand eclipses supply, the more catching up we’re going to have to do,” De Haan says.

Vilsack Announces $2B in Funding to Transform U.S. Food System

Thu, 02 Jun 2022 00:38:43 GMT

Transforming the U.S. food system by improving supply chains and addressing issues exposed by the Covid-19 pandemic will be detailed today by USDA Secretary Tom Vilsack during a speech at Georgetown University.

The over $2 billion package includes previously announced funding to expand meat and poultry processing and to finance new infrastructure such as cold storage facilities, but there $600 million in new aid to support food supply chain infrastructure outside meat processing. The plan also includes $400 million for regional food business centers, up to $300 million for a new organic transition initiative and $75 million to support urban agriculture.

The initiatives are funded through the American Rescue Plan that was enacted in March 2021 and other relief legislation. On Thursday, Vilsack will be in Ohio with Democratic Rep. Marcy Kaptur to visit a full-service grocery store in central Toledo called Market on the Green.

The package includes $650 million in funding and loan assistance for meat and poultry processing projects, including $275 million to help entrepreneurs who have had trouble getting credit. Another $100 million would go toward training workers in meat processing. Another $600 million is earmarked for improving food supply chain infrastructure, including cold storage and refrigerated trucks, outside of meat and processing.

Other funding in the plan includes:

$200 million to help fruit and vegetable growers comply with food safety regulations.
$400 million to create regional food business centers that will provide coordination and technical assistance and other support to small and mid-size businesses involved in processing, distribution and aggregation.
$155 million to expand USDA’s Healthy Food Financing Initiative, which is aimed at reducing food deserts.
$90 million to prevent and reduce food loss and waste.
$60 million farm-to-school programs that increase markets for smaller-scale farmers through child nutrition programs.

The announcement comes as supermarkets and distributors are pushing back on higher prices from food makers, as escalating inflation drives more consumers to rethink their spending. The Wall Street Journal reports ( link ) that Kroger Co. and other grocery chains said they are asking brands to prove why higher prices are necessary before accepting them, and warning manufacturers that they will stop carrying products if food companies won’t negotiate prices. Some companies said they are switching to new meat suppliers with cheaper products and are delaying price changes for items like canned goods.

Retailers generally have been passing price increases along to consumers, and executives have said that for months shopper demand has remained strong. Industry executives said that is starting to change, as consumers increasingly look for ways to stretch their dollars.

Can China's Economic Stats Be Trusted?

Wed, 01 Jun 2022 13:31:44 GMT

China is rolling out more economic relief policies. Shanghai offered some tax rebates for companies and allowed all manufacturers to resume operations from June as authorities rolled out policies to revitalize an economy impacted by Covid lockdowns.

Shanghai’s Vice Mayor Wu Qing said over the weekend that the authorities will loosen the conditions under which companies are able to resume work this week, and the city’s government laid out a 50-point plan for accelerating the economic recovery. The measures include tax cuts for businesses and subsidies for purchases of electric vehicles, the official Xinhua News Agency said. The financial hub will accelerate approvals for property projects and supply new residential developments, according to a plan issued by the Shanghai municipal government.

Other Recent News Out of China

China got some upbeat economic news early this week as its official purchasing managers index for May rose to 49.6 from 47.4 in April. Still, a reading below 50.0 suggests contraction in the sectors.

China’s downturn shows signs of easing but economists are skeptical about a big revival. The slowdown is testing the credibility of official economic data. Link to more via the WSJ.

Chinese Foreign Minister Wang Yi mocked Biden’s wide-ranging economic framework for failing to lower tariffs, in some of the strongest criticism yet of the US’s plan to counter Beijing’s influence in Asia. “The so-called Indo-Pacific Economic Framework recently rolled out by the U.S. claims to build a free, open, and inclusive new order, but how can any economic frame call itself free if it doesn’t lower tariffs?” Wang said during a visit to Fiji, according to a statement.

U.S. Defense Secretary Lloyd Austin and Chinese Defense Minister Wei Fenghe are expected to meet in person for the first time on the sidelines of a Singapore conference in June, a conversation that would take on extra significance because of increased tension over Taiwan, the Wall Street Journal reports. The meeting hasn’t been fixed, though, and plans could change. In a check on Chinese ambitions, Pacific Island nations deferred action on a proposal that would have extended Beijing’s influence to areas including law enforcement and cybersecurity.

China sent 30 warplanes into Taiwan’s Air Defense Identification Zone, a buffer region where intrusions trigger military alerts. Taiwan is used to saber-rattling from its covetous neighbor, but this is the largest incursion since January

Filling A Tractor Tank Daily Now Costs Some Farmers $1,000, Double What It Did a Year Ago

Fri, 20 May 2022 20:17:40 GMT

Filling a tractor tank daily now costs some farmers $1,000, twice what it was a year ago. And the most intensive part of the farming season is still ahead.

U.S. diesel prices are the highest ever, with warnings of shortages, especially in the eastern U.S.

“Diesel is the lifeblood of farming,” Iowa corn and soybean farmer Ben Riensche told Bloomberg.

Diesel Prices Just Hit a New Record High, Here's Why a Diesel Shortage May Be Next

Tue, 10 May 2022 21:18:45 GMT

Farmers are already faced with a shortage of equipment parts, tires and some crop inputs. Now, due to increased demand and a drop in production, a diesel shortage may be next as the largest diesel distribution hub in the U.S. is sitting on supplies at a 30-year low.

Record gap between gasoline and diesel, but the gap will start to shrink very soon- not by leaps and bounds, but slowly. https://t.co/oFGj8piR3h
— Patrick De Haan ⛽️📊 (@GasBuddyGuy) May 9, 2022

Diesel prices hit a record again this week. The national average price of diesel is now $5.54 per gallon, which is an increase of 22 cents from last week, which was when the most recent record was set. Data shows there’s no state that’s currently seeing diesel prices below $5.12 per gallon.

So, what’s causing the historic run-up in prices?

It’s a combination of things, but Russia, supply chain trying to play catch-up and lower production along the East Coast are all adding to the dire supply situation.

“Diesel supply is short all over the world due to sanctions against Russian oil and much higher post-pandemic demand as supply restocking takes place,” says Peter Meyer with S&P Global Commodity Insights.

Meyer adds the “just in time” supply chain model only exacerbates the problem as the supply chain works through issues that date back to the Covid-19 pandemic.

Some farmers are now even reporting farm diesel prices are higher than on-road diesel, which is typically not the case.

Record prices are one thing, but getting your hands on enough diesel may be the next issue for farmers.

“Certain areas of the country have seen shortages already and we expect that to continue. Supplies at New York Harbor–a hub for diesel distribution–are at a 30-year low,” says Meyer. “As such, the East Coast of the U.S. has been hit especially hard, resulting in diesel prices above $6.00 per gallon in that area, well over the equivalent of $250 per barrel. Exports of U.S. gasoline, diesel, and jet fuel to Latin America is also very high, adding to the tightness.”

(Farm Journal)

The bottlenecks in the diesel supplies are not a shortage of oil that the U.S. is dealing with, even with the sanctions against Russia. Instead, Meyer says it’s a shortage of refining capacity on the East Coast.

The problem on the East Coast is refining capacity, not so much the supply of oil,” he says. “East Coast capacity has been cut in half from 1.6 million barrels per day to 800,000 barrels per day over the past 10 years as half of the refineries in the east have shuttered. Lower production capacities and higher post pandemic demand has caused this squeeze in the eastern U.S.”

Meyer says making price forecasts is proving to be extremely difficult considering, but margins are enticing refiners to produce as much diesel as possible.

“When the profit margin on producing diesel is over $70 per barrel, every refining company in the US will be doing all they can to produce as much as they can,” says Meyer. One bright spot may be that after a cold spring, heating oil demand will obviously diminish quickly in the summer months.”

Meyer also says renewable diesel production may actually benefit from the historic spike in diesel prices, but he points out soy oil, which is still the predominate feedstock, continues to take its lead from the oil product markets and is overpriced for many.

Diesel Export Ban Looming?

There’s a higher demand around the globe for products like diesel, heating oil and jet fuel, which are known as “middle distillates” since they are made from the middle of the boiling range when oil is turned into products. The U.S. currently exports more than 1-million barrels of distillates every day to countries such as Mexico, Brazil and Chile.

So could an export ban be coming for diesel fuel?

AgriTalk host Chip Flory put that question to Farm Journal Washington analyst Jim Wiesemeyer during this week’s “Signal to Noise.” Wiesemeyer says while it’s not known to be on the table at this point, anything his possible. You can listen to that discussion here.

Supply Chain

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USDA Prepares to Protect Farmers in a Trade War

Second U.S. Port Strike Averted as Union, Employers Reach Deal

Trade Associations Urge Biden Administration To Act Now To End Port Strike

How Important is U.S. Ag and Food to the Economy?

Economic Output

Jobs and Wages

Productivity

John Phipps: Is There Really a Shortage of Truck Drivers?

Related Story: Walmart Will Now Pay Starting Truck Drivers $110,000, Could It Backfire and Make the Nationwide Trucker Shortage Even Worse?

Related Story: SHIP IT Act Could Save Truck Drivers Up to $10,000 and Cover CDL Costs

What Ag Equipment Parts Are In the Shortest Supply Right Now?

Parts in Shortest Supply

The Biggest Issue? Labor

Growing Optimism

What's The Biggest Supply Chain Headache Crippling Equipment Manufacturers Right Now?

Supply Chain Issues Projected Through 2023

Parts In Shortest Supply

The Biggest Issue? Labor

Growing Optimism

Signs Growing that the Global Supply Chain Crisis is Over

On the Water

Shippers Note ‘Notoriously Difficult’ Railroads During Latest Hearing

Rail Strike Derailed as Biden Signs Labor Bill

Congress “Likely” to Pass a Rail Deal this Week, According to Soy Transportation Coalition’s Steenhoek

Next Steps in Congress

Rail Strike Averted Until Dec. 4, Saving U.S. $2 Billion Per Day

Is the U.S. Now Officially in a Recession?

Possible U.S. Rail Strike Now Back On the Table

Transportation Nightmare

History of Ongoing Rail Strike Threat

Impact on Farmers

USDA Is Now Sending Out $500 Million to Fight High Fertilizer Prices in the U.S.

Details of USDA’s Fertilizer Production Expansion Program

What’s Causing High Fertilizer Prices Today?

Concerns About Farm Income in 2023

How High Are Fertilizer Prices Today?

Can the Push to Domesticate Fertilizer Production Solve the Issues?

U.S., China Container Shipping Rates Plummet 50%, Backlog of Unfilled Orders Grows

Nitrogen Prices Now Seeing a Resurgence For Fall, and Natural Gas Isn't the Only Driver

What’s Behind the Price Increase for Fall?

The U.S. is Now 30 Days Away From a Possible Railroad Labor Strike

Congress Holds the Power to Intervene

Trouble Shipping Grain And Feed Via Rail Far From Over, Concerns Now Growing About Possible Worker Strike At Harvest

Tense Labor Negotiations

BNSF Train Derails This Week

Trouble Shipping Grain And Feed Via Rail Far From Over, Concerns Now Growing About Possible Worker Strike At Harvest

Read More: U.S. Rail Strike Averted For Now As Biden Steps In Before Sunday’s Deadline

What’s Driving the Issues Shipping Via Rail?

Read More: Livestock Producers Report Being Just Days Away From Running Out of Feed Due to Shipping Rail Issues

Hearing Hints at Complexity of Issue

Concerns About Labor Issues Growing Worse at Harvest

Tense Labor Negotiations?

Congress Urges STB to Take Action

Wait Times Cause Economic Pain

Livestock Producers Report Being Just Days Away From Running Out of Feed Due to Shipping Rail Issues

Fears of Running Out of Feed

Congress Urges STB to Take Action

More Issues Due to Labor Discussions/Disputes?

Are Surprisingly Strong Cash Grain Bids Exposing Reality of U.S. Corn Supplies?

Have Grain to Sell? Check Your Local Basis Bids Now

Could USDA’s Report This Week Reveal Answers?

Railroad Issues Make California Dairy Producer Worry About Growing Corn Shortages

Issues Sourcing Feed Farther West

The Price Risk in Both Directions

Farmers Are Now Paying Above $5 For Off-Road Diesel, And It's More Than Just Russia to Blame

Why Are Diesel Prices So High?

One Hurricane Away from a Diesel Shortage?

Searching for Solutions

How Long Could the Diesel Price Pain Last?

Vilsack Announces $2B in Funding to Transform U.S. Food System

Can China's Economic Stats Be Trusted?

Related Stories :While America Slept, China Stole the Farm

Other Recent News Out of China

Filling A Tractor Tank Daily Now Costs Some Farmers $1,000, Double What It Did a Year Ago

Read more: Diesel Prices Just Hit a New Record High, Here’s Why a Diesel Shortage May Be Next

Diesel Prices Just Hit a New Record High, Here's Why a Diesel Shortage May Be Next

So, what’s causing the historic run-up in prices?

Diesel Export Ban Looming?