In the News

S&P Global – New York, NY – 6/24/20 – Josh Pedrick, Mark Novakovich, Wesley Swift and Sergio Alvarado

New York — Upcoming lock and dam closures along the Illinois River are set to hamper deliveries of corn, soybeans, animal feed and ethanol for export staging and consumption on the Gulf Coast.

"The closure of the Illinois River was timed to coincide with the growing season as fertilizers already made their way up river while the export season will start after harvest," said Pete Meyer, head of grain and oilseed analytics at Platts Analytics. "That said, the lack of a viable corn export market, along with continuing concern over ethanol demand, should result in price pressure for some Eastern areas throughout the shutdown."

The following are key facts about the river closure and its effects on agriculture markets:

Trade Flows

- Grain exports from the US Gulf Coast rely on supply that originates on the Illinois River

            - Most of China's recent soybean purchases from the US are for the 2020-21 crop year, US Department of Agriculture data shows

            - Corn sellers hoping to develop export demand after coronavirus-related cuts could be stifled until November

            - Animal feed and grains distributors are considering trucking supply to the Mississippi River to load on barges, if Gulf Coast demand justifies the cost

- Ethanol barges typically supply gasoline blending along the Mississippi River and Gulf Coast

            - Blenders in the Gulf Coast are securing deliveries by rail, paying a premium for the smaller volumes

            - Suppliers near St. Louis, Missouri, may consider loading barges south of the closures

- Grain barge volumes have spiked ahead of the closure

            - A total of 999,000 tons of food and farm products have barged through the La Grange lock through June 24, up from 406,000 tons in June 2019, according to the US Army Corps of Engineers

            - Barge companies stopped loadings above the locks due for maintenance, beginning in early June at Lake Michigan and progressing to late June for the lower river locks

Prices

- Off-river ethanol markets have climbed as buyers locked in supply without relying on river barges

            - Ethanol rail cars averaged a 0.3-cent premium to in-tank prices for the first half of June, expected to continue to gain as liquidity in Kinder Morgan's Argo terminal thins

            - The benchmark Argo ethanol market continues to trade, relying on recently expanded rail offtake capacity

- FOB US Gulf Coast soybeans surging relative to CIF New Orleans barges

            - The rough elevation of FOB USGC soybean cargoes over CIF NOLA barges rose to 28 cents June 23, its highest since Platts began assessing the markets in 2018

- Corn in and around Illinois could see pressure in late August or early September

            - Farmers will need to move the 2019-20 crop out of storage to make room for the new harvest, according to Platts Analytics

            - Coronavirus-related demand cuts will be harder to overcome if export demand increases but sellers struggle to move corn to the Gulf Coast

Infrastructure

- Locks and dams begin closures on July 1 and end October 29, finishing before harvest

            - Additional lock closures planned in the summer of 2023

            - Traffic could transit the La Grange and Peoria locks during maintenance if water levels are high enough, but not the upper river locks, according to the US Army Corps of Engineers