BRIEFS – for May. 10, 2010

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Grain shippers eye Gulf oil slick

U.S. grain markets last week were nervous that an expanding oil slick in the Gulf of Mexico may choke off exports of corn, soybeans and wheat from the country’s busiest grains port.

Any potential slowdown or halt in ship movement into or out of the Mississippi River could prompt exporters to divert supplies to other U.S. ports at an increased cost or to source grain from other countries such as Brazil or Argentina.

The U.S. Gulf is the country’s biggest export point for grains. Between 55 and 65 per cent of all U.S. corn, soybeans and wheat exports are shipped from the Gulf.

The U.S. Coast Guard said last Monday that there are no restrictions in place for vessels moving through the main deepwater shipping lane from the Gulf of Mexico into the Mississippi River, known as the Southwest Pass.

But shippers were keeping a close watch of the situation amid forecasts that the expanding oil slick may eventually spread into the key shipping lane.

At that point, the Coast Guard may restrict movement or require that vessels be decontaminated after passing through affected areas to prevent wider contamination, a process which can take one or two days, according to traders.

Railways pass on fuel costs

Canada’s two main railways can thank rising fuel prices for a revision in the math that decides how much revenue they get to keep from handling Prairie grain.

The Canadian Transportation Agency on Apr. 30 approved a seven per cent increase in the volume-related composite price index (VRCPI), a figure used to calculate the cap on western grain rail freight revenue, for the 2010-11 crop year starting Aug. 1.

“Over the last few crop years this index has seen significant fluctuations as a result of changing fuel prices,” the CTA noted in its release.

The figure had been revised down 7.4 per cent in April 2009 to 1.0638 for 2009-10 due to decreasing fuel prices – following an eight per cent increase the previous year due to higher fuel prices.

The VRCPI is an inflation factor that reflects forecasted changes in Canadian National Railway’s and Canadian Pacific Railway’s costs for labour, fuel, material and capital purchases.

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