"They have to go back and buy them from the market, and they buy them from the same guys who have the same problem that they've got. So the market goes up exponentially," said Joe Christopher, a grain merchandiser with Crossroads Commodities in Sidney, Nebraska.
Freight on BNSF has traded as high as $2,400 a car this month, Christopher said, although nearby bids have since fallen to about $1,300. The same freight for December is trading near $600, another grain trader said.
Barge Freight Costs Rising
The influx of newly harvested crops has also raised costs for shipping grain on Midwest river barges to export terminals at the U.S. Gulf Coast, particularly on the lower Ohio River, where a lock construction project has caused severe delays near its confluence with the Mississippi.
Costs for southbound freight last week rose to an average of $28.04 per ton, up 23 percent from the three-year average, the U.S. Agriculture Department said. Mid-Mississippi River barge freight was $33.57 per ton, 11 percent above the average.
"There's not a barge shortage. It's just that grain is really moving now," said a Midwest barge broker. "The Gulf needs corn right now and especially beans. We're probably going to export 40 million bushels of soybeans a week for the next three months, with maybe half of that from the center Gulf."
Gumming Up The System
Grain bottlenecks are occurring at the local level, where producers and country elevators are contending with big yields and, for corn, varying moisture levels.
"Depending where you are in the Corn Belt, you've got some high moisture that you are dealing with, and that is just gumming up the works, trying to dry it down," said Ken Erickson, a transportation expert with Informa Economics.
The moisture level of corn is about 30 percent at maturity, and farmers try to wait until it dries to 15 to 20 percent before harvesting to avoid the extra cost of drying it artificially.
In Iowa, the top U.S. corn state, the corn is coming in with a range of moisture levels, complicating the job of storing it.
"This year, I might be getting really dry corn, followed by some wet stuff, and I can't blend those together. So I've got to pile the dry corn here and wet corn there. It's a bigger logistical nightmare because of that," said Chad Hart, an extension economist with Iowa State University.
"You are doing this at a time we are staring at the biggest crop we've ever produced."