Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisn't Thal and I'm Tracy Allow. Tracy. You know,
Speaker 1: we've covered so many different aspects of supply chains and
Speaker 1: logistics over the last couple of years. You know, I
Speaker 1: think our first like sort of like supply chain episode
Speaker 1: was late when we first started noticing that the cost
Speaker 1: of shipping goods from China to the U S. It
Speaker 1: was like, it seems a little high. Yeah, you're right. So,
Speaker 1: you know, the early days of the pandemic, there was
Speaker 1: all the shipping related chaos, and I guess lucky or unlucky,
Speaker 1: I don't know. Um I had a sort of front
Speaker 1: row seat to observe some of it in Asia because
Speaker 1: it became very very apparent that it was becoming not
Speaker 1: only more difficult but also more expensive to ship goods
Speaker 1: from China to the US. Right, so it's like, huh,
Speaker 1: what is going on with that? And then we looked
Speaker 1: at international shipping and we started pulling on the string
Speaker 1: that got us to ports, and that got us to
Speaker 1: truck that got us to everything else. We pulled the
Speaker 1: thread into what you always think, there's going to be
Speaker 1: nothing left and then like you find something around the corner, right,
Speaker 1: But there's one big area that we've talked about doing
Speaker 1: for a long time that we haven't talked about. Oh yes, yeah,
Speaker 1: well this is my point. There's always something new barges, right.
Speaker 1: So we you know, the inland waterways, rivers, the Mississippi
Speaker 1: River in particular, there's everybody is something we wanted to
Speaker 1: talk about and talk about. It's significance in the U. S. Economy,
Speaker 1: and you know how important is inland infrastructure, but we
Speaker 1: just haven't gotten around to it. However, now we actually
Speaker 1: have a very good reason to talk about it. It's
Speaker 1: the barge episode finally here. But we do have the
Speaker 1: perfect peg, which is that at the moment there is
Speaker 1: a massive drought in the Midwest and it is affecting
Speaker 1: water levels on the Mississippi, which is of course the
Speaker 1: most important inland waterway in the country. And I think
Speaker 1: you know, I was reading a Bloomberg article it said
Speaker 1: waters in Memphis fell to negative ten points seven nine
Speaker 1: ft recently, which is slightly lower than the previous low
Speaker 1: of ten points seven zero from nineteen Did you say
Speaker 1: negative there was negative water? Yeah, I'm not entirely sure
Speaker 1: how that works. It sounds bad, it sounds bad, it's bad. Yeah, Right,
Speaker 1: So there has been a very severe drought in the Midwest,
Speaker 1: and it seems like a double whammy, right because on
Speaker 1: the one hand, like if you depend on the Mississippi
Speaker 1: River or any of the inland waterways and the river's
Speaker 1: tributaries to move your grains or to move your goods,
Speaker 1: that's a problem we're going to get to why. But
Speaker 1: also it's just bad because it's bad for growing, yeah, exactly.
Speaker 1: So if you're a farmer, you probably struggled to actually
Speaker 1: grow your harvest this year, and now you're struggling to
Speaker 1: get it out to the market where you're actually selling
Speaker 1: it into. So, yeah, a double whammy. And also, you know,
Speaker 1: we're going to be speaking a lot about grains on
Speaker 1: this episode, but there are all types of goods and
Speaker 1: resources and commodities that actually move up and down these
Speaker 1: pathways on the water. Right. So we're gonna do this
Speaker 1: episode a little bit differently. We're gonna break it up
Speaker 1: into two different sections. But first let's start with someone
Speaker 1: who works in the grain business and talk about how
Speaker 1: it's affecting them. Let's do it. We have the perfect
Speaker 1: guest to talk about grains and the effects of the
Speaker 1: drought on the grain industry and on shipping grains. We're
Speaker 1: going to be speaking with Ben Shull. He is the
Speaker 1: president of Louis b Oster Burr and Associates, which works
Speaker 1: with specialty grain companies organic grains, non gmo grains, etcetera,
Speaker 1: to move their goods overseas or to sell their goods
Speaker 1: much of its destination overseas, and of course his clients
Speaker 1: are highly dependent on the functioning of the Mississippi River
Speaker 1: and the barges there on. So Ben, thank you so
Speaker 1: much for joining us. Ben, what do you just sort
Speaker 1: of tell us, like, what do you do? What's your
Speaker 1: role within the grain ecosystem. I am the president of
Speaker 1: a specially grain company called Ostburne Associates. We buy especially
Speaker 1: grains non GMOs and the like in export um to
Speaker 1: Japan throughout the river system in the United States. Also
Speaker 1: come from a family farm, so I have a little
Speaker 1: bit of a farm background, and we are involved in
Speaker 1: production agriculture in central Illinois, in the production of specialty grains.
Speaker 1: So as a jumping off point, you know, we talked
Speaker 1: a little bit about this in the intro. How bad
Speaker 1: things actually are on the Mississippi at the moment. But
Speaker 1: give us your sense of how things are at the
Speaker 1: moment and how they stack up against history. Well, this
Speaker 1: is certainly I've been doing this for about sixteen years,
Speaker 1: certainly the worst I've ever seen. As I talked to
Speaker 1: some of the other veterans and people with a little
Speaker 1: more experience shipping on the river, it seems to be
Speaker 1: about as bad as we've had since the nineteen eighties.
Speaker 1: A lot of people are siting, uh, matching some of
Speaker 1: those records. Two thousand twelve was a dry year. We
Speaker 1: had some low, low water we had to contend with.
Speaker 1: But this is a lot really new compared to what
Speaker 1: we've been dealing with in the recent history, which is
Speaker 1: high water. That's interesting. So it's a double whammy. So
Speaker 1: if you're producing grains in the Midwest, you're contending with
Speaker 1: a imagine drought is extremely bad just for the growing
Speaker 1: of grains, and then the actual logistics. Yeah, so we're
Speaker 1: kind of beholden to the weather all year round, especially
Speaker 1: if your main market is the export market, which for
Speaker 1: most would be on the river and river tributary terminals.
Speaker 1: We are usually pretty consistent on the river with river
Speaker 1: levels but you know, we usually have to deal with
Speaker 1: low water in the fall, high water in the spring,
Speaker 1: and it's just something that we usually have to keep
Speaker 1: an eye on. Very rarely does it get parabolic in
Speaker 1: a situation like we're in today. Can you talk to
Speaker 1: us a little bit about the life cycle of a
Speaker 1: harvest or I guess the supply chain of you know,
Speaker 1: particular grain is grown in a few on a farm
Speaker 1: and then it goes down the river and it ends
Speaker 1: up in an export market like Japan or elsewhere. Like,
Speaker 1: how does that process normally work and where are these
Speaker 1: sticking points now? Typically farmers will want to get in
Speaker 1: the field and plant their crops in April May. If
Speaker 1: those are the ideal times to get in you would
Speaker 1: typically begin harvest in that scenario September, which would last
Speaker 1: through October and into the beginning of November. Now, for export,
Speaker 1: soybeans are usually the first thing to leave the United States,
Speaker 1: and a typical harvest, which is where we're at right now,
Speaker 1: soybeans move about of exports will happen between September and February.
Speaker 1: A half to might move by barge. That's where we
Speaker 1: are today. Corn usually follows maybe at the turn of
Speaker 1: the calendar year. That's when our big export program for
Speaker 1: corn will happen. So right now it's pretty much all
Speaker 1: hands on deck in terms of the shipping to get
Speaker 1: the soybeans out. Are big buyers, obviously China. We want
Speaker 1: to get those out and in overseas as fast as
Speaker 1: possible because we will have a South American crop come
Speaker 1: online somewhere January and February where we will no longer
Speaker 1: be as competitive to the market. When you ship something,
Speaker 1: depending on where you ship from. I will use St.
Speaker 1: Louis because it is the biggest origin port out of
Speaker 1: the Center Gulf. That might take in a normal scenario
Speaker 1: ten days to get to New Orleans, maybe another thirty
Speaker 1: to get to a place like Japan after it's loaded
Speaker 1: on a boat. Right now, what we're seeing is at
Speaker 1: least double the amount of time to get from a St.
Speaker 1: Louis to a New Orleans, but that varies day by day.
Speaker 1: There are land mines and pitfalls all over the place
Speaker 1: on the river. Right now, it's legitimately a day to
Speaker 1: day situation. So is the issue for farmers that the
Speaker 1: longer it takes to get the crops out and exported
Speaker 1: to market, the less competitive they are, or is the
Speaker 1: issue that if you wait too long the crops them
Speaker 1: start to spoil. We're both so this is where it's interesting.
Speaker 1: While the dry weather is actually a hindrance to shipping
Speaker 1: and moving the crop on the river, it is hugely
Speaker 1: beneficial for the farmer getting their crops out of the field.
Speaker 1: We are making very good pace on harvest because there's
Speaker 1: been no rain to stop the harvest progress. So they're
Speaker 1: coming off an extremely extremely fast paced in the West,
Speaker 1: even faster because they don't have as much of a
Speaker 1: crop because of the dryness and some of the drought
Speaker 1: issues out there. Where the bottleneck occurs is at the
Speaker 1: shipping point. Most farmers have built ample storage over the
Speaker 1: last few years, as in the last ten plenty of
Speaker 1: storage to store on farm, but the bottleneck becomes at
Speaker 1: the origin port. So now we cannot move as many
Speaker 1: barges because of reduced toes and barge is getting stuck
Speaker 1: all along the river segment, and that creates a backup
Speaker 1: at origin where it hurts the producer. Is a basis level,
Speaker 1: or the difference in cash prices versus the Chicago Board
Speaker 1: of Trade continue to drop off. So whereas a farmer
Speaker 1: might see something relatively equal to what you see quoted
Speaker 1: on the board. They might be getting a dollar less
Speaker 1: because the transportation costs and risks are so high. Can
Speaker 1: you talk a little bit more. You mentioned the logistical
Speaker 1: land mines. Right now, what actually happens in low water
Speaker 1: and how does it slow down the shipment of these
Speaker 1: goods or the ground. So low water causes two problems
Speaker 1: channel depth and channel width of which you can take
Speaker 1: barges down. How this is being slowed down on the
Speaker 1: river currently you have a tugboat that will push a
Speaker 1: pa pack of barges from a St. Louis to New Orleans,
Speaker 1: and they might typically push forty barges. Well, right now
Speaker 1: the max is twenty five on the river. The amount
Speaker 1: of grain that we can actually put in a barge
Speaker 1: is being reduced. So right now everybody is a nine
Speaker 1: ft draft. We can only sink a barge nine ft
Speaker 1: down and ship it. That's that constitutes somewhere between less
Speaker 1: than normal. Uh. Some of the other issues longer turns
Speaker 1: where a lot of people are running daylight only hours
Speaker 1: right now, which means the primarily the reason for that
Speaker 1: is so they can dredge or dig out the bottom
Speaker 1: of the river at night, so it just continues to
Speaker 1: make longer turns down to the gulf and back. We
Speaker 1: have stoppages which are day to day. It could be
Speaker 1: five six blockages on any given river segment and uh,
Speaker 1: all of that really you put all that together and
Speaker 1: what that means for shippers uh, and grain dealers and
Speaker 1: and people that move product on the rivers high shipping costs.
Speaker 1: So what are farmers actually doing to offset some of
Speaker 1: these issues? Like have they potentially built up I mean,
Speaker 1: I guess if you were prepping ahead of time for
Speaker 1: climate change in major drought, maybe you would build up
Speaker 1: your storage capacity for instance, so that you could store
Speaker 1: a lot of your grains if you can't move them.
Speaker 1: Are there things that farmers can do to offset some
Speaker 1: of these challenges? Well, farmers, you can always price ahead.
Speaker 1: You can price before the issue gets here. This issue
Speaker 1: really started well early in the year, but it really
Speaker 1: came to a head in September and October, So you're
Speaker 1: their issue. There are ways to mitigate that risk by
Speaker 1: pricing ahead, taking some of that risk off your off
Speaker 1: your table. You also have a huge build up in
Speaker 1: storage on farm so a lot of these producers can
Speaker 1: tuck away the grain until there's more beneficial river system,
Speaker 1: a better chance and a better opportunity to sell better
Speaker 1: values once we get some of these issues sorted out.
Speaker 1: Do farmers have any alternative ways of shipping goods? Is
Speaker 1: there any rail or trucking nearby or do any of
Speaker 1: them have that option when they can't get a spot
Speaker 1: on a barge. Absolutely, farmers by and large have their
Speaker 1: own trucks. They can move their own product. Uh, there
Speaker 1: are railhouses. Rail even before these river issues was pretty taxed,
Speaker 1: and they've had their own issues and performance and otherwise
Speaker 1: in certain markets in certain parts of the US. So
Speaker 1: I don't know that rail is in a position to
Speaker 1: really help out the river market. And we already have
Speaker 1: a huge demand pull by rail to move corn and
Speaker 1: beans and other products to the West where we had
Speaker 1: a substantial drought, into the Southeast where there's good demand
Speaker 1: for for rail in product, and it really isn't economically
Speaker 1: feasible to truck your grain to the New Orleans, which
Speaker 1: at the end of the day, for export is where
Speaker 1: all this what it needs to be. It's really a
Speaker 1: sit in wait. Look for other markets like a railhouse.
Speaker 1: Look for other markets like ethanol and feeders, and just
Speaker 1: if you need to move grain, find something else other
Speaker 1: than the river at this point to find a home
Speaker 1: because the values will be much better to the producer.
Speaker 1: So this is one thing I was wondering. Actually, you know,
Speaker 1: we're talking about moving things like soybeans down the river
Speaker 1: so that they can get exported to markets like China
Speaker 1: and elsewhere. How much of the grains that are moving
Speaker 1: through the Mississippi, How how much of that goes to
Speaker 1: the US versus the rest of the world. So if
Speaker 1: you're talking about it, let's just take corn for instance,
Speaker 1: because I deal in corn mostly but probably oh my gosh,
Speaker 1: that's all I hear in my house. My I mean,
Speaker 1: my kids have never cared one iota what I do.
Speaker 1: But since that came out, they've done so much for
Speaker 1: the corn industry. Let me tell you, uh, I would say,
Speaker 1: of like the corn in the United States goes for export,
Speaker 1: the majority of that gets used in house for between ethan,
Speaker 1: all uh, feed of animals and just other domestic food products.
Speaker 1: Beans are much more heavy export, probably closer to half
Speaker 1: or something like that. So that's why there's such a
Speaker 1: big on It's not only is it our time to
Speaker 1: ship beans and to get them out. It's our window,
Speaker 1: the place where we're the most competitive, where we are
Speaker 1: typically cheaper than Brazil and our competition in Argentina. That's
Speaker 1: why it's such a high priority to get those out
Speaker 1: now because they will be coming online with bigger crops.
Speaker 1: Is are especially Brazil continues to increase acreage year over year.
Speaker 1: They are becoming more of a force and a bigger
Speaker 1: player in the grain and especially soybean UH competition force
Speaker 1: in the world. Do farmers have to make a decision
Speaker 1: about Wait, this might be like a new normal that
Speaker 1: if you know, because droughts can last a long time. Obviously,
Speaker 1: the drought in the Southwest has happened for several years
Speaker 1: and there like crisis of water levels there. Do farmers
Speaker 1: have to make a bet so to speak, on whether
Speaker 1: the drought is going to persist and constrained waterways is
Speaker 1: a new normal and there has to be a different
Speaker 1: way of exporting their goods. I don't know that they
Speaker 1: need to sit there and worry about drought into the future.
Speaker 1: And as it relates to the river system, they could
Speaker 1: certainly look at diversifying some of their in use. Buyers
Speaker 1: maybe do a little eth and all. Do some river
Speaker 1: feeder maybe diversify it. But my my experience in weather
Speaker 1: and river conditions and rain is much like the economy,
Speaker 1: just like a drought in a recession. The best part
Speaker 1: about them is they will end at some point. What
Speaker 1: would be most helpful for farmers at the moment? Would
Speaker 1: it be like more coordination on the river or better
Speaker 1: dredging capacity? What would people like to see here? There's
Speaker 1: no magic bullet right now for the river. The thing
Speaker 1: that we need is heavy rain, a flash flood type
Speaker 1: event north of St. Louis. The biggest problem with this
Speaker 1: event that we have right now isn't so much the
Speaker 1: low water, it's where the low water is located. The
Speaker 1: biggest problems are Memphis South. So if you had a
Speaker 1: flooding on the Illinois, some of the bigger companies and
Speaker 1: a d M or a Cargill could shift their operations
Speaker 1: to really push product out of the lower Mississippi or
Speaker 1: the Ohio River and kind of ore that opportunity. The
Speaker 1: problem we have right now is where this biggest issue
Speaker 1: is located, and that's Memphis South, which affects every signal
Speaker 1: river segment. So there is no magic bullet what we need,
Speaker 1: or heavy rains, a flash flood type event, like I said,
Speaker 1: that would just run off into the rivers, the tributaries,
Speaker 1: in the in the in the main rivers to provide
Speaker 1: us a little relief. The other would be a kind
Speaker 1: of just soaking rain and start knocking back this drought
Speaker 1: where we have soil moisture and every rain adds to it.
Speaker 1: That is obviously a longer process. It will be slower
Speaker 1: to bring the river levels back up, but absent of
Speaker 1: widespread rain, dredging is just a kind of a band
Speaker 1: aid on a bullet hole at this point. It's just
Speaker 1: keeping us going. Just the one last question for me,
Speaker 1: more out of curiosity. But you mentioned that normally the
Speaker 1: problem that you face is actually too high water. Can
Speaker 1: you talk about some of the challenges that that poses. Yeah,
Speaker 1: so high water. The one experience that I had that
Speaker 1: was probably the worst would have been the spring of
Speaker 1: nineteen where it just continually rained, and more than rain,
Speaker 1: it didn't it didn't ever get warm in the spring,
Speaker 1: and there wasn't a whole lot of sun to dry
Speaker 1: up the soils, and we were pretty much non operational
Speaker 1: on the river, especially the Illinois River, until from spring
Speaker 1: to June where there was a complete backlog at origin,
Speaker 1: a lot like what we have here, but just nothing
Speaker 1: was moving. We're actually trying to move in this situation.
Speaker 1: With high water there, you can get to a point
Speaker 1: where you can't load anything physically because the water is
Speaker 1: so high that barges sit above spouts and product that
Speaker 1: you're trying to load on the barge. Neither or fun,
Speaker 1: but high water comes with its own set of challenges
Speaker 1: just like low water, and high water has definitely been
Speaker 1: the more prominent of the two in recent years. Ben,
Speaker 1: Thank you so much for joining us. This was extremely helpful.
Speaker 1: So appreciate you coming out on ad lots. Oh, it's
Speaker 1: an honor and it's appreciate you guys having me. Yeah, absolutely, yeah,
Speaker 1: thanks man. That was really good. Well, Joe, that was
Speaker 1: fascinating and there is a lot to dissect there. But
Speaker 1: just before we do, we're gonna bring in two other
Speaker 1: guests to people who have actually been on the show before,
Speaker 1: kind of talking about barges, but this time we're really
Speaker 1: going to get into it. We're gonna be speaking with
Speaker 1: Mercy Group CEO Anton Posner and President Margot Brock In
Speaker 1: just a few minutes after the break. So we're back
Speaker 1: and we are continuing our discussion of the Great Mississippi
Speaker 1: Drought and what it actually means for the economy, for
Speaker 1: transport and logistics. We are going to be speaking with
Speaker 1: Mercury Group CEO Anton Posner and President Margot Brock. Anton
Speaker 1: and Margot, thanks so much for coming back on our thoughts.
Speaker 1: Pleasure to be here, Thanks for having us. Yeah, great
Speaker 1: to be back. So I remember the last time we spoke,
Speaker 1: we did touch on barges briefly, and so Joe and I,
Speaker 1: you know, when we were prepping for this episode, we
Speaker 1: thought who do we need to call to talk about barges,
Speaker 1: and it was, of course Mercury Group. Just to begin with,
Speaker 1: give us a sense of your connection to the barge business.
Speaker 1: The river. River business is a huge part of Mercury
Speaker 1: Group business and has been since our inception. Of course,
Speaker 1: millions of tons move of commodities and cargoes move on
Speaker 1: the river system every every year, northbound, southbound, east and
Speaker 1: west throughout the Mississippi River High river system, so it's
Speaker 1: been a big part of our business, primarily moving import
Speaker 1: commodities via coming in via New Orleans and mobile commodities
Speaker 1: like steel and aluminum and lead and zinc and on
Speaker 1: raw materials for the steel and metals metals industry. UM.
Speaker 1: So it's such a significant part of the North American
Speaker 1: and American transportation UH system and a big huge part
Speaker 1: of the Mercury Rickery Groups business that we manage for
Speaker 1: for our clients. Can you talk about like you know,
Speaker 1: we've talked a lot out about logistics and shipping and
Speaker 1: ports and trucks and dredging on the show several times,
Speaker 1: but just like how significant I do feel as though
Speaker 1: inland waterways specifically do not get that much attention. I
Speaker 1: guess maybe outside when they're in crisis, But how significant
Speaker 1: are they? To what degree do people need to appreciate
Speaker 1: the importance of our inland infrastructure. That's a great question
Speaker 1: because I think it is such an unknown in this
Speaker 1: country for people don't understand how extensive the river system
Speaker 1: is and how much of the US gets fed in
Speaker 1: and out of materials on the river system. And you know,
Speaker 1: Anton and I are East Coast based people, so I
Speaker 1: didn't grow up on the Mississippi. I didn't see barges
Speaker 1: moving on the Mississippi, and I didn't know they existed
Speaker 1: growing up, and even Anton and I, who went to
Speaker 1: merchant Marine merchant Marine school, we are came out as
Speaker 1: licensed third mate. Even in college, we didn't talk about it.
Speaker 1: We talked about ocean freight and and bigger, bigger scale.
Speaker 1: The river system is tremendous, and the amount of commerce
Speaker 1: that runs inbound, it really runs the gamut. There's barges
Speaker 1: that move liquids. There's an incredible, incredible fleet of barges
Speaker 1: that move dry materials. Inland. It can be you know,
Speaker 1: some interestingly enough, we at one point removing organic soybeans
Speaker 1: into Middle America because although we make soybeans here in
Speaker 1: the US, we don't have a great organic crop and
Speaker 1: you have to feed your organic meat organic food. So
Speaker 1: to have organic cows, we need organic feedstock for them.
Speaker 1: We send raw materials into production facilities. So you know,
Speaker 1: when we're looking at what has happened in this market
Speaker 1: that we're all living of reduced availability of so many
Speaker 1: items that we think of that come from China in containers,
Speaker 1: you know, and the chips for our cars and Christmas
Speaker 1: gifts on our shelves. That's one part of the market.
Speaker 1: But there's a lot of raw materials that feed up
Speaker 1: into the US that aren't able to reach these production
Speaker 1: facilities if the river is not working, and that's the
Speaker 1: next great shortage that happens when we can't get materials
Speaker 1: up to the production facilities. And then on the export side,
Speaker 1: we'll have discussed grain already for this podcast. Export grain
Speaker 1: is a huge part of the US is grain market.
Speaker 1: So although we feed plenty of our of ourselves domestically
Speaker 1: with what we produce, it's a really big global market
Speaker 1: for US grain. And right now is the green season.
Speaker 1: So when rivers are not running well, which is what
Speaker 1: we're going to talk about today, and cannot get that
Speaker 1: grain out of the river system, that's a huge financial
Speaker 1: impact on our farmers. So it really is very extensive
Speaker 1: the reaches because the river system, you know, it all
Speaker 1: runs up off the Mississippi and feeds east and west.
Speaker 1: It's a very big footprint of the US that the
Speaker 1: river system touches. So talk to us a little bit
Speaker 1: about what you've seen so far. How would you describe
Speaker 1: the current situation on the Mississippi. The current situation the
Speaker 1: Middle America is suffering from a huge drought, and typically
Speaker 1: about this time of year, it's a combination of we
Speaker 1: have self found grain coming out, which dominates the landscape
Speaker 1: because it's so important to the U. S economy to
Speaker 1: be shipping that grain out. And usually they're fighting against
Speaker 1: weather systems that are hurricanes, and we're used to seeing,
Speaker 1: you know, this time last year they were recovering from Ida,
Speaker 1: which took out grain elevators, and then there's too much
Speaker 1: water on the river and it's running too fast and
Speaker 1: it's dangerous and there's so many impacts from too much water.
Speaker 1: And what we're seeing this year is we didn't see
Speaker 1: any big weather systems come into the Gulf. The hurricane
Speaker 1: came in, came into the Gulf, it went to Florida,
Speaker 1: it didn't go to the river system. The river's did
Speaker 1: not see any of that rain water. The river is
Speaker 1: at historic lows and there are moments where you know,
Speaker 1: the gauge at Memphis, Tennessee reading water levels. They've been
Speaker 1: recording that gauge for the last eighty nine years and
Speaker 1: we learned through current events that was the lowest mark
Speaker 1: in that eighty nine year reading on the river. Well
Speaker 1: we've surpassed that. We have set new lows on this river.
Speaker 1: It is significant on the lower Mississippi and what it
Speaker 1: has caused is a series of domino effects. Really, the
Speaker 1: water is low, we are getting channels evaporating where we
Speaker 1: just can't transit it because they're too low. And certain
Speaker 1: areas of the Lower Mississippi have been dredged already, there
Speaker 1: are other areas waiting for the dredge. The dredges are
Speaker 1: very busy right now up and down the river, trying
Speaker 1: to keep keep traffic flowing. We're seeing when those rivers open,
Speaker 1: traffic is in one direction, so you've been waiting for
Speaker 1: days for the river to reopen. Your barges are stuck,
Speaker 1: and now you're sitting a few days more while traffic
Speaker 1: from the opposite direction passes through, and that dredge is
Speaker 1: now on its way somewhere else to salvage another location
Speaker 1: that's having problems. It's almost doing bare minimum just to
Speaker 1: keep the river operating and keep barges flowing. We are
Speaker 1: also because the water is so low, it restricts how
Speaker 1: much you can put in a barge, and so we're
Speaker 1: seeing very low drafts on bar barges, which then has
Speaker 1: that next implication that you need more than the usual
Speaker 1: amount of barges to move that size parcel of cargo.
Speaker 1: So you know, if you're previously you would have moved
Speaker 1: your parcel in ten barges, maybe now you need fourteen
Speaker 1: because of how you have to load them. So it's
Speaker 1: really there's constraints on the system coming from every direction.
Speaker 1: You know, we can't get the barges moving fast enough
Speaker 1: to get them to a point where we need them
Speaker 1: to load. Plus we need that many more to load now, yeah,
Speaker 1: add on you know that need for more barges per
Speaker 1: per per ton effectively on top of a busy grain season.
Speaker 1: And you think people used Percy spoke to on the
Speaker 1: grain market and probably get more insight on this. But
Speaker 1: we've seen a more active export grain market this year,
Speaker 1: with which seems to be of course servers alt to
Speaker 1: what's happening with Russia and Ukraine and European markets buying
Speaker 1: more American grain. And we're not grain people, so we'll
Speaker 1: leave it to the great experts to comment on that.
Speaker 1: But yeah, this situation on the on the river system
Speaker 1: is coming at a time within when there's a ready
Speaker 1: constraint on the barge market and we're seeing as a result,
Speaker 1: we're seeing spot barge rates skyrocket. We've seen on an
Speaker 1: important lane that we're moving on ray materials setting northbound.
Speaker 1: We've seen spot rates for October in the range of
Speaker 1: nine to ten times what the annual contract rate was
Speaker 1: for that particular move, and we were lucky to be
Speaker 1: able to find that. Tracy, I just found we have
Speaker 1: U S D A U S river barge grain spot
Speaker 1: rage on the terminal. So we do we actually st Louismasouri, Yeah,
Speaker 1: we do so. In fact, it's very clear what Anton
Speaker 1: just said. So you know, going back to August, we
Speaker 1: were at fifteen I'm not exactly sure what the fifteen
Speaker 1: dollars per short time, So we're at fifteen and it
Speaker 1: got as high as a hundred and six in the
Speaker 1: in early October, so really an extraordinary rise in a
Speaker 1: spot barge prices. All this chaos on the Mississippi, and
Speaker 1: you know, a lot of this is sort of reminiscent
Speaker 1: of the shipping chaos that we were talking about in one.
Speaker 1: But what exactly can be done to alleviate this? If anything?
Speaker 1: I know there's some dredging activity going on. Can you
Speaker 1: try to you know, expand capacity on the river rush
Speaker 1: to expand capacity at river ports? Is any of that
Speaker 1: possible or does it help the fix right now is
Speaker 1: a good old rainstorm. They just need water. You know,
Speaker 1: there is no significant rainfall in the forecast. Everyone's you know,
Speaker 1: watching carefully in the bards lines of all. And then
Speaker 1: the next concern is when that rainfall comes. The surrounding
Speaker 1: area is so dry as well that it's going to
Speaker 1: take a bit before we get to a point where
Speaker 1: there's actually runoff feeding the rivers. That's the corrective action
Speaker 1: that we need. We just need water in the rivers,
Speaker 1: you know, dredging. Dredging is always a difficult thing to
Speaker 1: stay ahead of to keep channels open, and you're talking about,
Speaker 1: you know, a massive amount of navigable rivers that that
Speaker 1: the Army Corps of Engineers needs to maintain to keep
Speaker 1: us moving freight on the rivers of the US. So
Speaker 1: increasing capacity right now is purely just by keeping channels operating,
Speaker 1: keeping navigable waterways operating, and that's where we're suffering. We
Speaker 1: just don't have the water to be able to navigate
Speaker 1: up and down these rivers right now. At some points
Speaker 1: we look at large capacity being the issue, and it's
Speaker 1: usually this time of year that's a big issue because
Speaker 1: the barges are all tied up in the grain sector,
Speaker 1: and those that are looking to move northbound cargo are
Speaker 1: constrained because the barge lines feed all their equipment up river.
Speaker 1: But that's not even the issue anymore. The issue is
Speaker 1: just it purely can't move. There's no water, it can't move,
Speaker 1: and everyone is just desperate to get the river the
Speaker 1: empty barges back and get them reposition to the next
Speaker 1: point for a load and keep right moving. I have
Speaker 1: a short question and then a slightly longer question. So
Speaker 1: the first short question is what are the non grain
Speaker 1: the dominant non grain goods that gets shipped along the
Speaker 1: river coal, steel, metals, chemicals and tank barges, petroleum products,
Speaker 1: things like that, iron ore, find row material sparrow alloys,
Speaker 1: things like this that go into into steel and making
Speaker 1: a coal. Coal is a huge commodity that moves on
Speaker 1: the on the river system. Our business tends to fold
Speaker 1: mostly towards the metals and steel markets and the row
Speaker 1: materials that go around those, and they're they're keeping us
Speaker 1: pretty busy, Joe. Then this gets to my second question,
Speaker 1: which is, Okay, yes, we see I'm looking at the
Speaker 1: start and the spot rate shot up. But if there's
Speaker 1: an issue of Okay, you just can't move it, which
Speaker 1: is sort of like a lot of our themes. That's like,
Speaker 1: there are certain things that you can't buy it any price.
Speaker 1: When there's a constraint on how many barges there are
Speaker 1: or the depth of the river, what are your clients
Speaker 1: doing as alternatives or how are you helping your clients
Speaker 1: find alternate mean divid shipment that's a yeah, that's a
Speaker 1: difficult one to work around, but it does depend on
Speaker 1: the commodity. When we're looking at a lot of the
Speaker 1: bulk products, which are you know, in terms of being
Speaker 1: raw materials into production, there's often not necessarily the easy
Speaker 1: ability to offload it at a terminal and find another
Speaker 1: conveyance to move it. When you're talking about a ship
Speaker 1: that has fifty thou tons of material on or even
Speaker 1: thirty tons of material on it, that's a huge, huge,
Speaker 1: huge amount of trucks. If you could move it in
Speaker 1: trucks to wait for rail cars would be not feasible,
Speaker 1: you know, And a lot of the instances waiting out
Speaker 1: the delays on the river system is still going to
Speaker 1: be the likely the best use of your time, the
Speaker 1: most time efficient to get to the end destination because
Speaker 1: simply finding a place to offload that much tonnage to
Speaker 1: ground and reload it out and finding enough conveyance to
Speaker 1: get it to that next point is too hard. Now,
Speaker 1: once you move into break bulk materials, where you know
Speaker 1: steels and metals and you know that fall into our sector,
Speaker 1: right now, we're seeing a good portion of that landing
Speaker 1: too dock when it wouldn't have before. And it's simply
Speaker 1: because there is no spot market for barges. If you
Speaker 1: didn't have it booked and you don't have a contract
Speaker 1: for it, nobody's moving it, nobody's touching it. And we're
Speaker 1: talking about like the ships coming into New Orleans discharging
Speaker 1: to the like the city docks in New World, just
Speaker 1: to leave it outside for later reload too barges instead
Speaker 1: of going direct from ship into barge, which is the cheapest,
Speaker 1: most effective, cost effective right And we're finding two that
Speaker 1: we're running a lot of rail rates on lanes that
Speaker 1: were not expected to be rail because there is capacity
Speaker 1: to offload break bulk materials onto the dock steven doors
Speaker 1: when it just needs a basic outside storage. It's easier
Speaker 1: to easier to navigate that and figure that one out.
Speaker 1: So it's landing to outside storage and then we will
Speaker 1: bring in rail cars and move it out that way
Speaker 1: is the best option. Best option for some other cargo
Speaker 1: may end up seeing what happens with the river system.
Speaker 1: If it's not urgently needed upriver or at a at
Speaker 1: a consumption point, it may just stay on the dock.
Speaker 1: In New Orleans, we're also seeing some interest in alternate ports,
Speaker 1: like let's go to mobile where maybe we can barge
Speaker 1: north out of Mobile and avoid the lower Mississippi River
Speaker 1: just to not get caught up in those bottlenecks. Uh, Margot,
Speaker 1: you briefly touched on this at the beginning up. Can
Speaker 1: you maybe describe what would you expect the second order
Speaker 1: effects of all of this to be. Is it going
Speaker 1: to be you know, we mentioned the higher spot rates
Speaker 1: and will that feed into prices. Is it going to
Speaker 1: be you know, shortages because manufacturers can't get the core
Speaker 1: components or resources that they need, things like steel or
Speaker 1: coal to stoke various furnaces. What exactly is going to
Speaker 1: be the result of all of this. Well, right now
Speaker 1: it seems like everything is moving slowly, but things are recovering.
Speaker 1: And the biggest fear that you have in pushing things
Speaker 1: up river predominantly. You know, in talking about a US
Speaker 1: economy and a US workforce, we become concerned with feedstock,
Speaker 1: raw materials, making it into production facilities to keep them
Speaker 1: running right. We don't want to see anyone shut down.
Speaker 1: We don't want to see a labor force for a
Speaker 1: load or cut because a facility has to stop working.
Speaker 1: So that's definitely an ancillary effect and an outcome that
Speaker 1: you have to worry about. But the river, thankfully, you know,
Speaker 1: they're working hard to keep it moving in a modified
Speaker 1: capacity right now. And what we're seeing from the barge
Speaker 1: lines is that they are currently able to cover what
Speaker 1: their commitments are, just they can't go above there already
Speaker 1: booked commitments. So if we can keep it, keep it moving,
Speaker 1: and keep the river alive until rainfall comes, that will
Speaker 1: help a lot and help lessen much of you know,
Speaker 1: some of the impact, I guess, but they're still going
Speaker 1: to be impact. And I think you know what we're
Speaker 1: anticipating is barge contracts run most commonly, if you're on
Speaker 1: a contract, it's a following a calendar. So we're coming
Speaker 1: into that time where we should be negotiating for contracts.
Speaker 1: But nobody's talking about it yet. The spot market being
Speaker 1: eight nine, ten times what the contracts market is is
Speaker 1: not a good time to be talking about, Hey, what
Speaker 1: do you think you want to price me for three?
Speaker 1: It's a really loaded question to be asking right now,
Speaker 1: and nobody's having the conversation we have where everyone is
Speaker 1: agreeing to defer that topic right now. Can I just
Speaker 1: ask a quick question about that? You know, I know
Speaker 1: when we've when we've done episodes on trucking, you know,
Speaker 1: contract is in trucking seems to be like sort of
Speaker 1: a nebulous thing, and uh and are ripping up their
Speaker 1: contracts all the time, and they're not particularly legally binding.
Speaker 1: Particularly spot and contract deviate far when you talk about
Speaker 1: contract with barge operators. Are these more binding or they
Speaker 1: also sort of like loosened subject to reprice? So, Joe,
Speaker 1: the barge lines are are honorable. These are binding contracts
Speaker 1: they are performing. So these these annual contracts that as
Speaker 1: Margo mentioned, right, it's typically a calendar year for for
Speaker 1: these types of contracts that handle the medals and steels
Speaker 1: and some of the row materials that we that we manage.
Speaker 1: So the barge lines are they they stand behind the contracts.
Speaker 1: They stand behind the pricing on the annual basis, annual
Speaker 1: rates that they agree to, and as Margot mentioned right that,
Speaker 1: what they're not doing is going over and above in
Speaker 1: a good year, well a good year for for shivers,
Speaker 1: right for cargo interest, there's some extra capacity and there's
Speaker 1: a possibility to get a barger two extra under the
Speaker 1: contract rates when when needed. Not now. As Margot mentioned
Speaker 1: right there, the barge lines are not giving a single
Speaker 1: barge beyond what they're committed to in their in their contracts.
Speaker 1: But but they are, they are performing and there's no
Speaker 1: back trading, as a phrase that we like to use
Speaker 1: right now, no back trading and Joe as you men
Speaker 1: should right with the trucker is a whole different world
Speaker 1: of what a contract means. But but in the barge world,
Speaker 1: a contract is a contract and the barge lines are
Speaker 1: are sticking sticking to that. Can I just have one
Speaker 1: more question and you know whether it is what it
Speaker 1: is and the rain you know there will be another
Speaker 1: rain or maybe a flood and that might help, but
Speaker 1: how much you know long term do you think about
Speaker 1: your clients, think about climate change and whether the river
Speaker 1: capacity may be impaired on a meaningful basis for some
Speaker 1: time to come, Probably not as much as they should
Speaker 1: be thinking about it, because I know a lot of
Speaker 1: people are going to say there's no such thing as
Speaker 1: climate change, but I don't know. I sort of have
Speaker 1: to beg to differ on that. So you've you've seen
Speaker 1: like sitting aside, what what what you can? Can we
Speaker 1: attribute this drought to climate change or not versus random
Speaker 1: things that happened in the weather. Your perspective from your
Speaker 1: whole career is that things have been worse, Yes, yeah,
Speaker 1: but but I do think that is supported by weather data.
Speaker 1: I think that is supported by looking when you look
Speaker 1: year on year the storms that hit, and you know,
Speaker 1: talk to the people that live in New Orleans and
Speaker 1: tell me what they think about the increase of hurricanes, right,
Speaker 1: I mean except this year, this year, we're not they're
Speaker 1: not getting them. And you know, dare we say we
Speaker 1: need a good hurricane to roll through there, but we don't.
Speaker 1: But the river needs it. But yeah, So that that
Speaker 1: was something I had actually read at one point, talking
Speaker 1: about the climate change and talking about you know, how
Speaker 1: much of the US is under a drought condition right
Speaker 1: now and this time last year they were trying, you know,
Speaker 1: talk speaking specifically to the river system and the barge market.
Speaker 1: Our barging market was desperately trying to recover from a
Speaker 1: huge hurricane that came through that reeks complete havoc with
Speaker 1: the system. And here we are a year later, we're
Speaker 1: talking about we have no rain and we have havoc
Speaker 1: in the river system. So I think, I think it's
Speaker 1: really something they do have to talk about. And there
Speaker 1: was one article I had read and it talked about
Speaker 1: even just global trade and the key choke points that
Speaker 1: are exposed both on political situations and um piracy and
Speaker 1: you know, acts of man that are in control of someone,
Speaker 1: and then the weather events that are in control of
Speaker 1: no one, you know, and talking about straits and Panama
Speaker 1: Canal and Suez Canal and places like that in the
Speaker 1: Black Sea, and everyone being subject to the impacts of weather.
Speaker 1: I mean, any weather extremity causes a problem in shipping.
Speaker 1: And actually this article I read it was so interesting
Speaker 1: that it went as far as to point now excessive
Speaker 1: heat warping about ten years ago getting so hot in
Speaker 1: parts of the US it affected the railroad tracks because
Speaker 1: all the railroad tracks expanded and it caused tremendous derailments.
Speaker 1: So you know, it's not just water, it's not just
Speaker 1: our barges and our ships, it's you know, it definitely
Speaker 1: affects our our network across across all conveyances. Yeah. I
Speaker 1: think that's a really important point and one that we
Speaker 1: all seem to be um learning in real time unfortunately.
Speaker 1: But Anton and Margot, that was fantastic. Thank you so much.
Speaker 1: Really appreciate you coming back on all thoughts to talk
Speaker 1: about barges just like we promised. Finally. Thank you so much.
Speaker 1: Absolutely thanks for having us high so Joe, I'm so
Speaker 1: happy we finally did the barge episode. I should say
Speaker 1: I've been reading a really good book on barges lately
Speaker 1: that a listener actually recommended. Yeah, it's called Brown Water
Speaker 1: Boating by Dean Gabbert. Anyway, if you want to learn
Speaker 1: more about barges, you should definitely check that out. But
Speaker 1: I mean, you know what was interesting in that very
Speaker 1: last bit of the conversation with Margo and Anton the
Speaker 1: talk about climate change. I mean, this is a climate
Speaker 1: change episode, right, and this is sort of what I
Speaker 1: mentioned this already, but this is what we're all learning now,
Speaker 1: is that a lot of our economy depends on the
Speaker 1: weather acting in a certain way. There are being enough
Speaker 1: water for us to transport goods by river, there being
Speaker 1: you know, not too much heat so that the railway
Speaker 1: lines still work. And we're kind of discovering all these
Speaker 1: vulnerabilities in our transport and infrastructure as um as climate change. Yeah,
Speaker 1: you know, I'm thinking also back to that episode we
Speaker 1: did earlier in the year with Elex Turnbull, and we
Speaker 1: were just talking about energy and you know the issue
Speaker 1: of nuclear plans even that need a certain amount of
Speaker 1: cool water to uh, you know, to cool down, and
Speaker 1: if the rivers are too warm then that doesn't work, etcetera.
Speaker 1: And so yeah, we really see that, like certain things
Speaker 1: we take for granted, like the smooth operation of the
Speaker 1: Mississippi River or just the idea that there's gonna be
Speaker 1: cool water for nuclear facilities is not something that we
Speaker 1: can just take for granted. But it's interesting, and you know,
Speaker 1: it really does seem like the inland waterway is the
Speaker 1: Mississippi River. It kind of feels like old timy, you know, right,
Speaker 1: like if you like, what does the Mississippi River contropp
Speaker 1: like some sort of like old verboats riverboats. So who's
Speaker 1: you know, one of those authors who like wrote books
Speaker 1: about that time. You don't think of it as being
Speaker 1: like all that vital like these days, but obviously it
Speaker 1: really is. Yeah, Twain, I was going to say Mark Twain, like,
Speaker 1: come on, Mark Twain, uh, you know and going down
Speaker 1: the Mississippi. Okay, but seriously, if you like that topic,
Speaker 1: you should read that barge book I just mentioned. Um,
Speaker 1: the other thing that struck me is it's not even
Speaker 1: like we need more water, it's that we need water
Speaker 1: in a specific pattern. So, as Ben was mentioning, you know,
Speaker 1: you either need a downpour sort of upriver that then
Speaker 1: flows downstream, or you need a prolonged rain that softens
Speaker 1: the ground like further south and then flows into the river.
Speaker 1: And then the other thing that struck me was that
Speaker 1: even if you get a disruption like this and it's
Speaker 1: relatively short lived, to Anton and Margot's point about the contracts,
Speaker 1: like the way those work, basically means that this disruption
Speaker 1: can have this lagged effect for many many months to come,
Speaker 1: even if it only like is extreme for two or
Speaker 1: three months. Right, the chart is really extreme. It's come
Speaker 1: down a little bit. The spot prices but you know,
Speaker 1: as they as they pointed out, like nobody, nobody wants
Speaker 1: to enter like contract renegotiation season now with the levels here,
Speaker 1: because where the where where do you price things? Also
Speaker 1: like what did the Antons say something about how on
Speaker 1: the barge business they take their contract seriously, unlike unlike
Speaker 1: those truckers where they just rip them up in the
Speaker 1: in the In the barge business, a contract is a
Speaker 1: contract words to live by, live like a barge operator,
Speaker 1: you know, just the just the other thing, you know,
Speaker 1: to Ben's point about how look, you know, price is
Speaker 1: one thing and capacity is another thing. And if you
Speaker 1: don't have the capacity, then you have all these issues.
Speaker 1: You have various terminals that aren't equipped to move things
Speaker 1: at different spots. You have more storage at the ports
Speaker 1: because you're just waiting longer for the barge to come
Speaker 1: and move them. I mean, it's a real mess. And again,
Speaker 1: you know, like it's so interesting in the broad sweep
Speaker 1: of things that we cover, because there are clearly things
Speaker 1: that are sort of macro, right, like inflation generally probably
Speaker 1: is a macro story. But this really does seem like
Speaker 1: one where it's just it's a lot of bad luck. Yeah,
Speaker 1: on top up of the Ukrainian grain situation as well,
Speaker 1: which we've already spoken about, and the booming demand for
Speaker 1: U S domestic grain. So it is connected. And to
Speaker 1: Margot and Anton's point, the booming demand for grains globally
Speaker 1: also means that there's less capacity for non grain goods
Speaker 1: like the various industrial commodities or coal or iron that
Speaker 1: they were talking about. So it really is a it's
Speaker 1: kind of a perfect storm. You're going to say that
Speaker 1: it does seem like it does seem like a perfect storm.
Speaker 1: All right, Well, on that note, before we utter any
Speaker 1: more cliches, I think we should leave it there. Let's
Speaker 1: leave it there. Okay, this has been another episode of
Speaker 1: the All Thoughts Podcast. I'm Tracy Alloway. You can follow
Speaker 1: me on Twitter at Tracy Alloway. And I'm Joe Wisnal.
Speaker 1: You can follow me on Twitter at the Stalwart. Follow
Speaker 1: our guests on Twitter. Ben Schole he's at Auto Shoal
Speaker 1: and Tom Posner He's at Anton Posner and I don't
Speaker 1: think uh. Margot Brock, the president of the Mercury Group,
Speaker 1: is on Twitter. But follow our producer Carmen Rodriguez at
Speaker 1: Carmen armand and if you enjoy it today's episode and
Speaker 1: enjoy odd Lots. Check out Bloomberg dot com slash odd lots.
Speaker 1: Tracy and I write a blog, We post transcripts there,
Speaker 1: and we have a weekly newsletter where we talk about
Speaker 1: some of the themes of the episode. Find it all
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Speaker 1: Thanks for listening.