
The U.S. Department of Agriculture's latest Grain Transportation Report reveals a robust demand for grain transportation in the fourth quarter of 2024, continuing the trend observed in the third quarter. Despite challenges such as weather-related issues and fluctuating market conditions, the transportation system largely met the increased demand driven by strong exports of corn, soybeans, and wheat.
Grain production and demand
The January World Agricultural Supply and Demand Estimates (WASDE) report adjusted harvest estimates downward for both corn and soybeans:
- Corn production for marketing year 2024/25 is now estimated at 14.9 billion bushels, down 276 million bushels from December's projection.
- Soybean production for MY 2024/25 is estimated at 4.4 billion bushels, a decrease of 95 million bushels from the previous estimate.
Despite these reductions, total grain disappearance from September to November was 5% above last year and 3% above average, indicating strong demand for transportation services.
Rail transportation performance
Rail transportation showed notable improvements and challenges:
Volume increases:
- Rail grain carloads in Q4 2024 increased 5% from Q4 2023 and 2% above average.
- Norfolk Southern Railway saw a significant 23% increase above average in grain carloads, likely due to higher demand for feed grains in the Southeast following a poor harvest.
- For the entire year of 2024, Class I railroads originated 1.3 million grain carloads, 8% above 2023 levels but 1% below average.
Service improvements:
- Rail service for grain exports to Mexico improved, with BNSF Railway's shuttle turns to Mexico increasing from 0.9 trips per month in October to 1.5 trips per month in December.
- Grain inspections destined for Mexico by rail were up 7% from Q4 2023 and 15% above average.
Market dynamics:
- Secondary market values for shuttle trains decreased significantly since peaking in October, indicating a shift in supply and demand balance.
- By early January, BNSF shuttles for January delivery averaged $300 per car, while Union Pacific Railroad shuttles averaged -$287.50 per car, suggesting an oversupply.
Service challenges:
- Canadian Pacific Kansas City (CPKC) faced service issues, with high origin dwell times and unfilled manifest grain car orders in November, though these metrics improved by late December.
- Recent extreme winter weather events have impacted rail velocity and dwell times across the network.
Barge transportation trends
Barge transportation saw increased volumes despite some challenges:
Volume increases:
- Downbound barged grain shipments through Mississippi River System locks were up 16% year-over-year and 8% above average in Q4 2024.
- The fourth quarter accounted for 32% of annual grain shipments through locks, up from 31% in 2023 and 28% on average.
Rate fluctuations:
- Q4 2024 average barge rates at St. Louis, MO, were 12% higher than last year but 21% below the 3-year average.
- Increased barge demand from higher export sales contributed to the rate increase compared to 2023.
Weather and infrastructure challenges:
- Extreme cold and ice since mid-December have slowed barge movements and raised spot rates in the Upper Mississippi River, Ohio River, and Illinois River.
- Closures of Lock 25 and the main locks of Locks 26 and 27 have further impacted barge movements.
Columbia-Snake River system performance:
- Wheat movements through the CSRS locks increased 9% from Q4 2023.
- Barge rates along the CSRS were down 4% from Q4 2023.
Ocean freight dynamics
Ocean transportation saw decreased rates despite increased activity:
Rate decreases:
- Rates from the U.S. Gulf to Japan averaged $49.74 per metric ton, down 14% from Q3 and 16% year-over-year.
- Pacific Northwest rates averaged $28.96 per metric ton, down 6% from both Q3 and year-over-year.
Increased vessel loading:
- U.S. Gulf grain vessel loading activity increased to an average of 37 oceangoing vessels at berth per week in Q4, compared to 24 vessels in the previous three quarters.
Market factors:
- The drop in ocean freight rates may reflect ample vessel supply, insufficient cargo due to the holiday season, and slow global economic growth.
- Increased transits of the Panama Canal since last summer have also contributed to lower ocean freight rates.
Outlook and implications
The strong performance of grain transportation in Q4 2024 demonstrates the resilience of the U.S. agricultural supply chain. However, the industry faces ongoing challenges, including:
- Weather-related disruptions, particularly in early 2025
- Fluctuating market conditions and global economic factors
- Potential impacts of reduced harvest estimates on future transportation demand