River, rail & road
On a stormy day in early September, Andrew Belza mans the wheelhouse of the Mary Lynn with five grain barges in tow—some of the first of the harvest season— down the Missouri River from AgriServices of Brunswick to St. Louis.
“This river is like no other out there,” Belza said. “All rivers are unique and present their own challenges, but this one changes more.”
Lightning flashes to the left as he steers the boat through a narrow bend. Belza and his crew can feasibly run nine barges up and down this river if conditions are right. Thirteen is the most they’ve ever done, but even nine barges make for a narrow channel on a river with tight s-bends and limited depth control.
Though usually the cheapest method when it comes to moving large volumes, the river is only one link in a logistics chain that must be multi-modal to get grain to export.
Managing that mechanism is no easy feat. Deciding when, how and where grain needs to go on any given day is a calculation that takes careful consideration.
“Grain marketing is nothing more than being the most efficient at transport,” said Tyler Francis, MFA grain merchandiser. “We have a unique position where we can have truck, rail or barge. There aren’t many other companies in Missouri that can do that.”
By having access to multiple modes of transportation, MFA spreads out risk. It can leverage the cost of one against another.
“Freight is just another commodity,” Mitch Dawson, MFA director of grain operations, said. “We trade freight logistics just like we trade grain. The cost of freight overall is probably the largest component that changes on an ongoing basis for us.”
Freight is subject to the same fluctuations in price governed by supply and demand, he added. Those fluctuations must be factored in on a daily basis.
“We try to look at where the market is,” Dawson said. “We figure what we’re willing to pay minus our freight cost. Once we have that spread evaluated, we can determine the best avenue to ship grain from a certain point on the map to maximize the return to MFA and our customers.”
When farmers sell their grain to their local elevators, it will then be either sold domestically to facilities such as crush plants, feed mills and biorefineries, or it can go to export. In either case, that grain must travel by river, rail or road to the end user, whether that’s the poultry market in Arkansas, soy oil refineries in Mexico or Chinese swine feed manufacturers.
Because market prices and freight costs rise and fall with the market, there are many factors in getting grain there profitably. One shipment may change hands multiple times, and every barge company, towing company, rail company, trucking company, local elevator and farmer needs to profit.
“This is the beauty of the grain market,” Eric Williams, MFA manager of grain trading, said. “When prices rally, farmers can get a competitive price. As prices fall, they’ll decide to store their supply rather than sell. So that difference between what the cash price the farmer is getting and the relationship to the board starts to narrow. That’s where I come in. I buy it wide, and sell it narrow, which is how we can make money as a company and support our members.”
Situated on the northernmost part of the Missouri River between Kansas City and St. Louis, AgriServices of Brunswick (ASB), which MFA partially owns, relies on barge transportation to move hundreds of thousands of tons of fertilizer in addition to grain.
In the late ’90s and early 2000s, however, drought conditions made the Missouri River unreliable for transport. Nearing retirement anyway, the two towing operators on the river at the time decided to get out of the business.
“At that point, we did a couple of different things,” Doug Bonderer, ASB operations manager, said. “ASB leased a boat and then had a couple of companies out of Paducah and Cincinnati crew it. We just gave them work. That kept us active on the river when nobody else was.”
About eight years ago, Bill Jackson, recently retired co-owner of ASB, took matters into his own hands and bought the Mary Lynn towboat. At first, ASB piloted the vessel and later leased it to Steve Engemann, who owns Hermann Sand and Gravel and Missouri River Towing. In 2016, Engemann purchased the Mary Lynn from Jackson.
“That was really Bill’s goal the entire time, to find someone who was dedicated to the river,” Bonderer said. “And the last several years we’ve also had great water conditions.”
Service on the Missouri River is a niche market, and there still are very few operators. However, more have entered the space slowly, said Engemann, whose family started in the gravel business in 1978.
“We’re a stakeholder on the Missouri River,” said Engemann, who serves as co-chair of the Missouri River Action Committee. “And it’s our focus to grow the business on the Missouri River.”
Inland waterways transport more than 60 percent of U.S. grain exports. One 15-barge tow can carry 787,500 bushels, the equivalent of 200 rail cars and 870 large semis. MFA began using the river again in 2014 after a 10-year hiatus due to the same factors that forced ASB to buy a boat.
There are benefits of moving grain or fertilizer by barge, said Dawson. Typically, it’s cheaper. Plus, it reduces truck congestion, uses less overall fuel and emits less carbon dioxide, according to a study by the National Waterways Foundation.
“One big advantage is you’re selling to the world out of your local area,” Engemann said. “The Missouri River is a world highway, and farmers are competing in the world market. It gives them the opportunity to ship or sell their grain globally.”
The decision to move by barge is typically an easy one to a certain degree, Williams explained. When storage is full, MFA locations near the river need to move grain in large volumes. It becomes more complicated when it’s time to calculate freight costs.
“Barge freight is very liquid,” he said. “It’s constantly trading. For instance, if there aren’t any buyers, the price reflects that almost immediately. Whereas, if no one is moving rail cars on a specific line, the price is infinitely slower to react.”
Even loads with direct routes via train may still end up on a barge because the liquidity of the market may make it cheaper and more efficient to do so, Williams added.
“Right now, barge rates are traded in St. Louis as percent of tariff,” he said. “These tariffs were published over 100 years ago and haven’t changed. So, for example, right now if you’re trading in St. Louis, the tariff is $3.99 per ton for every 100 percent. So if something is trading at 375 percent of tariff, you take 3.75 multiplied by that number. So 3.75 times $3.99 means that barge freight is going for about $15 a ton in St. Louis.”
Most barges can hold around 2,100 tons of grain. Multiply that by $15 a ton, and barges were going for $31,500 on that given day. Those 2,100 tons equate to a roughly a 12-foot draft, which corresponds to the depth of the river. Thus lies one major issue with Missouri River transport. Some years, the river is shallow.
“The Corps of Engineers is required to keep a navigable channel at 8 foot, 6 inches,” Williams said. “Six inches in a barge is a difference of 110 tons. That barge is $31,500 whether we fill it or not. That’s 110 tons we either pay dead freight on or don’t. On something like a rake barge, which fills to a 12-foot draft, that could be more like 500 or 600 tons of dead freight if water levels are low. If we load 200 barges a year, that’s 100,000 tons of dead freight. In years when the river is shallow, it can become pretty inefficient.”
And efficiency and speed are the driving forces changing the industry, Bonderer said. “Grain handlers have put a lot into their facilities, and we are all getting more grain in from farmers. It’s forced us to deal with it faster. Through that process, we also have to make it more efficient.”
Last year, partially with the help of a Missouri Department of Transportation grant, ASB improved its river facility to increase both speed and efficiency. A new loading spout, conveyors and operations room were installed. Over the last couple of years, ASB has been utilizing more winches and installed new bins next to the river for additional working storage. It took a year of careful planning to determine optimal times to complete the work.
“Yearly, we probably bring in 100-120 barges of fertilizer,” Bonderer said. “We’ll clean them out and ship out about the same number. It previously took us seven or eight hours and several employees to load a barge with grain. Now we can do it in two and a half hours with a couple of people.”
It’s an interesting perspective rolling down the river, pushing barges through hilly terrain of rural Missouri on this winding, ancient waterway that bisects the state. Belza, who began working on the Mary Lynn in 2010, has roughly 30 years of experience, including running big tows on the lower Mississippi from Cairo, Ill., to New Orleans. He said the Missouri is similar to the lower Mississippi, but on a smaller scale—free-flowing, free of any locks or dams, and free of man’s control.
“Everything is kind of in slow motion here,” Belza said. “There’s a lot of weight on there, especially with nine barges. But look at where my office is. We’ve basically got this whole river to ourselves. People pay money for this kind of view.”
When dealing with the efficiencies of volume, rail is the next best bet to the river, which is subject to seasons and weather events and limited to a few of MFA’s facilities.
“Rail is becoming fewer and fewer shippers with 25 cars and under,” Dawson said. “Not many destinations are set up to handle those anymore. The end users have realized that to be cost-effective, the best structure is these big 100-car shuttles like we handle at Hamilton.”
Despite that trend, MFA still uses entities such as the Kansas City Southern, the Norfolk Southern, the Canadian Pacific, and the Missouri and Northern Arkansas railroads that serve more local destinations. The poultry industry in southwest Missouri, northwest Arkansas and eastern Oklahoma is one such market. Other short-run lines may service MFA’s own feed mills.
“No one year is the same as the next,” Dawson said. “There have been times when some of our facilities on the Missouri and Northern Arkansas line, which has an agreement with Union Pacific, will send wheat all the way into Mexico on these smaller trains. So, there’s a lot of different ways on a yearly basis where the cost of freight or abnormal demand may allow us to ship in smaller volumes.”
MFA owns or partially owns 15 rail facilities in total, most of which handle 25 cars or less. The lion’s share was acquired through acquisitions over time. Prior to the large, shuttle-loaders that opened over the last couple of years in Hamilton, Mo., and Central Missouri AGRIService in Marshall, Mo., the last rail facility MFA built was in Vandalia, Mo., in the early 2000s.
“At the time when these older facilities were built, 25 cars was the largest capacity you were going to use,” Dawson said. “But the market has expanded and changed to these larger shippers, and we recognized that we had to get into that game.”
Trucking is the most known form of transportation, Dawson said. “You can always put something on a truck and haul it, and in a lot of ways, it fills in the gaps. It’s how MFA is able to move grain from location to location or to nearby rail and barge facilities.”
But in some ways, Dawson admitted, whether to choose truck transportation becomes a much harder question.
“You have to consider the balance of owning your own trucks versus going out and finding private entities to haul your grain,” he said. “If you own your own fleet, it’s typically not just for grain, but also for hauling fertilizer. It doesn’t make sense solely from the grain side to take on the front-end cost exposure of buying the equipment, amortizing it over time and hiring full-time drivers.”
Currently, MFA uses private operators for a majority of its grain trucking, explained Todd Rauch, MFA manager of dry fertilizer and grain trucking logistics.
“We have 786 contracted carriers that we can work with,” Rauch said. “Some are brokers, some are individuals, some have five or six trucks. We also have 88 hoppers owned by our locations that are used for both hauling fertilizer and grain.”
Though there are still primary seasons for moving grain and fertilizer, those seasons seem to be expanding. Typically, when an MFA location needs to move some of its grain, the staff will call MFA’s Grain Division to check rates. Dawson, Francis or Williams will give them a breakdown of freight rates based on access. If they need to move something by truck, Rauch will post those loads on a website where truck drivers can then call in and pick up those jobs. Like barges, if a truck goes to a location with fertilizer, it may be cleaned out and loaded with grain to avoid “deadheading,” or driving with an empty trailer.
“What managers need to know from us is the value of their grain, when their best sales are, and what they need to move based on their facility’s capacity,” Dawson said. “Then they can determine when and how they balance that with the demand to sell. It’s a three-way interaction. The freight department, grain department and location all share information and work together to make sure everybody stays on the same path.”
While trucking is a perennial staple in MFA’s transportation lineup, rail and river routes both require investments for the future, Dawson said.
“The Hamilton shuttle facility was a long-term play in logistics,” he said. “That gave us an opportunity by rail to hit markets we typically couldn’t get. We had to plan forward for what we believe is going to be the marketplace in the future.
Whether it’s Mexico, Arizona or California, those are all markets we wanted to reach in the long term. The only way to get there is to be cost-efficient with these large shuttle facilities.”
MFA’s barge facilities may be next on the list for improvement. With some facilities nearing 40-plus years old, MFA is looking to increase efficiency in many of the same ways ASB did.
“At some point, we would like to upgrade our river facilities,” Dawson said. “We feel the river is a long-term marketplace we need to be in.”
The MFA river terminal at Glasgow Agri Services, for example, typically loads 16 barges annually, but General Manager Mike Watring believes that number can be more than doubled if improvements are made. Proposed upgrades such as electric-powered winches, new mooring dolphins and conveyor upgrades will help give the Glasgow facility a competitive advantage in price and speed, Watring said.
“We anticipate improvements here could reduce our load time by one hour to an hour and a half,” he said. “In the middle of harvest season, that will make a big difference.”
With harvest coming to a close after a drought-challenged growing season, many farmers in MFA territory are facing low prices combined with low yields and uncertainty in the export market. In light of trade disputes such as recent increased tariffs on exports to China, it becomes particularly important to know what’s happening in the worldwide logistics chain. Williams said he thinks it’s likely some U.S. beans will still make their way into China. The question is just what route they will take.
With this perfect storm of unfavorable factors, price potential and decisions to sell or store are even more important.
“It’s uncertain times like these when we have to make decisions on the fly,” Dawson said. “But grain is always logistics. Are we 100 percent right all the time? No, but we hope we’re better than 50 or 60 percent. Those are just some of the opportunities and risks that we have to take so we can profitably move grain for our customers and make more space, because the more grain we can take, the more efficient we can become at running it through our facilities.”
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