And now a little break from your usual Fed and Jobs Week programming…
Ukraine Grain shipments have resumedbecause the US Midwest is tackle the droughtIt made part of the Mississippi River too shallow The normal pace of barge traffic to export grain from the Illinois breadbasket to the Gulf Coast.
River barge spot rates have surged to their highest levels in decades, according to a Goldman Sachs memo.
Also, grain prices (corn, soybeans, wheat) are relatively lower in the interior than in the Gulf.
this is one of several Events that add unexpected friction to exports of certain US commodities this year.
Goldman Sachs argues that the drought probably won’t have a lasting impact on global demand for grains in the United States. buyers no longer need to look for new sources of supply. Second, the drought also affected grain supplies, so the backup of the Mississippi Congestion of container ships It’s been happening regularly outside major U.S. ports this year.
None of this sounds particularly good news for global food prices!
bread As shown in the chart above, hard winter wheat is cheap to buy.
Unfortunately, the drought on the Mississippi could also slow the export of thermal coal, another important commodity from Illinois to the Gulf Coast. Thermal coal exported from Illinois is primarily used for heating in Europe.
This accounts for 0.6% of total seaborne coal exports and is expected to have a limited impact. API2, the European benchmark for thermal coal, actually fell $19 to $239/ton last week. This dynamic is also seen in the still wide $140 spread between API2 and Newcastle coal prices. . . if the turmoil continues, there may be a slight reroute to the domestic market, but it is still too early to observe. Domestic markets should also be largely unaffected, as only two plants receive coal by barge and both have alternatives to rail delivery.
Fortunately, Europe’s coal reserves have not yet been drawn much. unusually warm autumnBut hopefully the Midwest will get some much-needed rain before the Eurozone starts to get cold.
https://www.ft.com/content/388e88b2-9de1-4628-8654-33a817742969 Mississippi Drought Blues | Financial Times