Luck, Planning Help Growers Cope with Closureby Matthew Weaver
Capital Press, September 2, 2010
Grain, potato growers prepare for disruption of Columbia-Snake transportation system
While lock maintenance on the Columbia and Snake rivers will force some growers transporting crops to Portland's port to switch from barges to truck and rail, industry representatives say planning -- and a little luck -- have combined to make the closures less of a burden.
"The reality is we've lost one mode of transportation," Pendleton Grain Growers grain marketer and broker Bryce Olson said. "You just want to make sure whoever you're selling to has a plan for that time period or the storage to carry it to a later date."
While some cooperatives rely on barges, his also ships via rail, so the loss of the river isn't a big deal, he said.
About 75 percent of the soft white wheat and club wheat grown in the Pacific Northwest is shipped by barge down the Snake and Columbia rivers and 25 percent moves by rail, said Tana Simpson, acting administrator of the Oregon Wheat Commission. About 85 percent of the hard red wheat and 95 percent hard red spring wheat already moves by rail, she said.
For three months this winter, the U.S. Army Corps of Engineers is closing three locks to replace the huge gates that allow barges to pass around The Dalles and John Day dams on the Columbia River and the Lower Monumental dam on the Snake River. Three other locks, at the McNary, Ice Harbor and Little Goose dams, will be inspected or repaired during the closure.
The locks allow the massive barges that carry crops downstream and fuel and supplies upstream to bypass the hydroelectric dams on the rivers.
Executives at Tidewater Barge Lines -- the barge company that operates on the rivers -- expect much of the grain to move downriver before the Dec. 10 lock closure.
The company has 62 grain barges and eight petroleum barges. Tidewater's largest grain barges hold 3,600 tons, with smaller barges holding 2,800 tons. Its petroleum barges hold 3,000 to 6,000 tons, said Greg Lines, the company's manager of business development for grain and wood products.
Ironically, the luck for the wheat industry came in the form of a Russian drought and a weak U.S. economy.
Farmers had been facing $4 a bushel prices as this year's harvest approached, but a drought and the short wheat crop in Russia prompted that country to suspend its wheat exports. As a result, prices jumped in July -- more than during any month in decades -- to around $7 a bushel before leveling off in August.
Instead of a break-even price, farmers were looking at a healthy profit as world export market shuffled supplies to fill the gap left by Russia. That in turn allowed them to absorb the additional cost of shipping by rail or truck instead of by barge.
The higher prices will also spur more farmers to sell their wheat immediately and send it downriver to the Port of Portland ahead of the lock closure.
If prices had been lower, farmer Randy Suess said, there probably wouldn't have been as much wheat moving in the marketplace. He expects farmers to sell at current prices, noting that they aren't typically this high during harvest.
"I think it couldn't have come at a better time, when we do have this river closure staring us in the face," said Suess, a member of the Washington Grain Commission and vice chairman of U.S. Wheat Associates. "Maybe it's not going to be as bad as we thought it was going to be."
An outsized Willamette Valley wheat crop has also given exporters added volume to fill large overseas orders during this winter's barge stoppage. Facing dismal grass seed prices and a monumental carryover of the previous year's grass seed crop -- a result of the housing market crash and the struggling U.S. economy -- valley farmers nearly doubled the number of acres planted to wheat this year, to an estimated 180,000 acres.
"I think we've got a little bit bigger crop than we've had in the last couple years, so we're looking at a little bit more wheat available," the Oregon Wheat Commission's Simpson said. "I think that's making it a little bit easier to handle something that would have probably been very difficult."
Another major concern for farmers is the higher cost of supplies usually shipped upriver by barge.
Washington Grain Commission member Curtis Hennings is most concerned about possible price increases on fuel and fertilizer. Some fertilizer is shipped by barge.
"When you take that competitive component out of things, I'm concerned we're going to see more of a spike" in fertilizer costs, he said. "I'm a farmer, I don't like to see any of my inputs go up."
One company could benefit from the river closure.
Jeff Kaser, general manager of Mid Columbia Producers in Moro, Ore., said his company has a facility that will be open at The Dalles for loading barges. That lock is the farthest downstream to be slated for a long-term closure. The only other work farther downstream is a short-term closure at Bonneville dam.
Because of that, The Dalles lock closure's impact will be minimal, he said. His company will truck wheat from the company's other facility 20 miles upstream to The Dalles to be loaded onto barges.
Kaser doesn't expect shipments to be much different during the closure than they would be under normal circumstances. He's not expecting more grain because other companies upstream have come up with solutions like truck or rail shipments during the closure, he said.
Kaser's company also built extra storage in The Dalles, adding two 560,000-bushel grain bins to improve segregation, storage and marketing opportunities. The river closure was a factor in the decision to add storage, he said.
Expecting an increased amount of grain, Pendleton Grain Growers opened up both of its ground piles around Hermiston, Ore., each capable of holding 2.5 million bushels. PGG's Olson did not attribute this expansion to the closure.
Chris Voigt, executive director of the Washington State Potato Commission, said his industry is concerned about a lack of availability of trucks and rail during the closure. Potatoes primarily use those modes of transportation, which could become scarce if wheat shipments suddenly shift from barges, he said.
"If all of a sudden we had to take all of that wheat traffic off the river and put it into rail cars or trucks, it would be nearly impossible to try and find trucks or truck drivers to be able to haul our potatoes anywhere," he said. "They literally would exhaust the entire supply of any available truck or rail car out there."
Potatoes use a different type of rail car than grain, Voigt said, but the commodities would compete for space on the track.
Between the advance notice and the grain industry's preparation work to contact customers, Voigt hopes any issue will be resolved during the closure to minimize any potential impact on the potato industry.
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