WJ Editorial

Tariffs Bite At End Of Better Year For Barging

The barge business is used to uncertainty, and this year featured plenty of uncertainty. It started out with rates in last year’s doldrums. But for most of this year, barge rates have stayed above their one- and three-year averages.

With the opening of Olmsted Locks and Dam earlier this year, and the passage of a number of important waterways bills in Congress, the barging industry has been on a (modest) roll. The continuing oil and gas boom due to fracking boosted liquids carriers; Kirby Corporation’s latest earnings report saw equipment utilization back in the 90 percent range. Corn movements are up, and coal export movements have continued to improve.

America is poised to become the world’s largest exporter of oil and gas in the near future. Thanks to surging revenues from oil and gas, the state of Texas may be in a position to fund some of the necessary export infrastructure itself.

Then there’s grain. After a great deal of uncertainty and back-and-forth regarding tariffs, the Trump administration finally imposed a series of tariffs on Chinese imports to which the Chinese responded with tariffs on American goods, with soybeans being the most important targeted commodity. Barge movements were not immediately affected, as “front-loading” of contracts before the tariffs took effect and shifting of destinations for soybeans saw a temporary surge of movements.

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But through October, according to USDA data, American soy shipments to China have declined by 94 percent. News stories are reporting stuffed bins and soybeans being stored in open piles subject to rotting.

According to farm publication AgFax, November was the month that tariffs finally began to drag down barge rates. As of November 3, year-to-date grain barge tonnages on the locking portions of the Mississippi, Ohio and Arkansas rivers were 31.7 million tons, down 7 percent from last year. The AgFax weekly newsletter noted that “significantly reduced demand from China and poor navigation conditions have contributed to the reduction in the volumes of barged grain. Year-to-date (YTD) corn barge shipments were up 5 percent compared to last year. However, this was not enough to offset the 20 percent decline in YTD soybean shipments, resulting in lower overall demand for barge services.”

Farmers have until March to decide how they will plant next year. At this point, no one knows whether or how the tariff issue will be resolved, but it would be wishful thinking not to take into account the possibility that the dispute will stretch out. It’s safe to say that the ag tariff situation and America’s continuing oil and gas boom are the two factors most affecting barging’s future direction.