Wednesday, August 11, 2010

It was a tough year for many wheat growers in Ohio and the United States with poor weather and disease problems. Many were questioning whether to even plant wheat this fall. But then, news of a drought in Russia began to spread. In response, the per-bushel wheat price exploded.

“Prices were skyrocketing as old crop wheat prices climbed over three dollars in less than a month,” said Doug Tenney, an economist for Leist Mercantile in Circleville. “Russia has been ravaged by a summer drought that is drastically affecting wheat yields for this year’s crop. Last year they exported 18 million tons. Traders during mid-July pulled that number back to 11 million tons. The Russian weather was a big reason for the higher prices. In early August, Russia suddenly announced wheat exports would be suspended for the rest of 2010. The market responded by skyrocketing even higher, closing up the sixty-cent limit. Then the very next day wheat prices were down the sixty-cent limit as Russia revealed they would be honoring their export commitments if supplies were available.”

Even after the prices dropped, they were still much stronger than they had been and the high prices renewed farmers’ interest in planting wheat this fall.

“While seed wheat supplies are tight and dwindling with time, it appears wheat is now back into the picture for many producers,” Tenney said.

Today, Ohio agriculture is more globally interconnected than ever before. Buying trends in China, the whims of Indian consumers or a drought in Russia can have a tremendous impact on the crop field just around the bend. We live in an increasingly small world, but why is that?

A big part of the reason, particularly in Ohio, is the modern transportation systems that allow farmers to produce grain and efficiently move it anywhere in the world. Without the ability to get their crops to the consumers (whether in Columbus or Calcutta), crops are not worth much. Ohio is blessed to be at the center of the world’s transportation hub with a Great Lake, numerous interstate highways and railroads and a mighty river running along its southern border that connects the state’s agriculture and manufacturing with the world.

At Cincinnati, the Ohio River picks up a tremendous amount of agriculture shipping from the rich farm fields of southwest Ohio and southeast Indiana.

“A lot of grain funnels down into these facilities on the Ohio River,” said Scott Thibaut, facility manager for Consolidated Grain and Barge Co. in Cincinnati.

According to the Army Corps of Engineers, the Cincinnati market will ship around 30 million to 32 million bushels of corn and 18 to 20 million bushels of soybeans in a year. The corn, soybeans and wheat that leave facilities on the river are hauled in 220-foot-long barges that are pulled by towboats. A truck can haul 1,000 bushels, a rail car can haul 3,500 bushels and a barge can haul 55,000 bushels of grain. As the grain moves down through the Mississippi River, as many as 45 barges can be hooked to one tow for hauling nearly 2.5 million bushels in one trip. This provides extremely efficient shipping of farm and manufacturing products from the U.S.

Unfortunately, the efficiency of U.S. river shipping has been suffering recently due to the aging system of locks and dams that were built 50 to 60 years ago, or longer. Bigger ships, older systems and increased traffic are slowing down shipping and creating a massive problem that will need to be addressed in the near future.

“We can keep putting Band-Aids on these problems, but eventually we’re going to have to fix them,” Thibaut said. “Grain transportation does not always get the attention because it is still working so well. But one day, it is going to stop working and we will have big problems in agriculture and Ohio commerce as a whole. Just think of what that means for the economy of this state. If we start seeing problems further down the Mississippi River, it will affect the economies of many states.”

The undertaking of upgrading the locks and dams will be very costly and very challenging, but vitally important. U.S. agriculture has been a crucial component of the economy, the environment and the food supply in today’s ever shrinking world. The farmers of this country can continue to produce enough to accomplish this goal, but a world supply of grain is worthless if we can’t get it to the world.

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