Prospects for Untangling Rail and River Bottlenecks Here and Abroad

Transcription

1 Prospects for Untangling Rail and River Bottlenecks Here and Abroad Strategies for Ag's Super Cycles: Reassess Your Strengths, Weaknesses, Opportunities and Threats Ken Eriksen Senior Vice December 9, 214

2 Charting the Course Overall Transportation Situation Rail Barge Long Term Considerations 2

3 Overall Transportation Situation 3

4 Crop Production (million metric tons) Bigger Crops... Something to Move 7 6 Canada United States U.S. and Canada Crop Production Crop Year 4

5 Sep-85 Jul-86 May-87 Mar-88 Jan-89 Nov-89 Sep-9 Jul-91 May-92 Mar-93 Jan-94 Nov-94 Sep-95 Jul-96 May-97 Mar-98 Jan-99 Nov-99 Sep- Jul-1 May-2 Mar-3 Jan-4 Nov-4 Sep-5 Jul-6 May-7 Mar-8 Jan-9 Nov-9 Sep-1 Jul-11 May-12 Mar-13 Jan-14 Nov-14 Million Bushels Sep-85 Jul-86 May-87 Mar-88 Jan-89 Nov-89 Sep-9 Jul-91 May-92 Mar-93 Jan-94 Nov-94 Sep-95 Jul-96 May-97 Mar-98 Jan-99 Nov-99 Sep- Jul-1 May-2 Mar-3 Jan-4 Nov-4 Sep-5 Jul-6 May-7 Mar-8 Jan-9 Nov-9 Sep-1 Jul-11 May-12 Mar-13 Jan-14 Nov-14 Sep-85 Jul-86 May-87 Mar-88 Jan-89 Nov-89 Sep-9 Jul-91 May-92 Mar-93 Jan-94 Nov-94 Sep-95 Jul-96 May-97 Mar-98 Jan-99 Nov-99 Sep- Jul-1 May-2 Mar-3 Jan-4 Nov-4 Sep-5 Jul-6 May-7 Mar-8 Jan-9 Nov-9 Sep-1 Jul-11 May-12 Mar-13 Jan-14 Nov-14 Million Bushels Million Bushels Bigger Crops... Someplace to Go An October to Remember Record Monthly Grain and Soybean Export Inspections 6 5 U.S. Grain and Soybean Export Inspections 35 U.S. Grain and Soybean Export Inspections through Center Gulf Month 5 16 U.S. Grain and Soybean Export Inspections through Pacific Northwest Month Month 5

6 Jan-9 Jul-9 Jan-91 Jul-91 Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan- Jul- Jan-1 Jul-1 Jan-2 Jul-2 Jan-3 Jul-3 Jan-4 Jul-4 Jan-5 Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-9 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Freight Index 2=1 Real GDP ($ billion) Closing Index Value U.S. Freight Movements at All Time High Wall Street Pleased And this with a subdued economy. Volumes speak volumes and tightens capacity, something shareholders and Wall Street finds attractive. Freight Transportation Services Index and Real GDP ($ billion) Real GDP 18, 16, 14, 12, 1, 9, 8, 7, 6, Dow Jones Transport Index 1 8 Freight Index 1, 8, 5, 4, 6 6, 3, 4 4, 2, 2 2, 1, Month Daily 6

7 Rail Situation and Outlook 7

8 4-Jan 11-Jan 18-Jan 25-Jan 1-Feb 8-Feb 15-Feb 22-Feb 1-Mar 8-Mar 15-Mar 22-Mar 29-Mar 5-Apr 12-Apr 19-Apr 26-Apr 3-May 1-May 17-May 24-May 31-May 7-Jun 14-Jun 21-Jun 28-Jun 5-Jul 12-Jul 19-Jul 26-Jul 2-Aug 9-Aug 16-Aug 23-Aug 3-Aug 6-Sep 13-Sep 2-Sep 27-Sep 4-Oct 11-Oct 18-Oct 25-Oct 1-Nov 8-Nov 15-Nov 22-Nov 29-Nov 6-Dec 13-Dec 2-Dec 27-Dec 4-Jan 11-Jan 18-Jan 25-Jan 1-Feb 8-Feb 15-Feb 22-Feb 1-Mar 8-Mar 15-Mar 22-Mar 29-Mar 5-Apr 12-Apr 19-Apr 26-Apr 3-May 1-May 17-May 24-May 31-May 7-Jun 14-Jun 21-Jun 28-Jun 5-Jul 12-Jul 19-Jul 26-Jul 2-Aug 9-Aug 16-Aug 23-Aug 3-Aug 6-Sep 13-Sep 2-Sep 27-Sep 4-Oct 11-Oct 18-Oct 25-Oct 1-Nov 8-Nov 15-Nov 22-Nov 29-Nov 6-Dec 13-Dec 2-Dec 27-Dec Carloadings Carloadings Rail Commodity Mix Energy renaissance needs flexibility and available networks. U.S. Class I Petroleum Carloadings U.S. Class I Carloads Plus Intermodal 18, , , 14, 55, 12, 1, 5, 8, 6, 45, 4, 2, 4, 35, Week Week 8

9 Key U.S. Shale Basin Activity and Refinery Infrastructure 1.2 million barrels = 1,714 tank cars or 15 unit trains/day 4 5 thousand tons sand/well = 8 unit trains to Bakken 9

10 4-Jan 11-Jan 18-Jan 25-Jan 1-Feb 8-Feb 15-Feb 22-Feb 1-Mar 8-Mar 15-Mar 22-Mar 29-Mar 5-Apr 12-Apr 19-Apr 26-Apr 3-May 1-May 17-May 24-May 31-May 7-Jun 14-Jun 21-Jun 28-Jun 5-Jul 12-Jul 19-Jul 26-Jul 2-Aug 9-Aug 16-Aug 23-Aug 3-Aug 6-Sep 13-Sep 2-Sep 27-Sep 4-Oct 11-Oct 18-Oct 25-Oct 1-Nov 8-Nov 15-Nov 22-Nov 29-Nov 6-Dec 13-Dec 2-Dec 27-Dec 4-Jan 11-Jan 18-Jan 25-Jan 1-Feb 8-Feb 15-Feb 22-Feb 1-Mar 8-Mar 15-Mar 22-Mar 29-Mar 5-Apr 12-Apr 19-Apr 26-Apr 3-May 1-May 17-May 24-May 31-May 7-Jun 14-Jun 21-Jun 28-Jun 5-Jul 12-Jul 19-Jul 26-Jul 2-Aug 9-Aug 16-Aug 23-Aug 3-Aug 6-Sep 13-Sep 2-Sep 27-Sep 4-Oct 11-Oct 18-Oct 25-Oct 1-Nov 8-Nov 15-Nov 22-Nov 29-Nov 6-Dec 13-Dec 2-Dec 27-Dec Miles Per Hour Miles Per Hour Key Rail Metrics Not Keeping Pace Train speeds running three mph behind, not finding momentum U.S. Weekly Average Train Speed 3-Yr. Ave U.S. Weekly Average Grain Train Speed 3-Yr. Ave Source: American Association of Railroads Week Ending Source: American Association of Railroads Week Ending 1

11 # of Cars Miles Per Hour Surface Transportation Board Submission Requirements Cars on Line and Train Speed Vary by Railroad, Car Type and Commodity Total Number of Cars Online by Car Type as of Dec. 3, 214 Average Train Speeds by Train Type as of Dec. 3, 214 3, 35 Intermodal Grain Coal Automotive Crude Oil Ethanol Manifest All Other 25, 2, 15, 1, Multilevel Intermodal Gondola Box Other Open Hopper Tank Covered Hopper , 5 CN KCS BNSF CP CSX NS UP CN KCS BNSF CP CSX NS UP 11

12 Rail Cars Hours Surface Transportation Board Submission Requirements North Dakota and Nebraska Backed Up, Grain Dominates Terminal Dwell Tim Outstanding Grain Car Orders by State and Class I as of Dec. 3, 214 Average Terminal Dwell Time by Train Type as of Dec. 3, 214 6, 7 Grain Coal Automotive Crude Oil Ethanol All other 5, 6 4, 3, 2, 1, KCS UP CP BNSF NS CN CSX ND NE MT IL MN KS ID SD OH OK All Other States 1 CN KCS BNSF CP CSX NS UP 12

13 Inland Barge Situation and Outlook 13

14 6-Sep 13-Sep 2-Sep 27-Sep 4-Oct 11-Oct 18-Oct 25-Oct 1-Nov 8-Nov 15-Nov 22-Nov 29-Nov 6-Dec 13-Dec 2-Dec 27-Dec 3-Jan 1-Jan 17-Jan 24-Jan 31-Jan 7-Feb 14-Feb 21-Feb 28-Feb 7-Mar 14-Mar 21-Mar 28-Mar 4-Apr 11-Apr 18-Apr 25-Apr 2-May 9-May 16-May 23-May 3-May 6-Jun 13-Jun 2-Jun 27-Jun 4-Jul 11-Jul 18-Jul 25-Jul 1-Aug 8-Aug 15-Aug 22-Aug 29-Aug 1, Tons 6-Sep 13-Sep 2-Sep 27-Sep 4-Oct 11-Oct 18-Oct 25-Oct 1-Nov 8-Nov 15-Nov 22-Nov 29-Nov 6-Dec 13-Dec 2-Dec 27-Dec 3-Jan 1-Jan 17-Jan 24-Jan 31-Jan 7-Feb 14-Feb 21-Feb 28-Feb 7-Mar 14-Mar 21-Mar 28-Mar 4-Apr 11-Apr 18-Apr 25-Apr 2-May 9-May 16-May 23-May 3-May 6-Jun 13-Jun 2-Jun 27-Jun 4-Jul 11-Jul 18-Jul 25-Jul 1-Aug 8-Aug 15-Aug 22-Aug 29-Aug 6-Sep 13-Sep 2-Sep 27-Sep 4-Oct 11-Oct 18-Oct 25-Oct 1-Nov 8-Nov 15-Nov 22-Nov 29-Nov 6-Dec 13-Dec 2-Dec 27-Dec 3-Jan 1-Jan 17-Jan 24-Jan 31-Jan 7-Feb 14-Feb 21-Feb 28-Feb 7-Mar 14-Mar 21-Mar 28-Mar 4-Apr 11-Apr 18-Apr 25-Apr 2-May 9-May 16-May 23-May 3-May 6-Jun 13-Jun 2-Jun 27-Jun 4-Jul 11-Jul 18-Jul 25-Jul 1-Aug 8-Aug 15-Aug 22-Aug 29-Aug 1, Tons 1, Tons Grain Barge Lockings Multi-Year High Something to be Moved, Someplace to Go Weekly Grain Barge Movements through Key Locks and Dam Weekly Corn Barge Movements through Key Locks and Dam 1,4 212/ / /215 5-Yr. Ave / / /215 5-Yr. Ave. 1,2 7 1, SOURCE: Army Corps of Engineers Week Ending SOURCE: Army Corps of Engineers Week Ending Weekly Soybean Barge Movements through Key Locks and Dam 9 212/ / /215 5-Yr. Ave SOURCE: Army Corps of Engineers Week Ending 14

15 Share of Volume Shifting Barge Loading Patterns North to South; Upper to Lower 1% Total Grain and Soybean Barge Movements by River Segment 9% 24% 23% 8% Upper Mississippi River (MSP to Missouri River) Illinois Waterway 7% 6% 31% 5% 17% 15% Mid-Mississippi River (Missouri River to Ohio River) Ohio River 4% 13% 3% 19% 2% 1% 9% % 16% 24% Lower Mississippi River (Ohio River to Baton Rouge) McClellan-Kerr Arkansas River Baton Rouge to New Orleans New Orleans to Mouth of Passes Year 15

16 3-Sep 1-Sep 17-Sep 24-Sep 1-Oct 8-Oct 15-Oct 22-Oct 29-Oct 5-Nov 12-Nov 19-Nov 26-Nov 3-Dec 1-Dec 17-Dec 24-Dec 31-Dec 7-Jan 14-Jan 21-Jan 28-Jan 4-Feb 11-Feb 18-Feb 25-Feb 4-Mar 11-Mar 18-Mar 25-Mar 1-Apr 8-Apr 15-Apr 22-Apr 29-Apr 6-May 13-May 2-May 27-May 3-Jun 1-Jun 17-Jun 24-Jun 1-Jul 8-Jul 15-Jul 22-Jul 29-Jul 5-Aug 12-Aug 19-Aug 26-Aug Percent of Tariff Barge Freight Rates Remain Firm Illinois River Barge Freight Rate (percent of tariff) by Crop Year (Sep/Aug) Fcst 3-Yr. Ave. 1,2 1, Week 16

17 Index (1998 = 1) 12 1 Covered Barge Market Grain Reigns Covered Barge Utilization Tonnage Covered Barge Informa's Covered BPI Covered Barge Tonnage Composition Stone, Clay, Glass & Concrete Prod. 7% Chemicals & Allied Prod. 1% Other & Misc. 5% 8 6 Lumber, Wood, Pulp & Allied Prod. % 4 2 Nonmetallic Minerals, Except Fuel 8% Primary Metal Prod. 7% Farm Prod. 53% -2 Year Metallic Ores 6% Flour, Animal Feed & Gr. Prod. 4% 17

18 Index (1998 = 1) Tank Barge Fleet Rising Crude Volumes Black Gold Tank Barge Utilization Tonnage Tank Barge Informa's Barge Pressure Index Crude Petroleum 16% Tank Barge Tonnage Composition Petroleum & Coal Prod. 64% 8 6 Food & Farm Prod. 1% 4 2 Chemical Prod. 19% -2 Year 18

19 Average Miles Index (1998 = 1) Tank Barge Fleet Distance Matters! Tank Barge Tonmile Composition 14 Tank Barge Utilization on Tonmile Basis Tonnage Tank Barge Informa's Barge Pressure Index Crude Petroleum 9% Food & Farm Prod. 2% Petroleum & Coal Prod. 55% 6 4 Chemical Prod. 34% Year 8 7 Domestic Barge Traffic Average Miles Liquid Products Total Liquid Chemicals Crude Petroleum Petroleum Informa Economics, Inc., Barge Fleet Profile Year 19

20 Long Term Considerations 2

21 Funding Highway Needs Road Conditions 32% of major roads are in poor or mediocre condition 42% of major urban highways are congested Estimated cost to maintain at existing condition: $11 billion capital investment / year Estimated cost to improve highway conditions: $17 billion / year Total Federal, State and local spending on highway capital investments: $91 billion / year 21

22 Funding Bridge Needs Bridge Conditions 11% (one in nine) are structurally deficit 25% are functionally obsolete Average age is 42 years old 3% of bridges have exceeded their 5 year design life FHWA estimates costs to repair or replace deficient bridges $76 billion FHWA estimates in order to eliminate bridge backlog by 228, would require about $2.5 billion / year, current investment is $12.8 billion / year 22

23 Funding Highway Needs Over the past 1 years, Highway Trust Fund outlays have exceeded revenues by $52 billion dollars (typically from the General Fund) That gap is projected to reach $167 billion dollars over the next 1 years State Alternatives: Raise Taxes Raise state fuel tax at the pump (MD, WY, MA, VY, NH) or wholesale (PA) Dedicated sales taxes (VA, AK) Issue Public Bonds Repaid on toll revenues (OH, MA) Long-Term Loans Transportation Infrastructure Finance and Innovation Act (TIFIA) Requirements: Total cost > $5 million (bundle projects) >25 million in rural areas (rural areas are eligible for interest rates ½ those in urban areas) 23

24 Funding Inland Navigation Inland river navigation covers 12, miles, 2 locks 566 million tons of freight per year, $152 billion in value Inland Waterways Trust Fund: Generates about $85 million per year (2 cent fuel tax on barge operators) Estimated total capital investment needs over next 2 years: $18 billion or $9 million per year If Federal funding continues at existing levels, the 22 planned major construction and rehab projects will not be completed until 29 24

25 Long-Term Problem on the Rivers Army Corps of Engineers Project Completion Schedule for Select Locks Army Corps of Engineers Project Completion Schedule Major Rehabilitation Mel Price Upper Miss ILL WW Thomas O Brien L/D Army Corps of Engineers Project Completion Schedule New Construction LaGrange L/D 24 Upper Miss 12 Lock Addition L/D 22 Upper Miss 12 Lock Addition L/D 25 Upper Miss Dam LaGrange 12 Lock Addition Year L/D 25 Upper Miss 12 Lock Addition Kentucky Lock Addition Olmsted L/D Construction Year 25

26 Modal Developments beyond the Borders: Panama Canal Long Term Opportunity Dimension Current (ft) 3rd Lock (ft) Change Draft % Width % Length 1,. 1,4. 4% Ship Length , % Soybean Planted Acreage Impact 7 miles 26.7 mil. 111 miles 27.9 mil. 161 miles 49.6 mil. (two-thirds U.S.) 26

27 Million Metric Tons BRAZIL: About the Spout Sustained Export Grain Flows; More Spouts Coming On-Line 1 9 Monthly Brazilian Grain Export Capabilities Potential Throughput = 7. mmt Potential = 81.1 mmt Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 27

28 Sustainability Looks Different When Factoring Modal Conditions Million Gallons U.S. and Brazilian Soybean Production and Exports on Equalizing Both send about 6% of exports to China Each sends slightly varying volumes to different markets Total Fuel Consumed Transporting Soybeans and Soybean Products to Market Position by Mode Barge Brazil Modal Share becoming Comparable to U.S. Truck is the discrepancy Brazil hauling nearly 5 times further than U.S Rail Brazil Highly Dependent on Truck to Final Market Position Trucking in Brazil alone: Generates 75% of total ton-miles Consumes more than 9% of fuel burned 5 3. United States Brazil Argentina CO 2 Emissions Transporting Soybeans and Soybean Products to Market Position by Mode Truck Emits nearly 93% of all CO Barge Compared to the U.S., Brazil: Consumes 15% more fuel Emits 17% more CO 2 All together, one Panamax ship filled with soybeans from Brazil emits 3% more CO 2 Million Short Tons CO Rail.5 Truck. United States Brazil Argentina 28

29 Key Takeaways 29

30 Key Takeaways Global commodity demand strong, especially for agricultural commodities Greater efficiencies warranted throughout logistics chain North American commodity flows being challenged on broad commodity mix, new lanes of shipment and rapidly changing transport and logistics model U.S. transports changing structurally, and with it comes regulatory and oversight implications U.S. inland towboat and towing industry facing certain constraints Railroads investing, but will it be enough? Brazil being pulled into higher efficient modal options: waterways key to economic competitiveness and environmental stewardship 3

31 Action Items Addressing S.W.O.T. Conduct Global U.S. Grain Export Competitiveness Study Develop Grain Market Optimization Assessment Tool Evaluate Issues Rail rate spikes and service disruptions Lock and dam closures Facility expansion/contraction (new export terminals, shuttle facilities, etc.) Regional production impacts (drought or flood impacts) Government policy changes (truck weight limits, hours of service, etc.) Monitor Panama Canal Expansion Impacts Evaluate Long-Term Port Changes and Impacts to Agriculture 31

32 Prospects for Untangling Rail and River Bottlenecks Here and Abroad Strategies for Ag's Super Cycles: Reassess Your Strengths, Weaknesses, Opportunities and Threats Ken Eriksen Senior Vice December 9, 214