Dry Edible Beans
Well guys and gals, its been a quiet and looooong winter, and it also looks like its going to be a slooooow spring thus far. Cooler weather all across North America has been the main story this season influencing business in every sector of the economy. With regards to dry edible beans, the weather has affected processors sufficiently the past 12 or so weeks. Everything from not being able to process beans because of cold temperatures, to bad road conditions, and we know the railroads have been a source of complaint from everyone in Ag across every commodity from dry edible beans to rice, corn, and wheat.
A few weeks ago Warren Buffet was on CNBC squawk box downplaying the rail problems this season with regards to big oil transportation. He was quiet on grain transportation, and I think Becky Quick who is Warren’s favorite journalist didn’t press him on agriculture freight disruptions this season. Speaking to several contacts throughout the country about rail transportation service this season, I’ve mostly heard the same story “there isn’t enough rail cars available”, and although this does happen to be the case in some parts of North America for processors and elevators; there is more to the story than just that.
Roughly 70% of the type of rail oil tankers responsible for moving crude oil is the DOT-111 tanker, it carries on average 30,000 gallons. In 2009 there was just over 10,000 oil tankers transporting oil on US railways, 2014 projections are about 400,000 loads. But what do oil tankers have to do with box or hopper cars? Beans and grains are not transported in tankers, so how can there be a shortage in rail cars?
The truth is, a shortage of locomotives exists in the United States because the rail companies were not ready for the exponential increase in production/demand from the oil sector. Functioning locomotives are being diverted to haul crude versus loading hoppers and boxcars filled with agricultural products. In truth, there are plenty of hoppers and boxcars in service to continue keeping dry edible beans and other grains steady to market. Growers, processors, and rail companies are used to dealing with bad weather and equipment problems, all those issues are normal to everyone each season, but what isn’t normal is the recent explosion in growth for US oil transport, which affects other rail customers in agriculture.
Understanding this locomotive shortage principle, peppering in a long hard winter, process-able bean conditions, unfavorable roads, and a tight bean market; what you get is a log-jam to put it delicately. Dry bean markets have been shaking and baking along with all this fun in volatility. The colored varieties really picked up value, most notably Great Northern’s, Peas (Navy), Small Reds, Red & LR Kidneys. Blacks have been steadily strong for most of the season, but pinto on the other hand has seen continuous declines since the price spike back in early August for what turned out to be for no reason. Pinto prices have been taken to the woodshed all season and activity has been flat for the past several months.
What everyone is gearing up for is Spring 2014, which now is looking a bit complex with mother nature still wanting to display her wardrobe of long winter coats, furry hats, gloves, and leather knee-high boots for the snow lingering around. These very cold and much higher next day temperatures will give the ground much-needed moisture that growers won’t mind as long as it doesn’t become too muddy where it impedes getting into the fields for work. On Monday the USDA will release planting intentions giving the market its first look at what to expect in terms of acreage allocation. Most markets are in consolidation mode this week as everyone waits for Monday’s acreage report, if numbers are to the bearish side of things then corn, wheat, and soybean market participants can expect a bit of volatility price action from current trading levels. Depending on which way the acreage numbers go, the ripple effect will reach the dry edible bean market shortly afterwards and we will be able to continue seeing price action in most varieties develop. This year’s dry bean carryover is tight as most already understand in certain varieties; hence the colored values continue remaining strong and price expectations reflect it week to week by the USDA.
Bottom Line: Find out which companies produce locomotive parts for all the major rails and diversify a percentage of your portfolio to those manufacturing companies based on your risk tolerance… I’ll bet Warren a soda pop he’s positioned already!