Newsroom

DeBruce Gavilon Completes Name ChangeErica Venancio posted on 1/25/2012

One year after Gavilon's acquisition of the DeBruce Companies, the integration of operations and branding is complete with all companies being under the Gavilon name.

Effective January 1, 2012, DeBruce Grain Inc. and its subsidiaries will merge with Gavilon's operating entities. All personnel and operations will remain the same under the Gavilon name, however all companies under the DeBruce banner will now also carry Gavilon in the title.

TEGMA Forms Rail Car Seals Task ForceErica Venancio posted on 1/25/2012

TEGMA serves as a vehicle to surface issues among our members. When certain issues in the industry arise, TEGMA first addresses them in the Issues Committee, and then when appropriate, forms Task Forces to address them specifically.

The Rail Car Seals task force was the result of discussions regarding railcar seals at the last TEGMA Issues Committee meeting. Members of the committee are:

• Jon Setterdahl, Farmers Cooperative Company (Chair)
• Shane Berrett, Gavilon Grain
• Joe Griffith, Bartlett Grain
• Dustin Buntrock, South Dakota Wheat Growers
• Greg Edelblute, Cereal Foods
• Darren Winiski, Union Pacific
• William Heileman, BNSF Railway

The committee has met via conference call in December and has another called planned prior to the Annual Meeting. Current issues being discussed in amongst the Task Force:

Cable Seals Difficult to Remove

Recent incidences across the US where shippers have received cars with heavy cable seals that require bolt cutters or other such devices to remove the seals. Such seals require extra resources and time, and most importantly reduces time for loading. However, industry standard plastic seals are too easily broken if present. 

Plastic Seals Failing to Stay Intact

Complaints have been received from receivers that the plastic seals are not arriving intact causing some receivers to reject cars.  It has been suggested that this is perhaps the reason that shippers have gone to the steel cable seals. The cost of changing to higher strength seals is almost 10 times as much. However, all agricultural carriers are required to have cable seals for claims purposes. 

Mexico Shipments

Reports that all cars going to Mexico have the top seals broken so that fumigation can be performed just prior to entering Mexico and cars are required to be sealed for security reasons prior to reentering the United States. The concern is that these actions are causing more cable seals to be arriving at shipper locations. Customs and Board Patrol is currently considering requiring returning cars to be sealed, but no such requirement is currently in place. 

Uniform Requirements Across All Carriers

All Class 1 carriers do not have the same requirements for cable seals making it impossible to comply with each carrier when the shipment is transferred between carriers. While uniformity would be desired, this may cause an overall tightening of the seal requirements. 

Receiver Burden

Placing cable seals on all shipments may also place a greater burden on receivers that must break these seals. Some may not have fall protection that would allow them to easily make the car ready to load as required. 

The Task Force is preparing a report on their current activities to provide to the Board of Directors at the Annual Meeting. The committee was also tasked with contacting other shippers and shuttle receivers to gain a wider perspective of the problem.

If you have any comments or concerns regarding the task force, or the current issues in discussion, please contact Abigail Hiles, abigail.hiles@tegma.org.

2011 Kansas Wheat Harvest Day 18 ReportErica Venancio posted on 7/6/2011

(Source: Grainnet.com)

This is Day 18 of the 2011 Kansas Wheat Harvest Reports, brought to you by the Kansas City Board of Trade, DeBruce Grain, the Kansas Grain and Feed Association, Kansas Association of Wheat Growers and the Kansas Wheat Commission.

According to the monthly Crop Report from Kansas Agriculture Statistics released Thursday, Kansas farmers will harvest 7.8 million acres of wheat this year.

With temperatures reaching 100 degrees for the second straight day, harvest is moving quickly through northern Kansas.

In more than three decades of farming, 2011 is the toughest year that KAWG Director Richard Kvasnicka, has ever seen.

His area of Logan County has been stricken by drought, with some areas receiving less than two inches of rainfall so far this year.

Kvasnicka has been harvesting wheat for three days; early on, the yield is better than what he expected, topping 30 bushels per acre.

However, Kvasnicka says that later-planted wheat is yielding poorly, from 15 to 25 bushels per acre.

Elevators in the area report test weights are good; 61 pounds per bushel for red wheat and 63 pounds per bushel for white wheat.

Protein averages about 13.

Larry Glenn, broker at Frontier Ag in Quinter, says half the area's wheat crop has been harvested in the last week, thanks to hot and dry harvesting conditions.

Test weights average 62 pounds per bushel and protein averages 12.5. Glenn says yields are more variable this year than normal because of the difference in planting dates.

Fields planted early are yielding around 40 to 45 bushels per acre, while fields planted later and immediate following a fall crop such as corn are yielding just 15 to 20 bushels per acre.

Glenn says farmers in Gove County should be finished with harvest in another 10 days.

Michael Jordan, KAWG director from the Beloit area, says harvest is about 90% done in Mitchell County.

Some fields were slow to ripen due to later emergence last fall and this spring - a problem that gets worse as harvest moves north.

Those same fields are lower in test weight and show signs of shriveled, non-ripe kernels.

In Mitchell County, the yield ranges from 30 to 70 bushels per acre, with a 45 to 55 bushel per acre average.

Harvest kicked into high gear in Smith County this week, according to Kandis Attwood at the Central Plains Co-op in Smith Center. Protein of the crop appears to be better than last year, although yields are not.

Test weight is 57-59 pounds per bushel and yields are still too early to project.

Harvest in the area is about 25% complete.

Free Trade Agreements Move ForwardErica Venancio posted on 7/6/2011

(Source: Delta Farm Press)

Free Trade Agreements (FTAs) with South Korea, Panama and Colombia moved forward on Tuesday with the announcement that a deal had been struck between Democrats and Republicans. Later in the day, doubts – centered on an extension of the Trade Adjustment Assistance (TAA) program -- emerged about the solidity of the announced compromise but it is expected the Senate Finance Committee will take up the FTAs on Thursday.

The Obama administration, eager to boost trade in a slow-moving economy, has long seen the proposed FTAs as a quick shot in the arm. At the same time, to the irritation of Republicans, Democrats have insisted on an extension of the TAA program, which would assist U.S. workers who lose their jobs in the wake of the trade deals.

Commodity groups were largely positive with Tuesday’s news. In the Mid-South, the lack of U.S. access to Korea’s rice market has tamped down some enthusiasm for the FTA. On the flipside, the American Soybean Association (ASA) said the three trade pacts represent the potential of some $3 billion of additional agriculture exports.

"This is a critical step in the right direction," said ASA President Alan Kemper, a soybean farmer from Lafayette, Ind., in a statement. "Now that an agreement on Trade Adjustment Assistance has been reached, we call on Congress and the (Obama) administration to quickly advance these trade agreements in order to boost our economy."

Bart Schott, farmer and National Corn Growers Association president, said the “NCGA is greatly encouraged by the movement on the pending FTAs. The United States is the largest corn producer and exporter in the world and developing new markets for our country’s agricultural products will help our sector lead the nation in economic growth and international competitiveness.”

For rest of article, click here. 

Mexican Border IssuesErica Venancio posted on 6/16/2011

Mexican Border Problems Arise

The Customs Trade Partnership against Terrorism (C-TPAT) recently released a list of seal requirements for Manufacturers that ideally would be in place by March 2012.  (Click Here to view list.)

Many view it as only a U.S. issue.  As of right now, grain industry will not need the new seals on southbound loads.  This currently only involves traffic coming into the U.S.  Shippers have been in contact with the Customs and Border Protection agency and are being told that cars will have to be sealed coming northbound but currently the seals can be the widely used aluminum seals that many shippers use today.

There is a possibility that Mexico will implement the same standards that the U.S. is implementing, and TEGMA will keep on top of the issue until Mexico decides to also adhere to new seal regulations on southbound loads. The most current issue is that cars will have to be sealed moving northbound as empties.  If contraband is found in the cars moving northbound, huge penalties could be assessed.  If the cars have seals, they should be able to be traced back to the place where the car started its movement northbound and the penalties will be assessed against the customer.  

The TEGMA Issues Committee has met and discussed this issue and would like to hear any issues members are having in Mexico to more adequately address the problem.

KCBT Wheat Futures ContractErica Venancio posted on 6/16/2011

Update on Recent HRW Wheat Contract Changes

The new contract terms in place for the KCBT HRW contracts have resulted in wider carrying charges as many experts expected, as well as improved basis in a wide geography.

Since the implementation of the new HRW futures contracts, many have seen an improvement in values. Said one industry insider, "Market conditions have changed to the extent that HRW convergence is no longer concerning people, as HRW bids at KCBT delivery stations are approaching delivery equivalent values. A big change versus a year ago."

The spot rail basis is currently about delivery equivalent for even ordinary protein levels. More recently, market factors such as weather and subsequent reduced production projections may also be factors in the basis recovery.

The changes to the KCBT wheat futures contract, approved by the exchange's membership in November, and by CFTC in January, would increase the base storage rate by 1.5 cents per bushel, with an additional 3-cent-per-bushel harvest storage premium from July through November. Under the KCBT seasonal storage rate rules, the current base storage rate for the KCBT HRW wheat futures contract would increase to 6 cents per bushel per month ($0.00197 per bushel per day), with an additional "harvest storage premium" that would increase the rate to 9 cents per bushel per month ($0.00296 per bushel per day) during the months of July through November. The changes would take effect with the September 2011 futures contract. (source: NGFA)

End of CWBErica Venancio posted on 6/16/2011

News from Canada: End of CWB?

Canada's agriculture minister said on May 18th that the country's Conservative government will probably introduce legislation this autumn that will allow the Canadian Wheat Board's marketing monopoly on wheat and barley to be ended in 2012, according to Reuters.

Western Canada's grain industry has operated since World War II under a monopoly that forces farmers to sell wheat and barley to the board, unlike other crops such as canola.

Farmers who have long urged the government to end the world's last major agricultural monopoly say they want the freedom to find the best possible price, while board supporters say the CWB's clout brings the best returns.

The legislation would take effect in August 2012, the beginning of the 2012-13 crop marketing year, said Agriculture Minister Gerry Ritz, shortly after Prime Minister Stephen Harper reappointed him to Harper's new cabinet.

"Everyone recognized the complexity of this," Ritz told reporters. "It is going to take a certain amount of work with (industry groups and farmers). All has to dovetail in to make the farm gate stronger."

Ritz said changing the marketing system in August 2012 has the support of industry groups.

The chief executive of Cargill's Canadian subsidiary told Reuters last week that the grain industry should have at least six months' notice of a change, which he said would logically take effect in August 2012.

New Members for TEGMAErica Venancio posted on 6/16/2011

TEGMA WELCOMES NEW MEMBERS

TEGMA welcomed the following new members to its membership since the Annual Meeting:

Farmers Cooperative Co.
Key Contact Person: Jon Setterdahl

Farmers Cooperative Co. (FC) has corporate headquarters in Ames, IA and is the largest farmer-owned local agriculture Co-operative in Iowa.  It was founded by the management and board of directors of Farmers Cooperative Company located in Farnhamville, IA and the first grain elevator was built in Farnhamville in 1881.  Today, FC serves over 5,800 active members throughout their trade territory of over 3,000,000 acres.  Members are served from over 60 locations by more than 700 employees.


Paul M. Bohn & Co, Inc.
Key Contact Person: Paul Bohn

Paul Bohn & Company, Inc. is the oldest privately-owned and continuously operated marine inspection company in Texas. In 1908, Worthy Boyd founded the marine services company that continues today under the leadership of Paul Bohn. Their services include, but are not limited to,marine surveying, rail car and ship cleaning, stevedoring subspecialties, and crew supervision.

Panel Discussion 2011Erica Venancio posted on 2/7/2011

Port Congestion & Volatility: Transparency Key to Better Business

Each year at Annual Meeting, a much anticipated panel discussion is held to discuss major issues affecting TEGMA's members. This year's topic: "Business and Operational Issues - Export Capacity and Related Logistics" opened many doors to discussion for our members.
 
Bill Eilbracht, General Director of Ag Products at Union Pacific, began the panel discussion with a look at UP's performance this past year. In 2010, Union Pacific had record performance, with customer service at a high, and UP recording their safest year ever. Eilbracht's company has also bought on 1100 new cars in 2010, with a commitment to spend $3.2 million in 2011 on 500 new cars.

With regards to the topic at hand, Eilbracht spoke from the shipper point of view, stating that port congestion is measured in grain trains held and that last year alone over 22,000 hours of customer caused delay happened at terminals last year. His hope for the coming year is to add capacity across the board, spend more money on elevators and tracks, and to work on the forecasting process for terminals.

David Pope, Senior Merchandiser of Rail Transport for CHS Inc., however, was the first to bring up the importance of transparency on the rails. Pope stated that one of the major problems today is that railroads have to decide how to allocate the available railway space. Furthermore,  Pope questioned when space is allocated to marketplace, does the railways want them to go to slippers or let the market sort them naturally.

Pope's answer: transparency. "We need to figure a way to be truly transparent," he stated. "The more transparent the better for business." With true transparency, Pope believes, we can better have an understanding of the true capacity of the railways. As long as railways are consistent with their programs, the market will follow, and Pope hopes, it will eliminate volatility.

TEGMA's third panelist, John Roby of the Port of Beaumont, spoke of how TEGMA's mission is reflected in the current Port of Beaumont Rail Improvement Program. Slating completion for July 2011, Port of Beaumont's 18 month project began with a relationship with Louis Dreyfus in concurrence with a $10 million project to improve their current elevator.

Port of Beaumont's improvements have fully automated their systems. The project also doubles holding capacity at port with a new interchange yard, which will now be able to handle 3 complete unit trains. Roby's positive remarks left TEGMA's members with an optimistic outlook on port congestion.

Tom Sexter, Merchandising Manager for Louis Dreyfus Commodities, spoke on the Pacific Northwest. With the growth and addition of a Bunge export facility, port congestion at the Seattle Terminal will theortically go from 11 to 15 trains a day, seeing an increase of 11.5 million metric tons in PNW port capacity.

However, Sexter also spoke on the factors affecting port congestion. Terminal switching, cargo size, rainy and windy weather conditions, are a few things affecting his terminal every day. Not to mention following holiday and labor rules, as well as accounting for down time for maintenance. Sexter also spoke of secondary market volatility.

After Sexter's mention of Bunge's new PNW facility, Ryan Warner of Bunge spoke on their new facility: EGT LLC in Washington. Warner also circled back to previously mentioned topics such as volatility in the secondary shuttle market. Warner's bottom line: "Transparency and consistency in the car programs are the key to the future."

Topic then shifted to the importance of forecasting to all sides of the grain industry. Said one representative from a major carrier, "Shipping is only as efficient and as good as the forecasting information from the commodity merchants."

TEGMA Welcomes New Board MembersErica Venancio posted on 2/7/2011

At the 2011 Annual Meeting, TEGMA's Board of Directors saw some slight changes. Joining the board for as active member directors, serving three year terms are:

-Pete Goetzmann, Archer Daniels Midland
-Brian Mehrmann, DeBruce Grain
-Joey Meibergen, W. B. Johnston Grain Co. (re-nominated)

TEGMA also has the pleasure of once again welcoming associate member directors Greg Edelblute, Cereal Food Processors and Tom Meyer, Kansas Grain Inspection Service to the Board for one year terms.

The Board would like to thank Charlie Regini and Eric Wilkey for their service on the Board these last few years, as their terms have expired. TEGMA thanks them both for their service to TEGMA on the Board of Directors, and all they have done to further the association in the past several years.

2011 Annual Meeting RecapErica Venancio posted on 2/7/2011

Annual Meeting welcomes nearly 100 

Sunny Scottsdale, AZ once again welcomed TEGMA and nearly 100 of their members and guests to the Hyatt Regency at Gainey Ranch on January 27-28. Members enjoyed six outstanding speakers, a panel discussion of industry experts, a reception, and banquet featuring guest speaker, former Dallas Cowboy quarterback, Danny White.

Also at the Chaiman's Banquet, two past members of TEGMA's Board of Directors were honored for their service, not only to the grain industry at large, but to TEGMA and the leadership they have provided over the years. Another special thanks to the 2011 honorees, Charlie Regini and Jerry Cotter.

For the past three years, TEGMA has enjoyed its time in Scottsdale, AZ and is once again looking to host the Annual Meeting there in 2012.

Erik AndersonErica Venancio posted on 2/7/2011

Fall Symposium Planned for Sept 16 17Erica Venancio posted on 2/17/2010

TEGMA is working with the Surface Transportation Board's National Grain Car Council on plans for a "joint" meeting on September 16 and 17, 2010 in Omaha.   This would combine the annual meeting typically held by the Grain Car Council and TEGMA's traditional Fall Symposium. 

TEGMA Welcomes Two New MembersErica Venancio posted on 2/17/2010

The TEGMA Board of Directors approved two pending member applications during its meeting in Scottsdale on January 28.

Issues Committee Examines Current TopicsErica Venancio posted on 2/17/2010

TEGMA's recently created Issues Committee met in Scottsdale, Arizona, during the course of the association's annual meeting to review current industry issues. 

Attebury Honored for Lifetime AchievementsErica Venancio posted on 2/17/2010

TEGMA members honored Sam Attebury, chairman, Attebury Companies, Inc., of Amarillo, Texas, with the Association's Lifetime Achievement Award at the group's annual meeting on January 28, 2010 in Scottsdale, Arizona.

TEGMA Elects Knief as ChairmanErica Venancio posted on 2/17/2010

TEGMA members have elected Bob Knief, senior vice president, Bartlett Grain Company based in Kansas City as Chairman for 2010 at the association's annual meeting on January 28, 2010.  Knief had previously served two years as first vice president. 

Annual Meeting Judged a Huge SuccessErica Venancio posted on 2/17/2010

An excellent attendance of over 100 people participated in TEGMA's 2010 annual meeting held January 28 and 29 at Marriott's Camelback Inn in Scottsdale, Arizona.  TEGMA welcomed an outstanding group of guest speakers on a variety of timely topics.

New MembersErica Venancio posted on 9/23/2009

TEGMA Chairman Mike Mandl said the association is pleased to welcome three new members.

• ADM Grain Company
• Cereal Food Processors
• Watco Companies, Inc.

TEGMA Fall Symposium a Huge SuccessErica Venancio posted on 9/23/2009

TEGMA continued to build on its past success with one of its best ever Fall Symposiums which was held September 9 and 10, 2009 in Kansas City.  A record 75 members and colleagues attended the session which featured a number of well-known experts.

• Bill Helming, Bill Helming Consulting Services, "What Goes Up Eventually Comes Down:" The veteran ag economist made a strong case for the public to prepare for a serious and painful modern day depression in 2010-2014 with further major declines in home, commercial, and farm values. He expects a total average decline in home values from the peak in 2006 to the projected bottom in 2010-2012 will be 45 to 55 percent. He recommended for those still in the stock market to exit now; he expects the Dow-Jones Industrial Average to bottom at 3,500 to 4,000 within the 2010-2012 time period. What to do? Helming counseled, "Hope for the best, plan for the worst, think positively. Be optimistic, but be very realistic in these changing times."

• Bernardo Ayala, vice president, Mexico Marketing & Sales, Union Pacific Railroad, "Mexico: Challenges and Opportunities:" Ayala said agricultural products account for 35 percent of the company's revenue from the Mexico market, ranking it ahead of automotive, industrial products, chemicals, and other segments. The Mexican economy has struggled over the last year in direct relation to the recession plaguing the U.S. and other nations. Mexico's GDP fell by 10.4 to 1.4 percent in 2009; the economy is expected to post a positive gain of 1.2 to 2.7 percent in 2010. Mexico's agricultural markets are currently experiencing softness and suffered from a severe drought in the second half of 2009. In the future, Ayala looks for increased demand for food and whole grains with Mexican rail customers upgrading and expanding their facilities. Those customers are looking for exports to international markets. Mexico's rail industry faces challenges on several fronts: aging infrastructure; drug smuggling, theft and vandalism; border process; and operating practices.

• Steve Whitney, vice president, Sales-Carload, Canadian Pacific, "Rail Service Update: CP Rail is Expanding its Footprint and Streamlining its Service." As an overview of the company and its business, Whitney said: CP had pro-forma total revenues of $5.2 billion in 2008; has a global reach through ports of Vancouver, Montreal and New York; prime connections to U.S. railroads; enhanced network reach through the DM&E to several key U.S. Midwest markets; and in 2008 had 16,798 employees in more than 1100 communities and over 15,500 miles of track. The company's U.S. footprint has grown with the acquisition of the DM&E. When the DM&E grain volume is added to that of the Soo Line, U.S. grain represents 50 percent of CP's total grain volume. The CP's grain hopper fleet stands at about 24,000 cars, plus about 4,000 from the DM&E. Velocity improvements are enabling improvements in fleet quality, allowing CP to target its oldest, least productive cars for return. In addition, CP is in the midst of a five-year program to replace obsolete gates on about 2,500 hoppers and refurbish gates on about 3,500 hoppers.

• Thomas Brugman, section chief, Rail Customer and Public Assistance Program, Surface Transportation Board, "Updates on the National Grain Car Council and the Rail Customer and Public Assistance Program:" Brugman explained that the Rail Customer and Public Assistance Program (RCPAP) is free and an informal alternative to litigation. The most common issues handled by the program are: rail service problems, abandonment-loss of service, rates and fuel surcharges, denial of service, embargoes, claims, demurrage and many others. Carrier and shipper participation in the program is voluntary. The National Grain Car Council, Brugman said, meets at least annually to conduct a continuing dialog on grain car service and supply issues to the STB. The size of the Council is not less than 40 members composed of shippers, carriers private car owners and car manufacturers. The Council is currently working on a white paper which will examine changes in the rail grain shipping markets over the last decade. As a starting point, seven subjects are being examined for their impact on rail grain transportation: evolution of the grain market; role of locomotive development; role of grain car development; role of unit train development; private vs. system cars; role of technology; and capital investment by agriculture and railroad industries. Comments or suggestions can be sent through TEGMA to Tim McNulty of CSX who is the chairman of the White Paper Committee for the NGCC.

• Dave Vander Griend, president & CEO, ICM, Inc., "Ethanol Industry Outlook: More Food, Less Carbon:" Vander Griend briefly reviewed ethanol's rapid ascent with Congressional passage of the Energy Independence and Security Act of 2007 which, among other things, mandates corn ethanol production of 15 billion gallons by 2015. The ethanol industry for the last 12 months has been under serious economic pressure. At the present time, those plants with modest debt should be operating at a modest profit. Vander Griend noted the nation can easily supply both food and fuel needs from the nation's corn crop and is headed toward a corn surplus. He pointed out in converting corn to ethanol about half of the consumption is returned in the form of DDGs. Thus, for every two acres of corn converted to ethanol there is only one acre of feed grain displacement. He said the U.S. EPA should approve the E-15 Green Jobs Waiver, noting that carbon reduction is possible with today's technology. Vander Griend said ICM has proposed a market-based solution for a low carbon fuel standard where phase I would require a 2.3 percent reduction of carbon dioxide emissions from the gasoline baseline by 2015 and phase II would require a 4.9 percent reduction by 2022. In conclusion, he said domestic ethanol production does reduce imported oil needs, creates U.S. jobs, reduces tailpipe emissions and smog, and ethanol from starch has net carbon comparable to all energy crops (including cellulosic).

• Kevin Barth, president, Commerce Bank, "Economic Outlook - Will Agriculture and the Midwest Fare Better than Most?" Barth looked at the roots of the current recession which was triggered by increasing personal consumption largely financed by others through excessive leverage. The U.S. agricultural economy, though, has outperformed the general economy with strong global demand, low inventory levels, and high ethanol demand. Strong net farm income in 2008 allowed farmers to increase land holdings, purchase equipment and payoff debt. According to the survey of the Federal Reserve's 10th District Ag Credit Conditions, the farm economy remained solid in the 2nd quarter after softening from 2008. In addition, land values are holding firm and the supply of farms for sale is limited. Grain prices are lower with reduced exports and good growing conditions. There should be ample funds to satisfy a modest rise in loan demand. Barth said the near-term outlook for U.S. agriculture includes these key elements: the U.S. & world economies should stabilize in 2010, world GDP in emerging markets should fuel ag recovery, growth should resume in 2011, and a return to growth should expand demand for alternative energy. In looking at the availability of commercial credit, he said banks now face increased regulatory scrutiny and there are fewer banks. In addition, there is increased awareness of risk which is reflected in the terms for financing: increased spreads & fees, lower LTVs, shorter maturities, emphasis on reducing concentrations, banks are re-evaluating business lines, and a back to basics philosophy from banks.

• "Operational and Business Issues Facing the Grain Industry," a panel discussion.

 *Several of the meeting presentations are available online and can be found by clicking here.*

TEGMA Annual MeetingErica Venancio posted on 9/23/2009

TEGMA will hold its 2010 annual meeting on January 28 and 29 at Marriott's Camelback Inn in Scottsdale, Arizona.

Industry NewsErica Venancio posted on 9/23/2009

TEGMA Welcomes New MembersErica Venancio posted on 5/27/2009

TEGMA is delighted to welcome two new regular members, Gavilon Grain, LLC, and West Plains Co.

TEGMA Fall Symposium Set for Sept 9 and 10 in KCErica Venancio posted on 5/27/2009

TEGMA will hold its Fall Transportation Symposium on September 9 and 10 in Kansas City at the InterContinental Hotel on Country Club Plaza.

New Faces New Priorities at USDAErica Venancio posted on 5/27/2009

As the Obama Administration begins to fill out the ranks of the top political appointees at USDA a picture is emerging that this won't be a USDA populated by your typical representatives of commercial agriculture. 

CFTC to Address Convergence IssuesErica Venancio posted on 5/27/2009

Poor convergence in the agriculture markets continues to attract concern and the CFTC has announced it has appointed a committee to bring together relevant information on the potential causes and help investigate possible solutions.

Report on Febr 26 Meeting with BNSFErica Venancio posted on 3/3/2009

Twenty TEGMA member representatives and guests met with key staff from the Burlington Northern Santa Fe Railway's Ag Products staff at the company's Fort Worth headquarters on February 26.  A list of the attendees is attached.  The agenda included these topics:

1. Operations and equipment issues.
2. Demurrage, storage, and extended services.
3. U.S. economic outlook.
4. Grain marketing issues.

 The following are highlights from the meeting.

 Operations and Equipment Issues

• Shuttles represent 70 percent of the BNSF's grain business.
• Velocity is improving.  For the third week in a row, they have reached 2.9 trips per week.  Velocity in 2008 was up 8.4 percent from 2007.  For 2009 to-date, velocity is up 6 percent compared to 2008.
• Averaging a pick-up time of 7.5 hours after notification the shuttle is ready for release (dwell hours).
• On time performance in 2008 was just under 75 percent.
• New customer communication initiative is resulting in better coordination and less duplication of effort.
• Planning a new pilot program to create greater incentive to companies for improved origin performance.

Demurrage, Storage and Extended Services

• Goal is to maximize efficiency of cars in service.  The goal is not to see how much demurrage can be collected.  Cost control is an imperative.
• The dwell hours (loading/unloading time) is sharply lower for private cars, suggesting there are still efficiencies to be gained in this area.

U.S. Economic Outlook

• Economy is on life support.  The economy depends on credit and consumer spending.  Banks have sharply curtailed lending, bring much economic activity to a halt.
• Housing starts are down 80 percent and have not yet hit the bottom.  Fewer housing starts means less lumber to move by rail.  Auto production is down over 60 percent.  Retail sales were off by 9 percent in the fourth quarter of 2008.
• Japan's exports are down 50 percent.
• Not quite a depression yet, but it could be.  Twenty percent probability for a deeper and longer recession.  The government bailout may be distasteful, but there is little alternative.
• Diesel fuel cost down sharply.
• West Coast container exports down 30 percent in December 2008.
• 2009 GDP for U.S. estimated at a negative 2.7 percent.  China's GDP for 2009 is estimated at over 6 percent and this strength is critical to the global economy.  While China's GDP is a strong positive, it is off from much stronger numbers.
• AAR estimates rail volume is a negative 16.1 percent for January 2009.  BNSF traffic is not down as sharply as is the case for other carriers.  Coal volume remains very steady.
• BNSF management guiding principles for managing this business cycle
• Continue maintenance capital program
• Service
• Customers
• Investors
• Reduce expenses
• Equipment
• People
• Maintain financial flexibility
• Position for eventual recovery

Grain Marketing Issues

• Shuttle capacity - expect another 8 to 9 shuttle facilities to come on line in 2009.  Very pleased with investments companies are making to be part of the BNSF shuttle program.
• Fleet - there are 11,000 grain cars in storage and 35,000 freight cars in storage.  There are 700 locomotives in storage.  The BNSF total grain car fleet is 30,000 cars.
• Cost controls - 2,500 employees have been furloughed.  There will be no merit salary increases this year.
• Exports seem to be coming back.  Shipments to Mexico are down.
• Very focused on fine tuning forecasts.  When corn does begin to move will there be quality issues from storage?  Hope poultry industry has bottomed-out.  Dairy animal numbers will likely continue to decline.
• Want to be positioned to move the grain when it is ready to move.
• Recent shuttle auctions have been for two-year commitments; will be one-year auctions, as well.

Enclosure:  BNSF Meeting Attendees

TEGMA Plans Grain Rail Task Force Meeting Feb 26Erica Venancio posted on 2/9/2009

TEGMA Chairman Mike Mandl has announced that the Association will hold a meeting of its Grain-Rail Issues Task Force on February 26 at the Burlington Northern Santa Fe Railway offices in Fort Worth, Texas  This represents a continued step under TEGMA's new initiative to address operational and business issues affecting its members, Mandl said.

TEGMA Re Elects Mandl as Chairman for 2009Erica Venancio posted on 2/9/2009

TEGMA members re-elected the current slate of officers for a second, one-term at the association's annual meeting on January 28, 2009 in Scottsdale, Arizona. 

TEGMA Annual Meeting a Resounding SuccessErica Venancio posted on 2/9/2009

TEGMA's 2009 Annual Meeting featured an excellent program and attendance, prompting Chairman Mike Mandl to declare the meeting a resounding success and a key step in TEGMA's re-building effort.  The January 28/29 session at Marriott's Camelback Inn in Scottsdale, Arizona was TEGMA's first stand-alone meeting in some 50 years.  Sixty-five people signed up for the event.

Mandl told the group, "The last year has been an eventful and productive one for the organization.  A lot of people have put in a lot of hard work to better position TEGMA to re-establish itself in these ever changing times.  In order to do so, TEGMA needs to be relevant and provide value to its members.  We defined that relevance in the revision of the mission statement, which reads as follows:

TEGMA seeks to provide a forum where the grain-based agribusiness industry can debate, discuss and facilitate resolution of operational and business issues bringing insight to its membership and stakeholders."

Grain Market Prospects for the Coming Year:  Surviving the Wild Commodity Ride We Are On:   Bill Lapp, principal, Advanced Economic Solutions, said he expects the nation's GDP to hit one of the lowest levels ever for the last quarter of 2008, to remain negative in the first quarter of 2009, but then to begin rebounding later in 2009.  The world economic recovery, he said, will precede the United States' recovery.  Key drivers of food commodities in the next year:  value of the U.S. dollar, extent of global economic slow-down, acreage battle and production shifts in 2009, U.S. weather in 2009 and beyond, and government bio-fuels policy.  The answers to these uncertain factors probably contain more upside than downside from current levels.  Lapp said corn availability in 2009/2010 could be extremely tight with only 88 million acres, leading to a likely rebound in prices.

The Financial Crisis and Its Affect on Commodity Lending:  Pete Lopoukhine, director, Structured Trade Finance, Lloyds Bank TSB, said the United States was facing its most significant economic crisis since the Great Depression.  All in all, it is probably a healthy adjustment, he said, but it presents a very challenging time with debt and equity markets at a virtual standstill.  Lloyds TSB is an established bank based in the United Kingdom that re-entered commodity lending in 2008.  Lopoukhine said all banks are looking at credit risk much more closely.

Railroad Industry Trends:  Darius Gaskins, partner, Norbridge, Inc., and former president of the Burlington Northern Railroad, looked at the broader trends facing the rail industry.  He said the rail industry in general is as sound today as any sector and most carriers are in relatively good condition.

·      Grain and coal carloadings rose slightly in 2008.

·      Industrial production has fallen dramatically and the outlook is dark in the near term.

·      Looking to the future, proposed climate change legislation will change the market.  Real carbon reductions will decimate the demand for coal and cause costs for electricity production to skyrocket.

Performance of the Agricultural Markets and Potential Contract Changes:  David Lehman, director of Commodity Research and Product Development for The CME Group, outlined the evolution of The CME Group, which now includes the former Chicago Board of Trade and New York Mercantile Exchange, and the key commodity issues facing the exchange.  In looking at historical basis levels for key grains, Lehman noted that futures and cash prices are showing economically rational behavior as they better converge at expiration of the futures contract.  The CME Group has increased storage rates for wheat, soybeans, and corn and haas approved several additional steps for the wheat contract:  adding three new delivery territories, implementing seasonal storage rates, and gradually tightening the permissible vomitoxin levels.  Changes still being reviewed include dynamic storage rates, modified compelled load-out, and cash settled futures.

Change Comes to Washington, DC:  David Lyons, vice president for government relations, Louis Dreyfus Commodities, said change has been coming for several years leading up to the election of 2008.  That 2008 election was historic and its outcome was likely determined with the onset of the financial crisis in mid-September.  Lyons said we live in interesting times and are entering a period of:

·      Bigger, more intrusive government,

·      More government regulation of markets and probably other aspects of U.S. life,

·      Less reliance on free and open markets to allocate resources,

·      Increased government spending and massive government debt, and

·      Extremely uncertain economic outlook.

Overview of Developments in the Official Grain Inspection System and Current Issues:  Randall Jones, deputy administrator of USDA's Federal Grain Inspection Service covered a number of key topics.

·      With a high percentage of its workforce reaching retirement age and the advent of technology FGIS is taking steps to centralize many services.

o        One element is more web-based applications, termed FGISonline, with the goal of bringing official inspection and weighing to the desktop.

o        Another element is development of the National Grain Center in Kansas City as more of a hub for FGIS services.

·      Quality management program - FGIS is collaborating with official service providers to incorporate principals of modern quality management programs into the official system.

·      Contract/load order comparison - FGIS will be checking compliance with GIPSA policy that export load orders reflect contract specifications.

·      Study regarding use of contractors for export services - FGIS has found no long-term savings to exporters from the use of contractors at export locations.  A final report on the subject should be ready very soon.

·      Sorghum odor - issues have developed with the application of the current inspection line on sorghum odor.  FGIS' goal is to ensure that the odor line continues to facilitate marketing and the agency will soon be appointing a task force to further explore the matter.  The objectives are to ensure the odor line reflects market needs and ensure consistency in application throughout the official system.

Arizona Agriculture, Ethanol, and Markets:  John Skelley, general manager, Pinal Energy, LLC, began by tracing the changes in Arizona agriculture.  Forty years ago, Arizona agriculture was characterized by the four Cs - copper, cotton, cattle, and citrus.  Many of the feedlots then were small and water was cheap.  Arizona agriculture today has:  (1) much more expensive water; (2) a burgeoning dairy industry with very large milking herds (average size of 1,331 cows per dairy); (3) fewer, but larger cattle feedlots that feed out mostly Holsteins.  Volatile grain markets have led to a dairy industry under duress.  The ethanol industry is also facing a difficult economic situation - the basis today for corn is much higher than envisioned in the original economic model.  He expects additional ethanol plant closings as ethanol producers adapt to the economic realities.

Operational and Business Issues Facing the Grain Industry, a panel discussion featuring:  Mark Huston, director of North America transportation, Louis Dreyfus Commodities; Larry Kittoe, president, DeBruce Grain, Inc.; Ryan Pellet, executive vice president, J.D. Heiskell & Co.; Al Vergin, general director-wheat and products, BNSF Railway; and Eric Wilkey, president, Arizona Grain, Inc.  The panel shared their views on a variety of topics posed by Bob Petersen, panel moderator.  Highlights from that discussion are as follows:

Question 1.        W hat are your top three everyday headaches that fall into the category of business and operational issues?

Panel grain responses:  Credit availability/counterparty risk, especially in Mexico.  Right-sizing the company's rail freight deck, operating the company's logistics within the windows allowed by the railroad car ordering systems.  Trying to trade deferred without knowing rail rates, fuel surcharge; taking on long-term freight commitments without knowing rates; passing of liabilities/assessorial charges including -- inaccurate Umler tare weights; track leases/agreements very one- sided; moving locomotives; railcar contamination tariff. 

Panel rail carrier response:  Maximizing train size - shuttles should be a minimum of 110 cars; resource planning - balancing fleet size with car orders, critical with managing cost, however will err on the side of customer expectations; pipeline management - commodity sequencing, slot planning, information sharing; and forecasting car demand

Question 2.         For grain companies, what are the three things railroads are doing right? 

Panel responses:  service has greatly improved, as have velocity and consistency; carriers are providing quality equipment, building capacity and reinvesting in their systems; ETA's have improved, but further improvement is still needed; systems and technology continue to improve.

Question 2(a).   What are the three things where you would like to see improvement?

Panel responses:  reduce the attempts to pass through liability; publish rates out forward to be able to trade on; keep accessorial charges reasonable.

Question 2.         For rail carriers, what are the three things customers are doing right?

Panel response:  investments in capacity, velocity, and efficiencies; logistics, pipeline management have improved; loading/unloading customer improvements; much improved communication; and jointly managing exceptions 

Question 2(a).   What are the three things where you would like to see improvement?

Panel response:  improve timeliness of non-shuttle order placement; need assistance in developing longer, more efficient trains; set the bar higher in pipeline management, need to continually improve velocity; most of all if they have an issue such as constructive placement, demurrage, OEP, or DEP, promptly communicate concern - it alleviates future misunderstanding and time consuming reconciliation

Question 3.         Given the challenging economic times that 2009 has brought, are there areas where carriers and grain companies can work together better in facing these challenges?

Panel responses:  Railroads should share the value savings of efficiency improvements; there needs to be a balance where railroads can plan and forecast resources while the industry maintains the flexibility necessary to respond to the world market.

Panel rail carrier responses:  balancing fleet size; longer trains; and communication of potential demand.

Question 4.         On a related note, as we look at the working relationship between grain companies and rail carriers, what are three longer term trends you see developing - positive or negative?

Panel grain responses:  on the positive side, carriers and grain firms seem to do a good job of communicating market observations.  On the negative side, a major item is the emphasis on the passing on of liabilities.

Panel rail carrier response:  full pipeline visibility and more efficient matching of origin and destination demand; risk sharing - tougher to find middle ground with enhanced visibility (origin report cards), customer needs to have direct communication with multiple departments within railroad such as demurrage, accounts receivable, operations, marketing, and utilize electronic tools; and safety.

Question 5.         Where can TEGMA play a constructive role that brings value to your company in 2009?

Panel responses:  continue to develop as a constructive venue for members to interface on non-rate business issues with the carriers.  Create a clearinghouse for industry and railroad issues.  Continue with small group meetings which focus on individual carriers.

We Thank Our Sponsors

An important part of TEGMA's improved financial condition, according to President Bob Petersen, is the excellent support of members in sponsoring key events at the meeting.  TEGMA again extends its thanks to these leading companies for their support of the Association's annual meeting.

Thursday Meeting Break
NIK Marketing Cooperative

Reception
Arizona Grain, Inc.
Bartlett Grain Co.
DeBruce Grain
J.D. Heiskell & Co.

Banquet
Champaign Danville Grain Inspection
Louis Dreyfus Corporation
Port of Corpus Christi
The Scoular Company

Friday Meeting Break
Union Pacific Railroad

Speaker Presentation 
BNSF Railway Co.

TEGMA Schedules Meeting with UPErica Venancio posted on 11/14/2008

TEGMA is planning a Grain-Rail Task Force meeting on Wednesday, December 10, with the Union Pacific Railroad in Omaha to discuss current business and operational issues facing the grain-rail sector.

Annual Meeting Set for January 29 30 in ArizonaErica Venancio posted on 11/14/2008

TEGMA’s Board of Directors has set January 29 and 30, 2009 as the date for the association’s annual meeting.  The meeting will be held at Marriott’s Camelback Inn in Scottsdale, Arizona.  The meeting general sessions will be held on Thursday afternoon, January 29, and Friday morning, January 30.  The hotel room rate is $249 per night.

STB to Review Competition in the Railroad IndustryErica Venancio posted on 11/14/2008

The U.S. Surface Transportation Board met Nov. 6 to discuss an independent study assessing the current state of competition in the freight railroad industry.

CN Begins Operating DM and EErica Venancio posted on 11/14/2008

Canadian Pacific Railway Limited on Nov. 6 celebrated the first day of operational control of recently acquired Dakota, Minnesota & Eastern Railroad Corporation and its subsidiaries: Iowa, Chicago & Eastern Railroad and Cedar American Rail Holdings.

Minneapolis to Close Trading PitErica Venancio posted on 11/14/2008

The Minneapolis Grain Exchange announced October 24 that its Board has voted to close the exchange’s historic, open outcry trading pits effective December 19.  

TEGMA Fall Symposium A SuccessErica Venancio posted on 10/1/2008

The September 24/25, 2008 meeting was very successful. We co-hosted with the Commodity Markets Council (CMC) - Energy Drives Everything, and it was held at the InterContinental in Kansas City, MO. We had a strong program and excellent attendance - the best attendance we have had for many years. As a result, we have wonderful momentum developing as we work to re-invigorate the association and strengthen its value proposition.

Grain Association Names Petersen as PresidentErica Venancio posted on 6/17/2008Headquarters to Re-Locate to Kansas City

Letter to MembersErica Venancio posted on 6/13/2008

I am pleased to report that the Board of Directors of TEGMA, after careful deliberation, has decided to hire Petersen Consulting to provide administrative services to the group.