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22 Oct 2008 10:44 EST US Barge Freight Rates Sinking Fast On Low Demand,Diesel Price
By Gary Wulf
Of DOW JONES NEWSWIRES
CENTRAL CITY, Neb. (Dow Jones)--Nose-diving demand and dropping diesel prices have torpedoed barge freight rates on the U.S. rivers system, following a spike in tariffs to all-time highs earlier this month.
"[Barge shipping] rates along the Illinois, Ohio and Lower Mississippi River were off 10 cents a bushel or more over the past week," said basis analyst Kevin McNew of Cash Grain Bids Inc.
Barge rental rates on some sections of the lower Mississippi River are now barely half of what they were in early October, when a temporary dislocation of the U.S. river barge fleet caused by record fuel costs, skyrocketing demand from coal shippers and the fleeting of barges filled with hurricane-damaged soybeans pushed tariffs to an unprecedented l,l00-1,200% of par value.
Since that time, a slowing global economy has produced record declines in U.S. fuel prices - including a 5.6% swoon in average prices for diesel fuel last week - declines which have greatly reduced operating overhead for energy-intensive towing firms.
Delays in the annual fall harvest and plentiful interior storage have also reduced demand for river freight from grain shippers.
"During the week ending Oct. 11, barge grain movements totaled 357,000 tons, down 29% from the previous week, and [down] 52% from the same period last year," said the USDA in its most recent grain-transportation report.
Barge freight rates currently stand at 535-550% of the benchmark 1976 rate on the Illinois River and northern two-thirds of the Mississippi River, 665% on lower reaches of the Mississippi River and at 775% of par on the Ohio River. They declined as much as 175 basis points during the past week alone.
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