Growing Gulf oil slick raises concerns on US grain exports

US grain markets are anxious that an expanding oil slick in the Gulf of Mexico may affect exports of corn, soy and wheat from the country's busiest grains port.

 

Any potential slowdown or halt in ship movement into or out of the Mississippi River could prompt exporters to divert supplies to other US ports at an increased cost or to source grain from other countries such as Brazil or Argentina.

 

"The market's definitely downside nervous," said Charlie Sernatinger, analyst with Fortis Clearing Americas. "You've got a pretty big corn programme going on down there and there are not a lot of ways to get around it.''

 

The US Gulf is the country's biggest export point for grains. Between 55% and 65% of all US corn, soy and wheat exports are shipped from the Gulf.

 

The USDA on Monday (May 3) reported a slight decline in grain export inspections at the Gulf in the week ended April 29, but traders said the decline had little to do with the oil spill. Inspections may actually accelerate in the near term as exporters seek to ship out as much grain as possible before the oil slick spreads further, traders said.

 

US corn shipments would likely be impacted more than other grains. Soy exports are seasonally slowing and most wheat is shipped from US other ports.

 

Grain and soy futures on the Chicago Board of Trade closed lower on Monday, largely due to a rising US dollar.

 

The US Coast Guard said Monday that there are no restrictions in place for vessels moving through the main deepwater shipping lane from the Gulf of Mexico into the Mississippi River, known as the Southwest Pass. But shippers are keeping a close watch of the situation amid forecasts that the expanding oil slick may eventually spread into the key shipping lane.

 

At that point, the Coast Guard may restrict movement or require that vessels be decontaminated after passing through affected areas to prevent wider contamination, a process which can take one or two days, according to traders.

 

Major grain companies such as ADM, Bunge Ltd and Cargill said they were monitoring the situation, but have reported no departure from their normal operations.

 

If Gulf shipping is restricted or halted completely at some point, grain companies may divert supplies to other elevators at the Texas Gulf or load vessels at their facilities in the US Pacific Northwest or on the East Coast, analysts said.