Evening Report | October 7, 2022
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Your Pro Farmer newsletter is now available... A logjam of ships, tugboats and barges due to low water levels on the Mississippi River is threatening to grind trade of grains, fertilizer and other goods to a halt. Impacts are wide-ranging as harvest rapidly advances, including surging freight/barge rates, plunging corn and soybean basis and reduced exports from the Gulf. Unfortunately, the forecast suggests there will be no major rain events for at least the next month to boost water levels on the lower Mississippi River, meaning conditions could worsen near-term. USDA will make big changes to its 2022-23 balance sheets on Oct. 12 as it incorporates Sept. 1 stocks, the final 2022 wheat crop estimate and any adjustments to its corn and soybean crop estimates. On the global front, economic concerns are building as rising interest rates to tame surging inflation slow growth. OPEC+ announced a major oil production cut, which threatens to tighten supplies and push up energy costs even more. The Supreme Court started hearing a case against EPA’s Waters of the U.S. definition that could have huge impacts for agriculture. On Oct. 11, the Supreme Court is expected to take up the case against California’s Proposition 12 rule – another major case for agriculture. Meanwhile, EPA may propose electric vehicles be eligible for renewable fuel credits. We cover all of these items and much more in this week’s newsletter, which you can access here.
Mississippi River low water disrupts supply chain at peak harvest... The National Grain & Feed Association (NGFA) said low water levels on the Mississippi River are impacting member companies, causing diminished barge capacity and one-way river traffic during peak harvest season. NGFA said it is working with its members, stakeholder partners including the Waterways Council Inc., and the U.S. Army Corps of Engineers to ensure every possible effort is made to relieve strain on the supply chain. Barge terminals are struggling to load barges with some terminals unable to operate due to low water at docks, stalling the 2022 harvest from getting to the Gulf of Mexico for export. To keep river traffic flowing, the U.S. Army Corps of Engineers has been dredging the Mississippi at several locations and placed limits on the number of barges for each tow, the U.S. Coast Guard is marking channels and operators are light-loading barges.
The Corps’ St. Louis District issued a Sept. 30 press release saying it has been monitoring low water levels along the Mississippi River, detailing several dredges. “In addition to the Dredge Potter, we have the Dredge Jadwin from the Vicksburg District working the lower end of the Mississippi and we are using the Dredge Goetz from the St. Paul District to address the Illinois Waterway,” said Lou Dell’Orco, chief of operations. “The St. Louis District has also utilized the Louisville District’s contract Dredge Bill Holman.”
Biden warns of nuclear ‘Armageddon’... President Joe Biden warned the Russian invasion of Ukraine invites the highest nuclear “prospect of Armageddon since Kennedy and the Cuban missile crisis” in 1962. Putin is “not joking when he talks about potential use of tactical nuclear weapons, or biological or chemical weapons — because his military is, you might say, significantly underperforming,” Biden said at a DSCC fundraiser, at the Manhattan home of James and Kathryn Murdoch. “I don’t think there’s any such thing as the ability to easily [use] a tactical nuclear weapon and not end up with Armageddon,” he added.
“I’m trying to figure out: what is Putin’s off-ramp? Where does he find a way out?” Biden said. “Where does he find himself in a position that he does not only lose face, but lose significant power within Russia?”
European leaders affirmed the warning, saying it shows the seriousness of the threat from Moscow’s escalation in Ukraine.
UN working to extend Ukraine grain export deal... The United Nations is working to expand and extend for a year the deal allowing Ukrainian Black Sea grain exports, which could expire in late November. UN aid chief Martin Griffiths and senior UN trade official Rebeca Grynspan are set to travel to Moscow in about a week to discuss both issues with senior Russian officials. A UN spokesperson told Reuters, “The Secretary General and his team are engaged in intense contacts on these issues. Mr. Guterres and the team are working hard on having an expanded and extended Black Sea Grain Initiative. They’re working actively to remove also the last obstacles to facilitate the export of Russian grain and fertilizer.”
Jobs growth slows again... The U.S. economy added 263,000 non-farm payrolls in September, down from 315,000 in August and 537,000 in July. The unemployment rate dropped to 3.5%. Hourly earnings rose 0.3% in September and climbed 5.0% over the past year.
While jobs growth has slowed dramatically the past two months, traders still priced in 90% odds of another 75-basis-point increase in November.
DOL to unveil final H-2A worker rule updates... The Department of Labor (DOL) on Oct. 12 will publish its final rule on H-2A workers with adjustments to the wage methodology contained in a draft rule issued in 2019, while making other changes. DOL said the final rule contains what it says are improvements in safety and health protections for workers housed in rental or public accommodations. It streamlines and updates bond requirements for labor contractors, clarifies the housing certification process to allow state and local authorities to conduct housing inspections, makes electronic filing mandatory for most applications to improve employers’ processing efficiency and modernizes the methodology and procedures for determining the prevailing wage to allow state workforce agencies to produce more prevailing wage findings. The latter provision requires workers to get the higher of the prevailing wage; state or federal minimum wage; or what is known as the adverse-effect wage rate. The final rule takes effect Nov. 14.
Biden mulls options after OPEC+ moves to cut oil output... OPEC+’s decision to slash oil production has the White House considering responses that could include measures aimed at breaking the cartel’s hold on markets or limiting U.S. oil exports should shortages emerge. The cutback is the latest dilemma for President Biden, who has sought to transition the U.S. away from fossil fuels while at the same time keeping consumer prices in check. A long fall in gasoline prices has started to reverse, and this week’s OPEC decision to cut oil production by 2 million barrels a day threatens to push prices higher again just weeks before the Nov. 8 midterm elections, the Wall Street Journal reports. “There are a lot of alternatives, and we haven’t made up our minds yet,” Biden told reporters Thursday outside the White House.
Legislation that would allow the U.S. to sue OPEC nations is being considered as a possible response to the oil cartel’s production cut this week that benefited Russian President Vladimir Putin, said Senate Majority Leader Chuck Schumer (D-N.Y.) on Thursday.
White House still wants to refill SPR – when prices are lower... The Biden administration is still planning on replenishing the nation’s crude oil emergency stockpiles when the price of oil goes down, White House energy advisor Amos Hochstein said on Thursday. The White House made the decision in March to release a million barrels of crude oil per day from the nation’s petroleum reserves to supplement the market while U.S. production ramped up to meet demand, with the intent on lowering prices. The drawdowns were supposed to last until October, but a portion of the sale of reserves has been pushed out into November — the month when OPEC+ will likely see about a million-barrel-per-day (bpd) cut from its production. Meanwhile, the U.S. has seen just a 200,000 bpd increase in crude oil production since the Strategic Petroleum Reserve (SPR) decision was made.
National Railway Labor Conference issues FAQs on rail labor deal ratification process... The National Railway Labor Conference, an association representing Class I freight railroads in rail labor negotiations, shared expected ratification dates for each union as well as a series of Frequently Asked Questions (FAQ) regarding the process. Railroad and union representatives announced on Sept. 15 they had reached a preliminary agreement in time to avert a nationwide rail shutdown. The deal extends the cooling-off period as union members consider ratifying the deal. The FAQ states that if the unions fail to ratify the deal, the parties have agreed to maintain the status quo and it would “not present risk of an immediate service disruption.” Four unions have ratified the agreement, while eight are pending.
Among the Q&As:
Q: What happens if ratification is unsuccessful?
A: In the event of a failed ratification, the parties have agreed to maintain the status quo for a period of time pending any further discussions and assessment of next steps. As such, a failed ratification does not present risk of an immediate service disruption.
Q: What is the status of negotiations over crew size?
A: The carriers have proposed to redeploy conductors from the cab of the locomotive to ground-based positions in PTC-enabled territory. This is an important issue for both the railroads and the employees. For the railroads, redeploying conductors will allow the carriers to continue to operate safely but more efficiently while maintaining customer service levels. On the employee front, ground-based conductor positions are expected to be regular assignments with predictable schedules. This type of scheduling will significantly enhance employee quality of life by eliminating the need for many conductors in through-freight service to overnight away from home.
The carriers invited SMART-TD to negotiate nationally over the crew size issue at the outset of the bargaining round, but this invitation was rejected. As a result, direct bargaining over crew size (which was delayed almost two years until SMART-TD legal and procedural objections could be resolved) has taken place on a carrier-level basis. The NCCC believes crew size must be addressed across the industry and views resolution of the carriers’ crew size and redeployment proposals as a matter of the highest priority. The national agreements were structured to allow local discussions regarding crew size to continue.
Q: Are railroads having trouble hiring?
A: As has been widely reported in the media, employers across the nation have faced challenges attracting and retaining qualified employees. The railroads, however, are far outperforming the broader labor market. The carriers reported more than 42 applicants per hire during 2021 – well above the benchmark ranges of 3:1 to 25:1 that normally are considered to be sufficient by workforce planning experts. Preliminary numbers from 2022 remain strong, with a similar number of applicants and even more hires.
Although the carriers’ overall recruiting data remains strong, they have been affected in certain local labor markets by some of the same forces that are impacting other employers. As a result, the railroads have ramped up their hiring efforts in those specific areas, including by offering the type of targeted incentives that are increasingly common in areas where the labor market is most challenging. The railroads currently are meeting or making progress toward their hiring goals. The new tentative agreements also increase compensation significantly, maintain platinum level healthcare benefits, and improve employee quality of life – factors that should further enhance the industry’s ongoing recruiting and retention efforts.
Q: Are claims that mid-career employees are “quitting in droves” accurate?
A: No, claims that employees are quitting in droves are not accurate. In the first part of 2022, each individual carrier’s voluntary attrition rate was between 2.0 percent and 3.7 percent. This is just a fraction of the 13.1% quit rate during the same time period reported in the Bureau of Labor Statistics’ JOLTS survey for the transportation, warehousing, and utility sector.
Moreover, among employees with more than five years of service, the carriers have voluntary attrition rates among employees that are a small fraction of the rates currently experienced on average by other employers. For employees with more than ten years of service, the carriers’ voluntary attrition rates are even lower – meaning that the retention rate for mid-career rail employees remains among the best of any industry.
