Shipping record U.S. corn crop burdens railroads, barge lines By Julie Ingwersen and Karl Plume CHICAGO (Reuters) - Harvesting the largest U.S. corn crop on record and transporting it on railroads and rivers to markets here and abroad is driving up costs for rail cars, barges and trucks in the world's top crop producer and exporter. After three years of crop shortfalls that left grain supply pipelines all but empty by late summer, the U.S. grain handling system is now tasked with quickly absorbing a huge corn crop - projected at a record 13.8 billion bushels, around half of which is already harvested. "You have a record North American grain mass, and you went from zero to 100 miles an hour in two weeks," said Charlie Sernatinger, an analyst with ED&F Man Capital in Chicago. With the bulk of the estimated 3.15-billion-bushel soybean harvest complete, farmers are turning their attention to the much larger corn crop, and yields so far are surprisingly big. People were projecting a sizable corn harvest, but yield results coming in from the field are better than expected. That's going to tax the system even more," said Mike Steenhoek, executive director of the Soy Transportation Coalition. Already, costs for rail freight have surged this month, due in part to strong export demand for U.S. soybeans and hard red winter wheat. Also, grain traders say freight trains have been running slowly, especially in the western half of the country. Normally they get 2.5 or 2.8 turns a month, sometimes 3. They're getting maybe 1.6 or 1.8 right now," said a grain trader who asked not to be named, referring to the number of trips rail cars were making each month. Service on the BNSF Railway, a major hauler of grain from Midwest to Pacific Northwest export terminals, has slowed after recent infrastructure upgrade projects fell behind due to adverse weather, he said. BNSF said it was working with its customers to "address the challenging service issues the grain supply chain is experiencing during this record compressed harvest season." Industry sources said a growing number of ships were waiting for rail-delivered grain to load at Pacific Northwest export terminals. "There are lots of vessels waiting in the Pacific Northwest that are waiting to be loaded and railroads are having trouble keeping up," said Steenhoek of the Soy Transportation Coalition. Rail cars are commonly traded in a secondary market by brokers who trade space on 100-car "shuttle trains," expecting the trains to make a certain number of trips. When the trains run more slowly, these brokers are forced to pay up for more freight to cover their commitments. They have to go back and buy them from the market, and they buy them from the same guys who have the same problem that they've got. So the market goes up exponentially," said Joe Christopher, a grain merchandiser with Crossroads Commodities in Sidney, Nebraska. Freight on BNSF has traded as high as $2,400 a car this month, Christopher said, although nearby bids have since fallen to about $1,300. The same freight for December is trading near $600, another grain trader said. The influx of newly harvested crops has also raised costs for shipping grain on Midwest river barges to export terminals at the U.S. Gulf Coast, particularly on the lower Ohio River, where a lock construction project has caused severe delays near its confluence with the Mississippi. Costs for southbound freight last week rose to an average of $28.04 per ton, up 23 percent from the three-year average, the U.S. Agriculture Department said. Mid-Mississippi River barge freight was $33.57 per ton, 11 percent above the average. There's not a barge shortage. It's just that grain is really moving now," said a Midwest barge broker. The Gulf needs corn right now and especially beans. We're probably going to export 40 million bushels of soybeans a week for the next three months, with maybe half of that from the center Gulf. Grain bottlenecks are occurring at the local level, where producers and country elevators are contending with big yields and, for corn, varying moisture levels. "Depending where you are in the Corn Belt, you've got some high moisture that you are dealing with, and that is just gumming up the works, trying to dry it down," said Ken Erickson, a transportation expert with Informa Economics. The moisture level of corn is about 30 percent at maturity, and farmers try to wait until it dries to 15 to 20 percent before harvesting to avoid the extra cost of drying it artificially. In Iowa, the top U.S. corn state, the corn is coming in with a range of moisture levels, complicating the job of storing it. This year, I might be getting really dry corn, followed by some wet stuff, and I can't blend those together. So I've got to pile the dry corn here and wet corn there. It's a bigger logistical nightmare because of that," said Chad Hart, an extension economist with Iowa State University. You are doing this at a time we are staring at the biggest crop we've ever produced.