Illinois River Lock Closure May Spur CME Grain Contract Tweaks

Posted by Eric Haun
Friday, July 11, 2014

An upcoming river lock repair project in south Chicago has attracted the attention of exchange operator CME Group because the lock's closure could disrupt deliveries against its Chicago Board of Trade grain and soybean futures contracts.

The U.S. Army Corps of Engineers will close the 64-year-old T.J. O'Brien lock and dam on the Cal-Sag Channel for two phases of repairs beginning on Nov. 3 and again on Jan. 19. It is the northernmost of eight locks on the Illinois Waterway system, near the entrance to Lake Michigan.

Each closure will halt traffic there for 47 days and could make it more difficult or costly for buyers of futures contracts to take delivery of grain housed in Chicago since the lock lies within the contracts' delivery zone 1.

The exchange has no plans in place yet to revise its delivery rules but is monitoring the situation, said David Lehman, CME's managing director of commodity research and product development.

Grain analysts said the closure is not likely to trigger a force majeure declaration by the exchange because grain housed in Chicago could feasibly be moved by truck or rail or shipped around the closure via Lake Michigan and the Chicago River via the smaller Chicago Lock.

But CME action cannot be ruled out, particularly if low cash market prices due to heavy post-harvest supplies spur deliveries, they said.

"This comes at a time when I think basis levels are going to be extremely depressed and deliveries may be the best sale for some guys. But I don't see shutting off the northern part of the river as being that important because the biggest share of the crop's going to be south of Chicago," said Roy Huckabay, analyst with The Linn Group.

The delivery period for November soybeans starts Nov. 3 and December corn and wheat deliveries begin on Dec. 1.

Difficulties taking delivery could widen spreads, analysts said. Full carry on the December/March corn spread, for example, is around 18 cents, and the spread itself was near 11 cents on Friday.

There have been no major objections to the timing of the lock project, which was announced this spring, said the Army Corps' Illinois River operations manager, Mike Zerbonia.

A month-long break between the project's two phases will allow cargo backed up by the closure to pass.

Repair work is needed to replace several worn components of the lock, which opened in 1960 and continues to operate with many original components.

If a part of the lock and dam structure known as a sheet pile cell were to rupture, navigation would be halted for at least 60 days, resulting in economic losses of $18.3 million, an Army Corps evaluation found.

While the vast majority of cargo passing through T.J. O'Brien is manufactured goods and energy products, as much as 15 percent of cargo can be food and farm products, according to Army Corps data.

(By Karl Plume; Additional reporting by Jo Winterbottom; Editing by Jonathan Oatis)

Maritime Reporter February 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Navigation

USS Jason Dunham Enters U.S. 6th Fleet

The Arleigh Burke-class guided-missile destroyer USS Jason Dunham (DDG 109) entered U.S. 6th Fleet’s area of operations in support of U.S. national security interests in Europe March 3, 2015.

VesselVanguard Partners with Hatteras Yachts

VesselVanguard announced today a new partnership with Hatteras Yachts to provide a five-year subscription for its award-winning maintenance management solution

Winter in US Northeast Takes a Toll on Ferries

With its black hull rumbling against a field of broken ice, the Warren Jr. slowly eased away from a dock in the Boston suburb of Hingham on Tuesday, aiming to clear

News

INTERSCHALT Expands Africa, Asia Service Networks

INTERSCHALT maritime systems AG, the provider of maritime software, services and supplier of Voyage Data Recorders (VDR 4G[e] and s-VDR) has expanded its network

Access to Brazil's Itajai Port to Open as Truck Protest Ends

Protesters have agreed to open access to Brazil's main poultry exporting port of Itajai in Santa Catarina state, the port said on Wednesday, ending a lingering

E-marine Begins Fleet Expansion

E-marine, a provider of submarine cable installation and repair solutions in the Middle East and Sub-Continent region, has unveiled plans to expand its fleet of cable ships in 2015,

Logistics

BG Group's Australian Project Helping to Double LNG Supplies

A smooth start to operations at BG Group's Australian project in Queensland is expected to help the British company to roughly double its liquefied natural gas (LNG) supplies in 2015/16,

Seadrill: Rig Rates Have Not Bottomed

The market for oil and gas drilling rigs continues to deteriorate as oil companies cut back on investments, Seadrill Chief Financial Officer Rune Magnus Lundetrae

UAE Shipping Delegation to Meet with Greek Counterparts

A delegation of Middle East maritime heavyweights including H.E. Khamis Juma Buamim, chairman & group CEO Drydocks World and Maritime World and Rashid Mohammed Al Habsi,

 
 
Maritime Contracts Maritime Security Naval Architecture Navigation Pipelines Pod Propulsion Ship Repair Ship Simulators Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1615 sec (6 req/sec)