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 September 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Navigation

Long Beach Port Honors OOCL Executive

Andrew Tung, CEO and Managing Director of Orient Overseas Container Line, was presented today with the prestigious “Port Pilot Award” by the Long Beach Board of Harbor Commissioners.

Maritime Reporter @ 75: The Daily Cartoon

Maritime Reporter & Engineering News was founded by John J. O'Malley (1905-1980) in 1939, and today ranks as the world's largest audited trade publication in the world serving the maritime industry,

Missouri River Basin is Booming

The U.S. Army Corps of Engineers Missouri River Basin Water Management Division is maintaining above normal releases at the four lower dams on the Missouri River.

News

USCG Reopens Port Allen Post Hurricane Ana

The Coast Guard Captain of the Port reopened Port Allen in Kauai Monday morning after surveying crews deemed it  safe for transit. The maritime public is advised

TRIYARDS Buys into Aluminium Shipbuilding Expertise

TRIYARDS Holdings Limited, an offshore vessel fabrication and engineering solutions provider to the oil and gas (O&G) industry, has added new capabilities, products

Singapore’s MPA Discuss LNG Bunkering

The Maritime and Port Authority of Singapore (MPA), Antwerp Port Authority, Port of Rotterdam and Port of Zeebrugge participated in a Liquefied Natural Gas (LNG)

Logistics

CEVA Airlifts Supplies to W. Africa for Ebola Response

CEVA Logistics - one of the world's leading supply chain management companies – airlifted  more than 70 tonnes  of urgent supplies to Monrovia, Liberia on October

Missouri River Basin is Booming

The U.S. Army Corps of Engineers Missouri River Basin Water Management Division is maintaining above normal releases at the four lower dams on the Missouri River.

Bollore Africa Logistics Sees Profit Plunge in H1

First half 2014 profit at shipping company Bollore Africa Logistics plunged to 5.89 billion CFA francs ($11.48 million) from 9.45 billion CFA francs in the same period last year,

 
 
Maritime Contracts Maritime Security Navigation Offshore Oil Port Authority Salvage Ship Electronics Ship Repair Shipbuilding / Vessel Construction Sonar
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: 0.1755 sec (6 req/sec)