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

News

Pentalver Opens London Container Facility

U.K. inland container service operator Pentalver opened a new five-acre site at the U.K.’s newest deep sea container port, DP World London Gateway, the London Port Authority announced.

USCG’s New Cutter Pulls into Boston

The U.S. Coast Guard’s (USCG) latest 418-foot National Security Cutter James (WSML 754) entered Boston Harbor August 3 ahead of her commissioning scheduled for August 8.

Egypt Says Finishes Work on New Suez Canal

Egypt has finished building its New Suez Canal, its overseer said on Wednesday, a project President Abdel Fattah al-Sisi sees as a symbol of national pride and

Logistics

Pentalver Opens London Container Facility

U.K. inland container service operator Pentalver opened a new five-acre site at the U.K.’s newest deep sea container port, DP World London Gateway, the London Port Authority announced.

Egypt Says Finishes Work on New Suez Canal

Egypt has finished building its New Suez Canal, its overseer said on Wednesday, a project President Abdel Fattah al-Sisi sees as a symbol of national pride and

CMA CGM to Resume Service to Iran

The world's third-largest container shipping group, France's CMA CGM, said on Monday it would resume operations to Iran following the deal between Tehran and world

Great Lakes

MacArthur Lock Dewatered for Emergency Repairs

The U.S. Army Corps of Engineers, Detroit District, announced the MacArthur Lock, located on the Soo Locks at Sault Ste. Marie, Mich., is experiencing mechanical

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Offshore Oil Pipelines Salvage Ship Electronics Ship Simulators Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | 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: 0.1765 sec (6 req/sec)