Only about 7 percent of U.S. soft red winter wheat exports were shipped through the Texas Gulf through the first six months of 2010, U.S. Department of Agriculture export inspections data showed. Most of the wheat shipped from the Texas Gulf is hard wheat, used for bread flour.
Soft red wheat, a low-protein variety used to make pan breads and snacks, is grown mostly in the eastern Midwest and parts of Missouri and Arkansas. About a third of the U.S. crop is exported, typically transported by river barge to terminals around New Orleans.
Traders at the Chicago Board of Trade downplayed the market impact of the discounted rate, doubting it would raise demand for cash wheat out of the Chicago delivery terminals.
One reason is poor export demand for soft red winter wheat, which is forecast to comprise only 6.4 percent of all U.S. wheat exports in the 2010/11 marketing year.
"There has been a lot made out of the Burlington Northern dropping rail rates from Chicago to the Texas Gulf as possibly sucking deliverable receipts out of the system, but we need actual (export business) for that to happen," ABN AMRO analyst Charlie Sernatinger wrote in a note to clients.
Still, traders wondered who might have bargained with BNSF for the discount, and why.
"I suspect that somebody said, 'I will do x number of trains, if you put this in,' said Roy Huckabay with the Linn Group, a Chicago brokerage.
"Did they request it because they have a soft wheat program developing? Did they request it because they can't get anyone to sell them barges? I don't know," he said.
A notice on BNSF's web site, dated Dec. 28, said the rate applies to 110-car trains of wheat originating from Chicago, southwest Wisconsin, Kansas City and St. Louis, among other locations, from Feb. 1 to May 31.
Officials from BNSF were not immediately available for comment.
Wheat traders estimated the freight costs under the special rate worked out to roughly 58 cents per bushel of soft red wheat, compared to roughly 70 cents for wheat shipped by from northern Illinois to the Gulf by barge. (Reuters)
