Condition of Illinois Infrastructure for Commodities

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1 Condition of Illinois Infrastructure for Commodities Prepared for Ken Eriksen Senior Vice President June 13, 2013

2 Soybean Logistics Chain and Global Competitiveness 2

3 Soybean Logistics Flows Multiple Markets and Routes 3

4 Industries Fully Dependent on Soybeans, Grains and Related Products To the Second Order Consumers in the Supply Chain: Delivery of commodities from farming of significant importance to the U.S. economy 1.5 million jobs, More than $352 billion in U.S. output, Over $41 billion in labor earnings, and Greater than $74 billion in value added on the U.S. economy. 4

5 Moving Soybeans to Market Position: United States and Brazil 100% 90% 80% Soybean Modal Shares in Brazil and United States % Soybean Modal Shares 60% 50% 40% 30% 20% Waterways Railways Highways 10% 0% Brazil United States 5

6 Where Illinois Soybeans Go, How They Get There 6

7 Illinois Soybean Flows Of Production (averaging 422 mil. bu.) About two-thirds remains in-state More than two-fifths outshipments Of the Out-Shipments (averaging 174 mil. bu.) 92% to export markets 8% to domestic markets Transport Dynamics of Out- Shipments 35% by barge 35% by rail 29% by container 7

8 Illinois Flowchart of Soybean Movements (2009/10) 8

9 Illinois Flowchart of Soybean Value (2009/10) 9

250,000 200,000 150,000 100,000 50,000 0 Illinois the Load Center for Containerized Grain and So

10 250, , , ,000 50,000 0 Illinois the Load Center for Containerized Grain and Soybean Exports U.S. Container Export Inspections by Crop BARLEY SORGHUM WHEAT CORN SOYBEANS 10 1,000 Bushels 2001/ / / / / / / / / / /2012

11 Deteriorating Infrastructure Research 11

12 Infrastructure Framework Infrastructure Problems = Inefficiencies Inefficiencies = Lower Effective Transport Capacity Lower Effective Transport Capacity = Higher Rates Higher Rates = Lower Farmer Returns 12

13 Deteriorating Infrastructure Situation Worsening roads and bridges More of Illinois s bridges have deteriorated than improved From 2010 to 2012 per the data 2,371 improved 3,426 deteriorated Illinois bridge deficiency and obsolescence has declined over the past decade Illinois bridges relative to the Nation have slowed in improvement 13

14 Illinois Bridge Infrastructure Age Profile (2012) 3,000 2,500 2,000 1,500 1, Number of Bridges % built prior to % built after 1965 Year Built

15 U.S. and Illinois Bridge Infrastructure Deficiency and Obsolescence 16% Illinois Structurally Deficient U.S. Structurally Deficient Illinois Functionally Obsolete U.S. Functionally Obsolete 15% 14% 13% 12% 11% 10% 9% 8% 7% Share of Total Bridges 15

16 Deteriorating Infrastructure Situation Backlog of Lock and Dam Repairs and Emergency Repairs Industry needs reliability through infrastructure maintenance Not full solution, clearing deferred maintenance buys down risk of catastrophic event or closure until authorized major rehabilitation or new construction can be appropriated and completed Diversion to other modes substantial 1 Barge = about 1,600 tons or 53,000 bushels 1 Railcar = about 110 tons or 3,670 bushels 1 Truck / Container = about 26 tons or 870 bushels So, One 15-barge tow on Illinois River is equivalent to 216 rail cars or 1,050 semi-trucks If 90-day closure at LaGrange Lock during peak soybean harvest movement 341 barge loadings diverted as 5,000 rail carloads or 21,000 truck loads 16

17 Long Term Problem on the Rivers Army Corps of Engineers Project Completion Schedule for Illinois Locks Major Rehabilitation Mel Price Upper Miss ILL WW Thomas O Brien L/D New Construction LaGrange L/D 24 Upper Miss 1200 Lock Addition L/D 25 Upper Miss Dam L/D 22 Upper Miss 1200 Lock Addition Year LaGrange 1200 Lock Addition L/D 25 Upper Miss 1200 Lock Addition Lower Mon 2,3 & 4 Replacement, Phase 1 Olmsted L/D Construction Year 17

18 Deteriorating Infrastructure Situation Truck Weight Limit and Overweight Fee Structures Differing state laws and bridge construction over the years Federal truck weight limits max. 80,000 pounds. Higher road weights improves competitiveness. Standardize Illinois overweight permits underway. Municipalities setting fees, industry lacks transparency In Illinois, bill limiting overweight truck permit fees that state and local governments could charge passed the Senate Transportation Committee, but was not enacted. The overweight fees can be changed at any moment by state, county, city and township governments. Driver shortages 18

19 Abundance of Rail Lines and Railroads Crisscross Illinois Lafayette Green Rock Kenosha Six Class I Railroads Serving all areas of United States Class I Railroads investing more than $10 billion annually Headwinds: coal and automotive Opportunities: energy, intermodal and grain Has its limitations Dubuque Lake Delaware Mchenry Boone Stephenson Winnebago Jo Daviess Berrien Jackson Jones Carroll Clinton Whiteside Cedar n Musc atine Louisa enry Des Moines Lee Hancock BNSF BNSF BNSF BNSF BNSF BNSF BNSF BNSF BNSF Davenport Henry Merc er Knox Warren Mcdonough Fulton Schuyler Marion Morgan Scott Pike Ralls Ogle Kane De Kalb Du Page Cook Lee Kendall Will Bureau Grundy La Salle Kankakee Putnam Stark Mars hall Peoria Peoria Mclean Tazewell Springfield UP Chicago Lafayette CN Jasper Newton Wa Miami Cass Livingston White Iroquois Ford Carroll Benton Howard Fountain Hamilton Vermilion Boone Mason Champaign Montgomery De Witt Logan Piatt Menard Vermillion Cass Parke Brown Mac on Douglas Edgar Johnso Morgan Moultrie Coles Christian Vigo Clay Owen Shelby Clark Brown Monroe Cumberland Monroe Jefferson White Hamilton Posey Vanderburgh Perry Franklin Randolph Henderson Washington Crawford Ste. Genevieve Saline Gallatin St. Francois Union lps Jackson Williamson Perry Webster Hardin Hendricks Putnam Pike Greene Montgomery Macoupin Sullivan Greene Ja Effingham Crawford Jasper Calhoun Jersey CP Lawrence Fayette Lincoln Bond Martin Daviess Montgomery Clay Lawrence Wa Madi son Richland Knox Orange Warren St. Charles Marion St. Louis Clinton St. Louis Pike Dubois Wayne Edwards Wabash Gibson Crawford St. Clair Franklin Washington Gasconade Jefferson Daviess Kal Van Buren Elkhart St. Joseph La Porte Porter Lake Marshal l Starke Kosciusk Fulton Pulaski Warren Warrick NS CSX Spencer Perry Hancock Other Class 1 Non Mclean Class 1 Rail Ohio Tipton Ind Mea Breckinridge Grays Dent Iron Madis on Cape Girardeau Union Johnson Pope Crittenden Hopkins Muhlenberg Butler E Shannon Reynolds Wayne Bollinger Pulaski Alexander Ballard Scott Mass ac Mc crac ken Livingston Marshall Caldwell Lyon Trigg Christian Todd Logan War Simpson 19

20 Longer Term Problem in a World of Opportunity From surveys, desk research and data analysis Number of deficiencies across modes is increasing Time and money required for rehabilitation is increasing Design, permitting, material and labor costs all increasing Permitting process can be extensive Time to complete projects challenged based on funding process and complexities Volume of agriculture goods is increasing U.S. population growth is positive Asia demanding greater agricultural supplies U.S. crop production potential has substantial growth curve Panama Canal expansion presents opportunity for enhanced exports 20

21 Where is the Silver Lining? 21

22 Economic Impact of Repairs and Upgrades Bridges: Studied 12 Illinois bridges and estimated an average $10.24 return for every dollar invested in repairs. Locks: Clearing the $560 million deferred maintenance of lock and dam components will generate savings totaling $1.2 billion over next 15 years, improving reliability and buy down risk of catastrophic failure. Truck Weight: Increasing weight limits decrease need for drivers moving agricultural products by 20% and save $84 million industrywide per year. 22

23 Condition of Illinois Infrastructure for Commodities Prepared for Ken Eriksen Senior Vice President June 13, 2013

Outline. Outlook for Crop Farm Income, Cash Rents, Farmland Prices, and Agricultural Credit. U.S. Corn Yield, U.S.

Outline. Outlook for Crop Farm Income, Cash Rents, Farmland Prices, and Agricultural Credit. U.S. Corn Yield, U.S. Outlook for Crop Farm Income, Cash Rents, Farmland Prices, and Agricultural Credit September 1st, 217 Outline Outlook for Crop Farm Income, Cash Rents, Farmland Prices, and Agricultural Credit Gary Schnitkey,