Study: U.S. Waterways Need Upgrading
Study: U.S. waterways need upgrading
World-Grain.com – Kansas City, MO – 10/30/19 – Arvin Donley
For many years, the United States’ waterway system has been the envy of other grain producing countries, many of whom produce bountiful crops each year but struggle to ship it. But the United States is in danger of losing this competitive advantage due to under investment in its aging inland waterways system, according to a study commissioned by the U.S. Department of Agriculture (USDA) and conducted by Agribusiness Intelligence.
The study, which was released in August, concluded that if the system isn’t upgraded it could put more than $72 billion in additional GDP and 77,000 new jobs at risk.
“The U.S. is in direct competition with Brazil for its agricultural export business, particularly for corn and soybeans — two of our largest exports,” said Ken Eriksen, senior vice-president of Agribusiness Intelligence’s consulting business and lead author of the study. “Therefore, infrastructure investments can have a tremendous impact upon a farmer’s profitability.
“Multinational corporations, including Chinese companies, are making significant investments in the Brazilian grain and soybean transportation and handling systems. While U.S. farmers currently have a cost advantage, if not addressed, U.S. infrastructure problems will erode that advantage, making U.S. grain and soybeans less competitive in global markets.”
The study found that while the United States currently has a 5.35-per-tonne advantage over Brazil when shipping soybeans on the inland waterways system (from Davenport, Iowa, to Shanghai, China), aging U.S. waterways infrastructure will increase the price to the end-user, lower the demand for U.S. grains and soybeans, and make them less competitive in global markets.
The U.S. inland waterways system, much of which was built during the 1920s and 1930s, is comprised of navigable areas of the upper and lower Mississippi River, the McClellan-Kerr Arkansas River, the Missouri River, the Illinois and Ohio river systems, the Tennessee River, and the Gulf Intercoastal Waterway. These waterways feed the Mississippi River export grain complex of elevators that extend from Baton Rouge, Louisiana, through New Orleans to Myrtle Grove. This region handles 57% of U.S. corn export volumes valued at $4.8 billion and 59% of U.S. soybean exports valued at $12.4 billion.
Eriksen said the study examined three scenarios that included potential impacts of reduced investment for U.S. waterways, maintaining the status quo of 2% growth, or increased investment of $6.3 billion during the next 10 years to help facilitate future export potential.
Current appropriated funds, which maintain the status quo, do not enable the U.S. Army of Engineers to keep pace with barge-volume traffic, let alone growth or infrastructure maintenance and improvements needs, the study found. The study estimates that by 2045, if inland waterway infrastructure is fully funded to meet the volume, maintenance and upgraded needs, employment will increase 20% to 472,000 jobs and the contribution to U.S. GDP would expand 39% to nearly $258 billion.
“U.S. agriculture has long been the envy of the world, not only for its yields but also due to its ability to move grains, soybeans and other products to the global marketplace in a competitive, efficient and reliable manner, thanks to a robust and expansive inland waterways transportation infrastructure,” Eriksen said. “However, that infrastructure is quite old — many of the locks are 80 years of age and far exceed their 50-year designed lifespans.”
‘Not a pretty picture’
Among the locks that have exceeded their intended lifespan are those on the Upper Mississippi and Illinois river systems, which transport large amounts of corn and soybeans. The study found delays on these waterways can cost operators and shippers more than $44 million annually. Randy Gordon, president and chief executive officer of the National Grain and Feed Association, said the study makes a strong case for the need to increase investment on the country’s inland waterways.
“Very importantly, this study quantifies the significant cost of further delays in rebuilding America’s inland waterway infrastructure, and it’s not a pretty picture,” Gordon said. “Foreign competition from countries like Brazil is only increasing given current trade disruptions, and China is investing aggressively in South America’s transportation infrastructure to the United States’ detriment.
Last year, Beijing-based China Communications Construction Co. (CCCC) broke ground on a port in Brazil’s northeastern state of Maranhao that will ship millions of tonnes of agricultural exports per year. That $520 million investment is being financed by the Industrial & Commercial Bank of China. The CCCC is also considering the purchase of an infrastructure investment fund that plans to build a large port in the southern state of Santa Catarina, mainly for soybean and beef exports.
China, which is in a heated trade war with the United States that has all but shut off U.S. soybean shipments, also upped its investment in Brazilian soybean production.
“This study is a wake up to the White House Office of Management and Budget and Congress to make the (Pre-Construction Engineering and Design) funding for the (Navigation and Ecosystem Sustainability Program) available this year, and to ensure growing investments are continued and expedited in the tremendous natural resources that America’s inland waterways represent,” Gordon said.