Low Mississippi River level will challenge grain movement again this harvestView Source
Persistent drought conditions in the Mississippi River region are expected to complicate transportation again during the most important agricultural shipping period of the year, according to American Farm Bureau Federation Economist Daniel Munch.
In a recent Market Intel report, Munch said water levels on the Mississippi River, a major thoroughfare for grain, is threatening barges’ ability to effectively navigate at full capacity.
According to the U.S. Army Corps of Engineers, the height of the river’s surface relative to the zero-stage level of 379 feet above standard sea level at St. Louis is 1.13 feet as of Aug. 22, 46% lower than the prior three-year average of 4.37 feet and 24% below last year’s level of 1.49 feet on the same day.
The impact could be significant, according to Munch, noting that 95% of corn, 94% of soybeans and 45% of wheat moved by barge traveled through the Mississippi River system to Louisiana, making the river the most significant inland waterways for grain movement to export markets.
“That corresponds to an average annual volume of 32 million tons of corn, 33 million tons of soybeans and 9 million tons of wheat traveling to Louisiana,” Munch said.
The shipping industry generally compensates for those low water levels by reducing draft allowances, which reduces the volume of goods moved. Beyond draft allowances, the industry often reduces tow sizes, or the number of barges a single boat can tow, further compounding the impact says Munch.
“Combined, this means more barges will be needed to move the same quantity of products and more boats will be needed to move smaller groups of barges, pressuring capacity and slowing downstream user efficiency.”
While barge rates haven’t increased yet, pressured capacity in barges and boats usually means increases competition for transportation, pushing up costs for shippers looking to get product moved.
USDA’s Agricultural Marketing Service tracks weekly barge rates for downbound freight originating from seven locations along the Mississippi River system. While rates are currently in line with previous years, rates as of Aug. 16 reflected the eighth consecutive weekly increase.
“It is important to note that last year’s barge rates did not react to low river levels until September and October when rates soared to record levels over 2,000% of their underlying benchmark,” Munch said.
USDA’s grain transportation report indicates that lower-than-average demand for grain transportation this summer has lessened the impact of low water levels on shipping rates thus far.
For the week ending Aug. 12, year-to-date 2023 total downbound barged grain tonnage at St. Louis was 10 million tons or 28% lower than the same week last year and 25% lower than the previous four-year average.
“Part of this is linked to weaker export demand for marketing year 2022-23 and lower domestic grain stocks,” Munch said.
“But the additional uncertainty of potential barge transportation disruptions due to low water levels in the Mississippi River is especially problematic during the harvest season, when farmers are looking to move grain to storage facilities.”