Low water levels continue to hamper traffic moving harvest to Gulf ports
There was very little good news last week for grain shippers struggling to get this year’s harvest down river to Gulf of Mexico ports via the Mississippi River.
“Unfortunately, conditions continue to deteriorate due to historically low water,” said Mike Steenhoek, executive director of the Iowa-based Soy Transportation Coalition. “The limits on channel depth and channel width restrict the economics of barge transportation at a very inopportune time for U.S. farmers. (It’s harvest) ‘game time’ for farmers and the supply chain responsible for transporting soybeans and grain to domestic and international customers. Barge transportation is an essential component of this.”
Steenhoek noted that as of last week, tugboats were only allowed to move up to 25 barges at a time, as opposed to 30 to 40 barges when water levels are normal.
“For soybeans, it is of particular concern given that 80% of exports occur between the months of September and February,” he said. “According to the U.S. Department of Agriculture, 54% of soybean exports are transported to port regions via barge. The strength of U.S. soybean exports and the condition of the inland waterway system are closely interconnected.”
In response, corn and soybean buyers that rely on inland waterways to move their product are slashing what they’re willing to pay. East of the Mississippi River, in portions of Indiana, Kentucky and Tennessee, prices for soybeans and corn are more than $1 below the CBOT (Chicago Board of Trade) price.
Iowa and Missouri are also seeing higher-than-normal basis spreads, including in Davenport where soybean prices were about 90 cents per bushel below the CBOT price at one point last week. Normally at this time of year, the soybean basis in this region is 30 to 45 cents below basis. Similarly, the soybean basis in St. Louis was 95 cents last week.
Corn basis was holding up a little better, at about 30 cents below CBOT in Davenport and 50 cents below in St. Louis.
Steenhoek noted that because barge capacity has significantly decreased due to channel depth and width limitations, there is an increased demand for barges, barge crews, towboats, etc., to transport the 2022 harvest.
This demand exerts upward pressure on freight rates. According to the U.S. Department of Agriculture (USDA), transporting a ton of soybeans — loaded in St. Louis — cost $90.45 per ton during the week ending on Oct. 4. Last year, the same shipment cost $28.45; that is a 218% increase in barge freight rates over the past year.
“Fortunately, the U.S. agriculture supply chain includes the Pacific Northwest, the Atlantic Coast and other port regions,” Steenhoek said.
“But the inland waterway system that connects much of the Midwest with our number one export region near the Gulf of Mexico is clearly under stress and a continued reason for concern.”
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