Low Mississippi Water Levels a Growing Concern for U.S. Exports and Basis Levels at and After Harvest
Basis Impact 100422
As if agricultural shippers did not have enough supply chain challenges, there is current and growing concern related to the diminished water levels along the inland waterway system that will impact barge transportation. Due to the scarcity of precipitation throughout the year, the water depth along U.S. waterways is limiting the efficiency of barge transportation in two ways – channel depth and channel width. For farmers that can negatively impact cash basis levels and their ability to export during and after harvest.
Low water levels on the Mississippi River are of particular concern in the area south of St. Louis. Barge companies are having load barges lighter to prevent groundings, which have already occurred. Mike Steenhoek, Soy Transportation Coalition Executive Director says, "One foot less of water level will result in you having to lighter load that barge with 5000 fewer bushels of soybeans. And then when you consider that a single barge can accommodate easily 50,000 bushels of soybeans you’re looking at a 10% reduction."
The width of the barges is also down from the normal 40, to a maximum of 25. This a concern for farmers like Mike Korth of Randolph, Nebraska, who are in the midst of harvest. "Depth of the barge and now they’re even talking width of the barges which I’ve never heard before. But they’re going to have to narrower because the water level is so low that you know they don’t want to ground them. You ground one of them and you’ve got problems," he says.
Steenhoek says with the lower volume the barges have to make more turns and that has pushed freight rates up over last fall as well. He says, "From this period last year barge rates have increased 41% if you’re loading a barge in the middle part of the Mississippi River between Minneapolis St. Paul and St. Louis."
Slowing barge traffic is already having an impact on cash grain prices and soybean basis around St. Louis plummeted last week. Matt Bennett, AgMarket.Net says, "You saw bean basis go down 50 to 60-cents on soybeans depending on which terminal you were talking about. You know there’s a lot of issues because you can’t float barges that are full down the river and with that being the case you know it just increases costs for everyone to move less bushels."
And basis could be impacted for some time according to Allison Thompson, with The Money Farm, "We could see basis definitely get wider if they don’t see any relief and I don’t think they will." And Unfortunately, precipitation over the next month is expected to be limited – further exacerbating the shipping challenges and export concerns.
USDA’s weekly export inspections will be the key thing to watch in the weeks ahead to see how much the low river levels are impacting new crop export shipments from the U.S.
