For the third consecutive year, historically low water levels on the lower Mississippi River are impacting the supply chain. While it isn’t translating into lost export business for the U.S., it’s having a negative impact on basis levels as higher transportation costs are passed on to farmers in the form of lower cash prices.
According to Pro Farmer, a lack of rain has led to reduced barge draft and tow sizes along the Mississippi river system, causing delays and groundings near Hickman, Ky., according to USDA’s Grain Transportation Report.
Pro Farmer reports grain transport along the river has fallen below last year’s levels and the seasonal average.
The Drought Picture Plaguing the Corn Belt
The latest U.S. Drought Monitor shows just under 50% of the country is experiencing moderate to exceptional drought. Sixteen states are seeing extreme drought and five states are experiencing exceptional drought.
Most of the increases in drought over the past week took place in the Eastern Plains, Midwest and South.
Impact of Lower Mississippi River on Soybeans
At St. Louis, water levels rebounded with ample rain during spring and early summer, but both declined significantly past mid-July. The same pattern followed at Memphis with the exception of a short-lived uptick in water levels due to Hurricane Helene.
“It did result in a pretty dramatic 15-foot-plus spike in a short period of time. But now we’re basically back where we were prior to the hurricane with low water levels resuming. The concern is that it impacts barge transportation,” says Mike Steenhoek, executive director, Soy Transportation Coalition.
How Farmers Bear the Cost
Steenhoek says barge restrictions are once again lowering the number of barges in tow and how heavy barges can be loaded.
“Every foot of reduced water depth or draft is the equivalent of loading 7,000 fewer bushels of soybeans on an individual barge,” he adds. “You can see an overall reduction of 10% to 15% on the modest end of the spectrum all the way up to 30% to 40% reduction, which is really considerable.”
In turn, that raises barge freight rates and cash basis takes the hit.
“The shippers tend to not absorb that themselves. What typically happens is those costs are passed on to the farmer in the form of a lower price at that point of delivery or a more negative or wide basis,” Steenhoek says.
The timing couldn’t be worse for soybeans as it’s coming during harvest season and the peak export window.
“You’ve got to move the volume because South America is going to be a viable supply option come the first of the year or certainly not long after that,” says Alan Brugler of Brugler Marketing. “This is not ideal. Fortunately, the Panama Canal is in better condition than it was a year ago, so that’s one thing that’s different.”
However, more soybean exports will shift to the rail system to move through the Pacific Northwest, thus raising rail costs, which are also passed onto the farmer.
