The Mississippi River provides the United States with a competitive advantage in the export of bulk agricultural commodities. This advantage in transportation costs allows U.S. commodities, including corn and soybeans, to better compete for market share with the product of other countries. Disruption of shipping on the Mississippi River can occur as a result of a variety of circumstances. Various events, particularly hurricanes, have previously suspended barge traffic on the Lower Mississippi River. While the Army Corps of Engineers is charged with maintaining the navigability of the Lower Mississippi River, the possibility of longer-term disruptions resulting from an avulsion of the Mississippi River at the Old River Control Structure has been considered by Lazard and Kennedy (2020).
The recent drought conditions have limited the shipment of agricultural commodities on the Lower Mississippi River due to draft limitations. The Ports of South Louisiana typically service over 55,000 barge shipments and 4,000 ocean-going vessels annually. The disruption of river commerce will force producers to consider shipping commodities using more costly alternative modes of transportation. Assuming the Mississippi River to be the most cost-efficient method of transporting soybeans, other modes of transportation to meet global demands will increase total transportation costs.
The immediate impact on agricultural exports can be seen through decreased barge traffic and increased barge rates. According to the U.S. Army Corps of Engineers, barge tows that are typically comprised of 36 barges are limited to 25 barges due to the decreased water levels (Kennedy, 2022) which significantly restricts the flow of grain to the Gulf. In addition, the USDA’s Grain Transportation Report (2022) indicated that the St. Louis barge rate for the week of November 8, 2022 was 145 percent higher than the previous year and 128 percent higher than the 3-year average.
As shown in Figure 1, nearly half of U.S. bulk agricultural exports flow through the Lower Mississippi River and the Ports of South Louisiana. The highest export volumes have occurred from October through January, particularly for the New Orleans Customs District (NOCD). The current drought conditions and resulting restrictions on barge traffic on the Lower Mississippi river will have significant implications for the U.S. agricultural sector. In addition to other supply chain issues that have existed, increased barge rates and decreased river capacity resulting from the abnormally low Mississippi River levels come at the time for peak export opportunity based on historic export data. Depending on the duration of the current drought conditions, these factors will likely combine to put downward pressure on the domestic prices of bulk agricultural export commodities.
Figure 1. U.S. Total and New Orleans Customs District (NOCD) Bulk Agricultural Exports by Month, Five Year Average in Million Metric Tons.
References:
USDA-AMS (November 10, 2022). Grain Transportation Report, accessed online at www.ams.usda.gov/GTR on November 16, 2022.
Kennedy, M. (2022). Mississippi River Barge Movements Restricted Due to Critical Low Water Levels. Progressive Farmer, accessed online at https://www.dtnpf.com/agriculture/web/ag/blogs/market-matters-blog/blog-post/2022/10/03/mississippi-river-barge-movements on November 16, 2022.
Lazard, P.M., and P.L. Kennedy (2020). Trouble at Old River: The Impact of a Mississippi River Avulsion on U.S. Soybean Exports. Journal of Food Distribution Research, 51(3): 1-5.
Author: P. Lynn Kennedy, Ph.D.
Crescent City Tigers Alumni Professor &
Department Head Agricultural Economics & Agribusiness
Louisiana State University and LSU AgCenter
Photo by Justin Wilkens on Unsplash
Kennedy, P. Lynn. “Barge Traffic Restrictions on the Mississippi River and Bulk Agricultural Exports.” Southern Ag Today 2(47.4). November 17, 2022. Permalink
