The Van Trump Report

More “Mississippi River” Shipping Problems Ahead?

According to the latest outlook from the National Oceanic and Atmospheric Administration’s (NOAA) Climate Prediction Center, flooding is not expected to be an issue for the Mississippi River this spring thanks to an unusually hot, dry winter. Unfortunately, the lack of precipitation means shipping along the river could be disrupted again by low water levels for a third year in a row with drought in the Great Plains expected to persist or even expand.

This winter’s dry conditions were heavily influenced by the El Niño weather pattern. “Our scientists at the Climate Prediction Center observed one of the strongest El Nino events on record during the winter of 2023-2024,” said Jon Gottschalck, chief of the Operational Prediction Branch from NOAA’s Climate Prediction Center.

On the positive side, the dry winter means the overall threat of significant spring flooding is very low. According to the NOAA, this is the first “Spring Outlook” since 2021 with no population expected to be impacted by major flooding.

The not-so-positive side is that historically low snowpack could cause low flow conditions to return to main stem rivers in the Greater Mississippi River Basin later this year. Low flows have impacted navigation on the Mississippi for the last two years, though 2023 was an improvement over 2022. At one point during the fall of 2022, over 100 towboats and 2,000 barges — equivalent to 140,000 semis’ worth of freight — were stuck in the mud.

The main consequence of low water levels on the Mississippi is that barge companies have to reduce their loads, making it more expensive to send corn, soybeans, wheat, and other commodities downriver. Shipping costs along the river have soared the last two years. Spot rates more than tripled the three-year-average in 2022, and jumped more than +100% in some locations last year.  

Higher shipping costs of course make US exports more expensive, making it even harder for American farmers to compete with lower-cost suppliers like Brazil, Argentina, and Russia. About 60% of U.S. grain exports are taken by barge down the Mississippi to New Orleans, where it is ultimately transferred to other ships and exported. A typical group of 15 barges lashed together can carry the equivalent of 1,000 trucks.

I haven’t seen numbers for 2023 yet, but by the end of 2022, the Mississippi River Basin drought is estimated to have cost the U.S. $20 billion in lost economic output. Notably, slower exports in 2023 prevented barge rates from climbing as high as they did the previous year. Grain bound for export moved through the locks to the Gulf were down -19% last year versus 2022. USDA notes that if export demand last year had not plummeted, barge spot rates likely would have climbed even higher than in 2022.

One of the big wild cards for river levels this year is the expected return of La Niña, which could be in play as early as the first part of summer, according to the NOAA.  La Niña episodes can have a major impact on weather patterns throughout the US.

According to the NOAA, there is an 83% chance that a transition from El Niño to ENSO-neutral is likely to occur by April-June 2024, followed by a shift to La Niña. This year’s setup is expected to increase the odds of a hotter-than-normal summer in the central and eastern US. Meaning increased chances of drought setting in or deepening along the Mississippi as we experienced during the La Niña summers from 2020-2022. (Sources: USDA, NOAA, FreightWaves)

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