As harvest gets underway, US agriculture is facing low Mississippi River levels for a fourth year in a row. The low water levels are again disrupting grain barge traffic on the Mississippi and threaten to boost freight costs, adding yet another complication for US ag exporters.
Typically, around half of all US grain and soybean exports travel through the Mississippi River system. In late September, some 87% of US soybeans shipments were departing via the Mississippi Gulf. Those shipments were mostly going to Egypt and the UK. Notably, China has not bought any US soybeans this season so there is nothing moving out of Pacific ports.
According to a report from North Dakota State University, states dependent on Pacific Northwest rail channels have experienced the sharpest basis declines, while railroads have shifted rates to favor gulf movements, accelerating a structural pivot in grain flows. “The outlook underscores how absent Chinese demand is reshaping US export flows, widening Northern Plains basis, and eroding farm-gate returns,” the report said.
That means more production from upper Midwest farmers will likely need to flow to the Gulf via the Mississippi River. However, low Mississippi water levels on top of increased shipments stand to back everything up and compound problems for exporters.
According to the National Waterways Foundation, US inland waterways save shippers as much as $9 billion per year over truck and rail transport. Barges can carry more grain than those alternatives, and usually at substantially lower costs thanks to lower per ton fuel and labor costs.
However, when river levels are low, draft restrictions have to be issued that force barges to lighten their loads, limiting tow sizes. This in turn drives up the per ton costs of shipment, eroding the advantage of utilizing the US inland waterway system. The latest draft size restrictions went into effect on September 19.
The most recent Grain Transportation Report shows southbound barge movements of corn, soybeans, wheat, oats, barley, sorghum and rye during the week of September 20 were down -48% compared to the same period last year. At the same time, loading of oceangoing grain vessels in the Gulf were +48% higher than last year.
The Mississippi River at Memphis, Tennessee, is forecast to hit minus -7.0 feet by October 4, and minus -8.6 feet by October 11. Further south at Mhoon Landing, Mississippi, the river is forecast to hit minus -7.8 feet by October 4 and -9.1 by the 11th. If current forecasts for very little rain pan out, all but two lower Mississippi River locations (Cape Girardeau, MO and Cairo, IL) are expected to be at negative levels by the end of October.
Similar to 2023 and 2024, barge rates have not risen significantly (despite low water levels) and are well below the records set in 2022, according to the GTR. One reason for the lower barge rates during Mississippi River low water periods since 2022 is that government agencies (e.g., USCG and USACE), barge operators, and shippers learned valuable lessons from the 2022 challenges and have been better prepared since then.
Another reason for the lower rates since 2022 is that soybean exports—which mostly ship immediately after harvest—were higher during MY 2022/23 than they have been in the years since. GTR adds that below-average soybean exports this year may again keep barge rates from rising substantially. However, the large volumes of corn exports and the potential for trade deals involving soybeans may raise the demand for barge transportation in the coming months. (Sources: American Farm Bureau Federation, NIDIS, GTR, NOAA)
