When we think of things that affect agriculture, the river probably isn’t on most of our top 10 lists, but in reality, a new study finds that rivers like the Mississippi and the Illinois can have as much of an impact as corn prices and the cost of inputs.
The economic shutdown of the lower Mississippi River system last year at the peak of the drought was a wake-up call about the importance of efficient river transportation to agriculture, according to a study conducted by Informa Economics. It was funded by the Illinois Corn Growers Association, Illinois Corn Marketing Board (ICMB) and other farm groups. Results were shared in a story in FarmWeek, a publication of the Illinois Farm Bureau.
In short, the study found that a drought, or any event that causes a disruption to river transportation services, has a significant impact on agriculture.
First, a little history: The U.S. Army Corps of Engineers kept the river open last year by blasting rock formations on the Mississippi River between St. Louis and Cairo, but barge traffic was slowed and carrying capacity was reduced due to low water levels. Freight rates on the river subsequently shot to record highs, according to Ken Eriksen, senior vice president of Informa Economics.
The study found freight rates on the river increased 111 percent while operational costs skyrocketed 180 percent. Meanwhile, the time to move fertilizer upstream from the Gulf to St. Louis increased by 15 days.
Unit trains used to transport fertilizer boosted shipping costs by 15 percent, according to the study. The premium to switch from barge to rail for grain shippers was about 45 cents per bushel.
It resulted in lost market opportunities for Illinois grain around the world.
More work is still needed on the Mississippi to remove rocks that pose a threat to navigation during low river stages.
There’s also concern that similar interruptions could occur if a lock and dam fails.
Many of the locks and dams have surpassed the original life expectancy. And there currently is about $585 million worth of deferred maintenance on the structures, according to Eriksen, who called the current river system “susceptible” to a failure.
An efficient river system is expected to be even more important in the future as U.S. farmers grow bigger crops to feed growing world demand. About 50 to 60 percent of crops exported from the U.S. currently are shipped through the Gulf.
The bottom line? A healthy agriculture needs a healthy river system to transport grain.
