As River Levels Drop, Barge Rates Rise

As harvest season proceeds with dry conditions continuing throughout the Mississippi River basin and no significant rain in the forecast, agricultural interests are expressing concern about low water and rising barge rates.

Water levels on the Mississippi River System have been falling since June. Restrictions lower the amount of grain allowed to be loaded on a barge. As a result, barge supply has tightened because more barges than normal are required to ship the same amount of grain. The Illinois and middle -Mississippi rivers continue to see reductions in loading draft of up to 15 percent.

The tight supply has resulted in a significant increase in barge spot rates. As of August 29, spot rates at St. Louis had reached $23.34 per ton—up 49 percent from the previous week, up 42 percent from last year and up 85 percent from the three-year average, according to the U.S. Department of Agriculture’s Grain Transportation Report.

The St. Louis one-month and three-month rates are also elevated—up 53 percent and 48 percent from the five-year average, respectively. “If these conditions persist, the tight barge supply could be especially problematic as the corn and soybean harvests progress,” according to the USDA.

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“It is concerning that our inland waterway system is not operating from a position of strength,” said Mike Steenhoek, executive director of the Soy Transportation Coalition. “It was hopeful that 2023 would not present a sequel to the historically low water levels on the Mississippi River in 2022, but unfortunately that clearly is occurring. Harvest and the concomitant export season is ‘game time’ for farmers and the entire agricultural industry. During this period, we need our supply chain, including the Mississippi River, to be operating at full capacity. The current low water conditions are therefore clearly a cause for concern.

“Unfortunately, the forecast for additional precipitation in the near future is not favorable. Moreover, any future rainfall that does occur will be largely absorbed by an increasingly dehydrated farm ground. Abundant and sustained rainfall will need to occur to change the water level trajectory along the inland waterway system.”

Steenhoek noted that for the week ending on August 29, barge rates originating in the Cairo-Memphis region were $23.71, which is 81 percent higher than the same period last year (rates were $13.09 per ton for the week ending on August 30, 2022). “One of the realities in agriculture is that many of these costs are disproportionately passed onto farmers in the form of a wider (i.e. more negative) basis,” he said. “This macro issue of low water conditions on the Mississippi River has a local impact on an individual farmer’s wallet.”

Added Pressure

The rising barge rates are further pressuring the farm sector, which has already seen rising input costs. After reaching record highs in 2022, farm income is forecast to fall in 2023, according to the USDA’s Economic Research Service.

Net farm income, a broad measure of profits, reached $183 billion in calendar year 2022, increasing $42.9 billion (30.7 percent) from 2021 in nominal dollars. In 2023, net farm income is forecast to decrease by $41.7 billion (22.8 percent) from 2022 to $141.3 billion.