Study: 2022 Low Water Cost Arkansas Soybean Farmers

A study carried out by two agricultural economists with the University of Arkansas System Division of Agriculture has quantified the effects of 2022’s low water on the Mississippi River on that year’s soybean crops in their state. The low water reduced the Arkansas soybean crop value by up to up to $293 million, they conclude. 

The findings of ag economists James Mitchell and Hunter Biram’s findings are reported in “The Effects of Extreme Weather on Rural Transportation Infrastructure and Crop Prices Along the Lower Mississippi River,” published in the journal Applied Economic Perspectives and Policy. The study did not look at the situation for farmers in the upper Midwest.

The two noted that record-low water levels increased transportation costs and barge freight rates. Those higher transportation costs are transmitted to row crop producers through lower cash bids or a weakening of local crop basis. “Basis” refers to the difference between the local cash price of a commodity and its futures price.

They are not the first ag economists to consider the effects of low river conditions on crop basis. Purdue University’s Center for Commercial Agriculture has developed a “Crop Basis Tool” that also reflects the difference between crops in river basins versus other areas and incorporates the effects of low (or high) water on crop prices. 

But the Arkansas study isolates its effects. In both 2022 and 2023, the Lower Mississippi River reached historic lows. In October 2023, the U.S. Geological Survey’s Memphis stream gauge read minus 12 feet. The previous year, also in October, the gauge read minus 10.8 feet. Draft restrictions were issued, meaning barges had to lighten their loads in order to sit higher in the water and not hit bottom. The number of barges in a tow was also reduced. At times, some reaches of the river were closed to allow dredging.

Over the past 10 years, the Mississippi River has fallen below the established zero level during harvest—between August 1 and November 30—seven times.

“We were getting a lot of calls about this issue from local producers, stakeholder groups and policymakers,” said Mitchell, the corresponding author. “It wasn’t just a regional concern; there were major news outlets featuring stories on how low Mississippi River levels had become in the fall and the disruptions it was causing to river transportation.

“What really stood out to us was how often this was happening, three years in a row, and always at harvest when soybean sales are at their peak,” Mitchell said.  “Everyone kept asking the same question: ‘What’s the cost to Arkansas producers when the river is low?’  We realized there was an opportunity to put numbers behind a very real and very visible problem.”

“Most of the major disruptions in the past have been flood-related, like the historic flood of 1993, which also impacts navigation but in a different way,” the authors said. “When it comes to low-water episodes, it’s actually difficult to find historical events that match what we were seeing in 2022-2024. There have been low-water events, but 2022-2024 was record-setting, both in terms of severity and timing. That’s what made it stand out and why we started paying closer attention.”

For their study, Mitchell and Biram defined low river conditions as minus 5 feet at the Memphis river gauge. At that level, the two found that,  on average, Arkansas soybean basis weakens more the closer the grain market is to the closest Mississippi River port.

The determined the basis decreased 58 cents per bushel in grain markets within 5 miles from the nearest Mississippi River port, 29 cents per bushel for markets 10 miles away and 12 cents per bushel for grain markets 25 miles away.

A parallel weakening was noted across the river in Mississippi, too, with the soybean basis widening by 55 cents per bushel, 28 cents per bushel and 11 cents per bushel for the same distances to grain markets.

Mitchell said the distance/basis size numbers show, “The farther away you are from the river, the less of an impact there will be on prices.” Mitchell and Biram estimate that low water levels on the Mississippi in 2022 reduced Arkansas soybean values by a typical range of $17.289–$26.24 million, with losses potentially reaching between $193.46 million and $293.8 million under the most adverse scenarios.

Biram said the study findings help Mid-South farmers with “market self-defense” strategies. “Farmers should be keeping an eye on river levels in order to manage the risk of lower basis and, therefore, lower prices,” Biram said. “In fact, it is never a bad idea to book a portion of production by the end of June in order to manage the risk of lower prices resulting from various factors, including low river levels along the Mississippi River.”

Mitchell added, “The broader takeaway from our research is that disruptions to inland waterways can have real, measurable economic impacts. Whenever you’re dealing with commodities and highly seasonal trade, transportation constraints can create bottlenecks and impact prices.

The specific context may differ, but the economic intuition and logic is transferable, which was part of our contribution.”