Cash Market Moves
Mississippi River at Memphis is Still Falling With Not Much Relief in Sight
The Mississippi River at Memphis in Tennessee, St. Louis, and the Ohio River at Cairo, Illinois, can't catch a good stretch of rain to help the low-water levels currently creating havoc for barge traffic in the Lower Mississippi River (LMR) basin.
On Oct. 27, the Mississippi River at Memphis was at -9.81 feet below zero gauge, -1.56 feet below zero gauge at St. Louis, and the Ohio River at Cairo was at 8.67 feet below the low threshold mark of 9.2 feet.
The USDA in its weekly Grain Transportation report on Oct. 24 said, "Over the next two weeks, the temperatures and precipitation predicted by the National Oceanic and Atmospheric Administration will not suffice to stabilize water levels. If the forecast proves accurate, then more draft and tow-size restrictions will follow."
Meanwhile, barge drafts and tow sizes are cut, which means less product loading and causing a need for more empties in some cases to pick up the slack.
"For each foot of draft reduction on the river, an individual barge is loaded with 7,000 fewer bushels (200 tons) of soybeans. In certain areas of the river, we are seeing several feet of draft restrictions due to low water. In addition, the lack of water will narrow the shipping channel, which limits the number of barges that can be attached together to form one single flotilla or tow," said Soy Transportation Coalition Executive Director Mike Steenhoek.
"Depending on the location in the river, tow sizes are being reduced from 10% to 15% at minimum and upwards of 30% to 40%. What makes barge transportation so economical is the ability to load individual barges with significant volumes of freight while attaching many barges together to form a flotilla or tow. Low water conditions on the river attack both of these features," said Steenhoek.
USDA said (as of its Oct. 24 report), "Currently, tow sizes on the Mississippi River System (MRS) are reduced as follows: from Cairo, Illinois, to Hickman, Kentucky, down 14% to 46% (5 to 21 barges); from Hickman, to Greenville, Mississippi, down 14% to 34% (5 to 16 barges); and from Greenville, to the Gulf, down 9% to 17% (4 to 5 barges). Transit delays of 2 to 3 days can be expected because of reduced navigable space in certain areas of the MRS."
"Unfortunately, we are experiencing an unwelcome three-peat with low water levels during harvest season, when we need our supply chain to be operating at full throttle. We experienced low water in both 2022 and 2023 and now, once again, in 2024. While water levels were quite robust during the spring and early summer, once we progressed past mid-July, precipitation declined significantly, which caused a steady and dramatic decrease in water levels," said Steenhoek.
He added, "The 15-plus-foot spike in water levels at Memphis due to Hurricane Helene was short-lived. Once that surge of water passed through the system, water levels at Memphis quickly returned to where they were earlier."
Once again, the dredges are hard at work keeping the channels open to prevent barges from grounding.
BARGE FREIGHT AND BASIS RESPONDS
The CIF NOLA basis was on fire through the week ended Oct. 25, with October soybean bids running from +125X to +130X and +95Z to +100Z for corn. (CIF stands for Cost, Insurance, and Freight and NOLA stands for New Orleans, Louisiana.)
Barge freight has also perked up on the nearby, costing shippers more money, of course. How much of an impact is it? If you take the offer quoted at St. Louis last week of 950% and use the benchmark rate of $3.99 for the St. Louis corridor, the cost would be $37.90 per short ton. Then divide that cost per ton by 2,000 (one short ton is equal to 2,000 pounds) and multiply by 56 pounds for corn and the cost is $1.06 per bushel and $1.14 per bushel for soybeans (60 pounds.) The farther upriver of course, the higher the benchmark tariff.
Normally, farmers would see the higher freight passed on via the basis, but exporters are scrambling to get beans and/or corn to their export houses. You can see that in the strong basis levels; so, those extra freight costs may not apply right now. And in some cases, farmers can find a better basis on the interior, so competition is tight for some exporters.
Exporters need to meet contract commitments at the Gulf and getting barges loaded and moved with the current safety restrictions is hampering that movement in parts of the LMR. So, having trouble buying bushels to fill those barges in some areas, is adding to the pressure.
"At a time in which soybean exports are confronted with numerous challenges, it is our hope that our supply chain can encourage profitability, rather than be one further impediment. Unfortunately, we continue to experience numerous supply chain challenges. Low water on the Mississippi River is one compelling example of this," noted Steenhoek.
Mississippi River at St. Louis hydrograph:https://water.noaa.gov/…
Mississippi River at Memphis hydrograph: https://water.noaa.gov/…
Explanation of barge rates: https://www.ams.usda.gov/…
Mary Kennedy can be reached at mary.kennedy@dtn.com
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