Market Matters Blog
If You Dredge It, They Will Come
Last week, I wrote about the dredging throughout the Mississippi River because of the shoaling caused by the constant flooding, creating navigation hazards for barges. This week is about non-flood related dredging that could have a positive impact on farmers who haul soybeans and other grains to river terminals that eventually send them down the Mississippi to the Gulf of Mexico for export.
As U.S. soybean farmers continue to encounter challenges with both growing a crop and marketing a crop, it is essential to maintain and enhance the transportation system established to transport those soybeans -- and all agricultural products.
The 256-mile stretch of the Mississippi River from Baton Rouge, Louisiana, to the Gulf of Mexico accounts for 60% of U.S. soybean exports, along with 59% of corn exports, and is by far the leading export region for both commodities. There is a growing effort among Mississippi River stakeholders, including agriculture, to promote the dredging of the lower river shipping channel from 45 feet to 50 feet in depth.
On July 10, 2019, Soy Transportation Coalition (STC) in a press release said the United Soybean Board (USB) announced a $2 million allocation to help offset the planning, design and research costs of deepening the Lower Mississippi River. The 73 USB farmer-directors are responsible for investing soybean checkoff funds to enhance the value and preference for U.S. soy.
In the press release, Mike Bellar, a soybean farmer from Howard, Kansas, and chairman of the STC, said "During this challenging period, soybean farmers are being aggressive in trying to increase our competitiveness. The $2 million in funding from our national checkoff organization, the USB, will help improve our number one export region of U.S. soybeans. It will remain critical for the STC, the American Soybean Association, and the individual state soybean associations to continue to promote this project at the federal and state level.”
The overall project is estimated to cost $245 million and would occur in three phases. Two of the phases will be cost-shared between the federal government (75%) and non-federal sources (25%). The State of Louisiana has been designated as the obligated non-federal entity:
-- Dredging from Venice, Louisiana, (approximately Mile 10 Above Head of Passes [AHP]) to the Gulf of Mexico. Removing this bottleneck would provide a 50-ft. deep channel to approximately Mile 154 [AHP] of the river. A substantial number of soybean and grain export terminals are located within this portion of the river. The estimated cost of this phase is $100 million. Given a 75% federal and a 25% non-federal cost share, the federal obligation would be $75 million, and the non-federal obligation would be $25 million.
-- Dredging from Mile 154 AHP to Baton Rouge, Louisiana, (Mile 232 AHP). The remaining soybean and grain export terminals would be included in the 50-ft. shipping channel upon completion of this phase. The estimated cost of this phase is $65 million. Given a 75% federal and a 25% non-federal cost share, the federal obligation would be $48.75 million, and the non-federal obligation would be $16.25 million.
-- The relocation of pipelines buried under the northern portion of the shipping channel. The estimated $80 million cost of doing so would be split evenly between the state of Louisiana and the pipeline owners.
USB is allocating the $2 million to help offset planning, design and research costs, combined with approximately $21 million in federal funding and $7.5 million in funding from the state of Louisiana to initiate the first year’s work of the project (i.e. commencing the deepening of the river from Venice, Louisiana, to the Gulf of Mexico). While the state of Louisiana has provided its initial $7.5 million allocation of matching funds, the federal government has yet to approve its approximately $21 million in initial funding.
Recent research conducted by the STC concludes that shipping costs for soybeans from Mississippi Gulf export terminals would decline 13 cents per bushel ($5 per metric ton) if the lower Mississippi River is dredged to 50 ft. A deeper river will allow both larger ships to be utilized and current ships being utilized to be loaded with more revenue-producing freight.
"The research also identifies the impact on interior basis, which is the difference between the local price a farmer receives, and the market value established by the Chicago Board of Trade for soybeans in 31 states if the lower Mississippi River shipping channel is dredged," noted Mike Steenhoek, executive director of the STC.
Here is a link to the press release, along with the full STC report that gives detailed examples of freight savings and basis impact the project would have: "Soybean Farmers Strategically Invest in Key Link in Supply Chain" and "STC Research Identifies Farmer Benefit of Dredging the Lower Mississippi River – Full Report": https://www.soytransportation.org/…
"If I had to select a single infrastructure enhancement that would provide the most benefit to the greatest number of U.S. soybean farmers, deepening the lower Mississippi River would be my choice," said Steenhoek. "Soybean farmers are demonstrating a willingness to collaborate with federal and state government on an innovative public private partnership that will enhance the competitiveness of both agriculture and a host of other industries. The STC, the American Soybean Association, state soybean associations and other stakeholder groups look forward to working together to ensure this critical project becomes a reality."
Steenhoek noted that all too often infrastructure investment is allowed to become a "theoretical issue" and that the STC research clearly explains how this single infrastructure enhancement will have a tangible benefit to individual farmers in individual states throughout the country.
"If our nation desires to make our farmers more competitive in a turbulent marketplace, this investment would be an excellent place to start. May we have the will to do so," concluded Steenhoek.
Here is a link to the detailed comparison in the size of a ship that would need a 50-foot draft to enter a port: https://en.wikipedia.org/…
Here is a link to give you a thorough understanding of everything to do with the process of dredging from beginning to end: https://en.wikipedia.org/…
Mary Kennedy can be reached at firstname.lastname@example.org
Follow her on Twitter @MaryCKenn
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