Channeling River Exports

Mississippi River Dredging Offers Ag Commodity Shipping Opportunities

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Cargo ships head in opposite directions on the southern Mississippi River near New Orleans. Deeper dredging of the river will allow even larger ships to eventually move as far north as Baton Rouge, Louisiana. (DTN file photo by Chris Clayton)

OMAHA (DTN) -- With a funding line in the U.S. Army Corps of Engineers budget earlier this week, advocates who have spent years advocating for a deeper channel at the base of the Mississippi River will get their wish.

The Army Corps announced it would spend $85 million to help dredge the Mississippi River channel roughly 5 feet deeper to a 50-foot draft depth, a move that will allow the lower Mississippi River ports to service Panamax ships that move through the third lock of the Panama Canal.

"The Mississippi River Basin has an unprecedented impact on our national economy, global competitiveness and American job creation," said Rep. Steve Scalise, R-La. "Modernizing our infrastructure and deepening the river to 50 feet will help strengthen Louisiana's dominance in domestic and international commerce."

While the Louisiana congressional delegation praised the Corps' funding announcement, the dredging project also has several champions hundreds of miles farther upstream in states such as Iowa. The Soy Transportation Coalition has been advocating for the deeper Mississippi channel for several years as well.

A 2018 study projected a deeper draft for ships in the lower Mississippi River would boost soybean revenues by roughly $450 million annually. That would come in the form of a more favorable basis for farmers who sell into the river market. There will also be some advantages with greater potential shipping competition that could put downward pressure on rail rates as well.

"Some of that is easier to project than others, but these are realities you routinely see in our supply chain," said Mike Steenhoek, executive director of the Soy Transportation Coalition (STC). "I am fully enthused about farmers seeing that much more income on an annual basis."

Sen. Joni Ernst, R-Iowa, noted Iowa farm groups had been championing the dredging project over the past year. She credited the Iowa Soybean Association and the Soy Transportation Coalition for their lobbying for the project.

"We have got a lot of particular ag groups that have been asking for this," Ernst said in an interview with DTN.

Ernst said Iowa farmers could expect to receive an additional $71 million for their crops once the Mississippi can handle the larger ships.

The dredging will actually be a three-part project and is expected to cost roughly $245 million. In the first phase, the Corps will deal with a 20-mile stretch of the Mississippi River leading directly into the Gulf of Mexico, which is a suspected spot for heavy sediment buildup. That will open the river channel all the way up to mile marker 154, about 50 miles north of New Orleans.

Then, some study will have to be done to examine a number of oil pipelines that run under the Mississippi River as well, Steenhoek said.

"One of the big next steps after this initial deepening is determining, of these pipelines, how many of them have to be moved and to what extent," he said.

Once the pipelines are addressed, the river will be farther deepening up to Baton Rouge, Louisiana, roughly 230 miles upstream from the mouth of the river. President Donald Trump's proposed fiscal year 2021 budget also includes another $45.7 million for the project.

"They believe that this next year they will get that additional funding to complete those other elements," Steenhoek said.

The impact of a deeper draft can translate into a Panamax ship, or other cargo vessel, moving from an average load of 66,000 metric tons (2.42 million bushels) to 78,000 metric tons (2.86 million bushels). STC projects that would save about $5 per metric ton in ocean freight costs. To stay competitive with river elevators, inland facilities will have to pay up to keep and handle soybeans, the STC analysis concluded. The report also cited the need for such infrastructure upgrades to maintain a competitive shipping advantage over South American competitors.

Some comparable analysis could be drawn for corn, rice, distillers dried grains with solubles (DDGS) and ethanol, all of which also move in significant export volumes through the ports in southern Louisiana as well.

In 2017, roughly 57% of corn exports, valued at about $4.8 billion, and $59% of soybean exports, valued at $12.4 billion, moved through the Mississippi River system, as well as 55% of soybean meal and 72% of DDGS exports. That's according to a USDA study on inland waterways released last summer.

The USDA study cited that moving agricultural commodities down the river already saved as much as $9 billion annually over shipping commodities through other modes of transportation.

The Corps' analysis doesn't offer the same sort of projection as the STC, but the Corps estimates the economy could increase by $127.5 million a year, while the cost to maintain the channel will be roughly $17.7 million, according to the New Orleans Times-Picayune.

Steenhoek said it could take 18 months to complete the first phase of the project and another two to four years before the full deeper draft is completed up the channel to Baton Rouge. One concern is the risk of Mississippi River flooding potentially slowing the progress if floods such as last year end up repeating.

Ernst and Steenhoek also each credited R.D. James, the Army Corps of Engineers assistant secretary for Civil Works, for advancing the Mississippi River dredging project. James is a Missouri farmer who also served as a member of the Lower Mississippi River Commission continuously from 1981 until the Senate confirmed him for his current position in 2018. Ernst had specifically met with James back in January to advocate for funding the channel-dredging project.

"We're just really thankful for Secretary James for putting attention on this issue," Ernst said. "So it's been great to develop relationships with these people and understand these river systems, and R.D. James understands the river systems and the impact to those who live along these rivers."

James had worked with USDA last summer to release a study showing the importance of locks and dams on the upper portion of the Mississippi River for agricultural sales as well. That report released last summer showed a $6.3 billion investment to upgrade locks and dams would boost agricultural exports as much as $142 billion through 2045.

2018 Soy Transportation Coalition study on dredging the Mississippi River:…

2019 USDA study on Inland Waterways:…

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Chris Clayton