Farmers and the barge industry are once again facing the challenge of low water levels in the Mississippi River. To mitigate the impact, there may be a shift in grain shipments from barges to rail and truck transportation. This insight was shared during a farmer sentiment webinar hosted by TD Cowen, featuring Professor Michael Langemeier from Purdue University’s Department of Agricultural Economics and the director of the University’s Center for Commercial Agriculture.
According to TD Cowen, farmers expressed their top concerns during the webinar, which included input costs, elevated interest rates affecting operating loans, machinery and land costs, as well as lower crop and livestock prices (excluding beef). The low water levels along the Mississippi River were also identified as a major concern.
TD Cowen analyst Matt Elkott highlighted the potential consequences of low water levels, stating that it could lead to more grain shipments being diverted to rail and truck transportation, resulting in higher freight costs. However, he reassured grain producers that both modes of transportation have sufficient capacity to accommodate the increased freight. Additionally, truckload rates are currently experiencing stagnation.
The Gazette, based in Cedar Rapids, Iowa, reported that the Mississippi River has reached near-historic lows for the second consecutive year. This decrease in water levels has led to slower river shipping and increased costs for barge companies.
Recent data from the U.S. Geological Survey shows that the gage height of the Mississippi River at St. Louis has dropped significantly, from 20.64 feet on May 16 to -1.01 feet on Thursday. Gage height, also known as “stage,” refers to the height of water above a reference point.
Low Water Levels on the Mississippi River: A Competitive Opportunity for Railroads
In a recent note by Raymond James analyst Patrick Tyler Brown, it was highlighted that the current low water levels along the Mississippi River could provide a unique opening for railroads. In fact, Raymond James had previously recognized Canadian National Railway Co. (CNR) as the primary rail operator in this region.
These low water levels have had additional consequences, such as the intrusion of sea water into the river in Louisiana. Consequently, the U.S. Army Corps of Engineers has taken action by filling barges with water upstream to be shipped to water treatment plants. Explaining this phenomenon, the Army Corps of Engineers stated, “Denser salt water moves upriver along the bottom of the river beneath the less dense fresh water flowing downstream. Under normal conditions, the downstream flow of the river prevents significant upriver progression of the salt water. However, in times of extremely low volume water flow, such as what has been occurring this year, unimpeded salt water can travel upriver and threaten municipal drinking water and industrial water supplies.”
Climate Change: Altering Large Rivers
The record-breaking low water levels experienced on the Mississippi River in 2022 serve as a stark reminder of how climate change is affecting major river systems. This alarming trend calls for urgent attention and comprehensive solutions.
As a response to this crisis, the Army Corps of Engineers has arranged for an initial barge load of 500,000 gallons to be delivered to the Port Sulphur Water Treatment Facility in Plaquemines Parish, Louisiana. Furthermore, efforts are underway to increase the height of an underwater sill that was initially constructed in July at river mile 63.8.
The situation demands collaboration and sustainable strategies to ensure the well-being of communities relying on the Mississippi River as a vital water source.