Report: Barge rates skyrocket amid Ohio, Mississippi river closures
Date: Thursday, October 12, 2017
Source: American Shipper
Spot rates for barges are skyrocketing as portions of the Ohio River into the Mississippi River are closed due to low water levels from dry weather, preventing harvested grain from being shipped, according to a report from agricultural industry news outlet The Farm Journal.
Thanks to what may end up being the third largest corn crop ever, farmers have had to reevaluate their harvest early on in the season. According to The Farm Journal, company officials on Archer Daniels Midland’s (ADM) weekly conference call recap last week said low water levels from dry weather the past six to eight weeks is causing issues on the Illinois, Ohio and Mississippi rivers, causing freight rates to rise.
Just last week, spot rates for export grain increased 27 percent to 50 percent compared to the week before, according to U.S. Department of Agriculture (USDA) data. The rate increases are expected to rise through October as there is no rain in the forecast, USDA said.
According to The Farm Journal, Karl Setzer of MaxYield Grain said the issues along the rivers mean farmers are better off financially to hold on to grain for a while, as opposed to selling it at harvest.
“There’s a 500 percent carry in the market. That means the river market is paying merchandisers 80 cents a bushel to hold corn from now until December, resulting better basis for farmers,” he said.
Furthermore, grain buyers said that record yields in the Southern U.S. have increased seasonal demand for barges on the Lower-Mississippi, causing a backlog of corn and soybeans along the Upper- and Mid-Mississippi pools.
While U.S. Army Corps of Engineers says they aren’t seeing any major backups in barge traffic due to low river levels around St. Louis, the agency is currently dredging near Thebes, Illinois to clear out high spots, said The Farm Journal. Slowdowns in that area are to be expected, but vessels are still allowed to transit during daylight hours.
One additional factor in the river closures is the emergencies outages at Locks and Dams 52 and 53, Deb Calhoun, senior vice president of Waterways Council, Inc., told The Farm Journal.
“The locks and dams on the system were built during The New Deal in the 1930s and earlier, and require recapitalization to be able to continue to allow shippers the most cost-competitive way to get their goods to the export market and for use domestically,” she said. “The Trump administration has suggested a $1 trillion initiative ahead for the nation’s ailing infrastructure and waterways’ locks and dams must be included in that plan.”
Both locks are scheduled to be replaced by the Olmstead Lock and Dam in 2018. However, recent rhetoric from Trump has suggested that his supposed $1 trillion federal infrastructure spending plan will no longer be funded by public-private partnerships (P3s), which could result in high costs for states and localities.
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