The Mississippi River, which carries nearly half of US agricultural exports, has been steadily receding, stoking fears of food supply disruptions in the marketing year 2023-24 (September-August).
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Register NowAmid lower-than-normal snowfall in the northwestern parts of the US last winter, followed by severe dry weather in May and June, the river's level has been shrinking since early June. With lower-than-normal precipitation forecast, levels will likely continue to fall in the coming weeks, the US Department of Agriculture said.
A diminishing water level is likely to cripple the supply chain in a way similar to the one witnessed last year when nearly 2,000 barges were left stranded during late October, in the middle of what was the peak harvest season for soybeans and corn.
According to the National Weather Service, the Mississippi River level at Memphis has been observed below zero gauge, and at St. Louis it has reached minus 3.3 feet. As a result, barge movements have been restricted.
Infrastructure
** The Mississippi River typically accounts for over 45% of annual US agricultural exports, making it the most significant inland waterway for grain movements in the country.
** Barge freight rates have already started to soar, putting pressure on basis prices of soybeans and corn. This is expected to weaken US farmers' profit margins in the coming days, market analysts said.
** Fearing the possibility of barges getting stuck on sandbars, grain loadings have been restricted to lower-than-average volumes since June, the USDA said. As a result, barge supply has tightened, because more barges are required to ship the same amount of grain, it said. The tight supply has resulted in a significant increase in barge spot rates.
** As of Aug. 29, spot rates at St. Louis had reached $23.34/mt, up 49% week on week and 42% higher year on year, and 85% over the three-year average, the USDA said. The St. Louis one-month and three-month rates are also elevated -- up 53% and 48% from the five-year average, respectively. If these conditions persist, the tight barge supply could be especially problematic as the corn and soybean harvests progress, the USDA said.
** The US is the world's top corn producer. The country is also the second largest soybean supplier, after Brazil.
** According to the USDA's latest World Agricultural Supply and Demand Estimates, the US is expected to harvest 383.83 million mt of corn in MY 2023-24, up 10.5% year on year, and 114.45 million mt of soybeans, down 2%.
Trade
** It is estimated that the Mississippi River ferries 34 million-37 million mt/year each of soybeans and corn to Louisiana ports for exports.
** US corn exports in MY 2023-24 are forecast at 52 million mt, up 27.5% year on year, the USDA said. Soybean exports are forecast at 49.67 million mt, down 15% year on year.
** However, if the Mississippi River's water level shrinkage continues to persist in September and October, the barge transportation could be severely impeded, likely cutting export volumes, market analysts said.
Prices
** Platts, part of S&P Global, assessed SOYBEX FOB New Orleans for October deliveries at $546.10/mt Sept. 6, down $7/mt week on week.
** Platts assessed CIF New Orleans corn for September deliveries at $219.10/mt Sept. 6, down $1/mt week on week.