Mississippi River water levels drop, leading to rise in freight rates

The Panama Canal is not the only waterway in the Americas where a lack of rain has resulted in a reduction in capacity. The cost to transport America’s harvest from the Midwest to the rest of the world has soared as a result of falling water levels on the Mississippi River. Barge freight rates have risen and below-average rainfall forecasts signal that things might get worse before they get better.

Barge spot rates on August 29th in St Louis were up 49% week on week and up by 42% year-on-year, at $23.34 a ton. That equates to an 85% rise on the past three-year average, according to Department of Agriculture data released last week. In terms of the percentage of the price of wheat, if one takes a benchmark of $1,000 a tonne spot rate, it constitutes something like a 1pp addition to the basic cost, to 2.35% total.

Of equal concern to producers in the US will be the impact on soybean and corn, for which the harvest is just beginning. Last year the extremely low water levels on the Mississippi stranded more than 2,000 barges. The Mississippi carries more than 45% of US agricultural exports, but water levels have been dropping since June, restricting the amount of grain allowed on each barge.

Susan David, a grain analyst for No Bull in St. Louis, said that transportation companies were “proactively reducing drafts as they are aware of the problems that heavier barges caused last time around. This year it feels like the market is better prepared to handle it.”

Low water levels in some locations are creating delays of up to two days and St. Louis loading drafts are approximately 15% below normal capacity, the American Commercial Barge Line said last week.