Barge costs soar as low water levels threaten US corn, soybean exports

Water levels on the key Mississippi river in the US have fallen sharply recently due to droughts, cutting back the tonnage barges can load and pressuring costs at the US Gulf grains and oilseeds export hub, market sources have told Agricensus.

The Gulf is the main export hub in the US for grains and oilseeds and most volumes arrive through the Mississippi river in barges loaded inland.

“[This] is a very large issue,” senior grain and oilseed commodity analyst at Futures International Terry Reilly told Agricensus.

Low water levels have been forcing barges to load up to 40% less volumes to reduce the draught and pass through shallower parts of the river.

This comes as the US approaches the peak of its corn and soybean season, with harvest works about to start.

Costs to transport grains and oilseeds down the Mississippi river have soared nearly 80% since the beginning of September and over 150% when compared to costs reported in the beginning of August, according to data from the US Department of Agriculture (USDA).

Rains are needed to ease down transportation constraints in the Mississippi river but if volumes do not increase water levels sufficiently over the coming weeks US exporters may face some headwinds.

“The forecast for the next week to 10 days doesn't offer much prospect of enough rain to make a difference. What is really needed are heavy rains from Saint Louis north to get the overall flow rising,” Grain Service Corporation vice president Diana Klemme told Agricensus.

“Expect barge freight to remain high through the first half of October [which will be] a drag on basis upriver and/or push Gulf basis levels higher,” Klemme said.

Klemme added that “the difference between cash bids for September/first half of October and December are now big enough that farmers and elevators will look to hold back as many bushels as they have room for – which in turn will only slow US export shipments further near term.”

If higher barge costs pressure FOB Gulf premiums higher, Brazil may overtake the US in terms of spot price competitiveness with more export demand shifting to South America just after a month when an incentivised exchange rate policy bolstered Argentine soybean shipments.

“If Brazil did in fact cut back on [soybean] crush per poor margins, then those extra soybeans could be exported to China,” Reilly said.

“I believe that if logistics make US prices less competitive or if importers feel insecure with the country’s loading capacity Brazil could be benefited,” Brazil’s Agrural senior analyst Daniele Siqueira told Agricensus.

Siqueira said that Brazil does not have the capacity to cover the large volumes the US usually supplies the export market through the last quarter of the calendar year but that a couple of million mt of soybeans could shift from the US to Brazil due to the Mississippi issues.