Freight rates are increasing as Mississippi River levels are dropping

Mississippi River.jpg

Harvest season is underway, and that means it is the busiest time of the year for shipments of U.S. soybeans.

Mike Steenhoek with the Soy Transportation Coalition has been following the impact of low water levels along the Mississippi River and is keeping us updated.

“You’re seeing barge companies limit the amount of freight – soybeans, and grain, in our case - out of the concern that if they load to a full capacity, you run the risk of scraping the bottom and maybe even getting grounded. That’s something that we did witness last year, and so it’s a concern. You have a supply-demand phenomenon occurring because you’re going to have a given amount of freight having to be accommodated by a now-diminished supply of barge transportation. You can’t load as much per barge, and we can’t put as many barges together to form one unit because the shipping channel’s more narrow. So, you’ve got an imbalance between demand and supply, and so the inevitable result of that is the upward pressure on barge rates.”

Steenhoek also emphasizes the need for a “plan B” because there are alternative routes out there.

“There are options B, C, and D, and for some farmers, that means just simple storage until you’ve got a more opportune condition on the river. It may be driving it to a more livestock-intensive area or a rail loading facility. There are options B, C and D, but you need to keep in mind that there’s a reason why there are options B, C, and D versus option A because that’s not the optimal route. So, there will usually be an added cost associated with that.”

Steenhoek says unfortunately, we are at a point where any additional rainfall will mostly be absorbed into the dry soil and will not make its way to streams and rivers.