Market Moment: Grains and the Mississippi River

By Shelby Myers
Grain Market Intelligence Director

Last fall, Mississippi River water levels fell to record lows, slowing grain barge traffic as peak supply came rolling in. We’re suddenly testing those lows again this year after serious bouts of dry weather in the Mississippi River watershed. Seven major rivers flow into the Mississippi: the St. Croix, Wisconsin, Rock, Illinois, Kaskaskia, Ohio, Yazoo, and Big Black rivers. Compounding this situation is the fact that the Mississippi River never recovered from its record lows last year. Understanding what happened last year can help prepare industry stakeholders for what’s to come if water levels don’t recover quickly this year.

In the past three months, Minnesota, Wisconsin and Iowa experienced rainfall that was barely half of normal precipitation. In the same period, drought conditions ranging from abnormally dry to exceptional drought peaked at almost 93% across the Midwest. This was when water levels in the Mississippi River just barely crossed and maintained levels of 10 feet or more. Typically, the river is at closer to 15-20 feet after winter snow melt accumulation. That set up a situation of one step forward, two steps back.

Why does it all matter? The Mississippi River handles transportation of 60% of US corn and soybean exports. To continue moving grain to export terminals when river levels are low, barges must lighten their loads so they don’t sit too low in the water. Water levels can even fall low enough to ground vessels from transporting grain at all. When barges must take more trips with lighter loads, freight rates increase due to high demand and low supply. It also takes more time to ship grain from north to south, which increases export prices. That makes US exports less attractive, especially when prices are typically at seasonal lows and demand is high. We saw this last September, when the quantity of soybeans and corn moving down the Mississippi dropped 74% in a month and declined 25% compared to the year before. Last month, downbound grain barges decreased 79% compared to July and dropped 80% compared to August 2022. Both events are anomalies that do not fit seasonal trends. Typically, downbound grain barge loads are highest late summer into fall, not at these record lows.

While depleted river levels are concerning, in a year like 2023 when we expect fewer US exports, the impact may not be as significant as if we were on track for record grain shipments. But that’s not the most reassuring news — especially considering we saw the impact trickle into corn exports last year, helping drag down performance to the lowest level in a decade. The demand side of the corn balance sheet relies on the seamless flow of grain down the Mississippi River. And since soybeans are grown in states that flank the Mississippi, the bulk of all bean exports rely on this transportation method to fulfill export commitments. A fully operational Mississippi River is crucial to a lot of supply chain logistics, too, not just commodities. The ripple effect could spread well beyond the farm economy and into the macro. Get in touch with one of our grain market advisors today to be ready for these kinds of implications.