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North Carolina All Commodities Conference set for Jan. 17-18

North Carolina All Commodities Conference set for Jan. 17-18

North Carolina’s agriculture community will meet in Durham on Jan. 17-18 for the annual All Commodities Conference, featuring the latest information on cotton, corn, small grain and soybean production in the state.

This year’s conference will be hosted by the North Carolina Soybean Growers Association. Charles Hall, executive director of the association says planners have tweaked the meeting a bit this year to make it easier for growers to see all the professional presentations.

Keynote speaker for the conference will be Dennis Gartman, editor of the Gartman Letter, a Suffolk, Va.-based publication that features in-depth information on grain buying and selling.

“With all the uncertainty over pricing for grain crops and cotton this year, we felt like Gartman’s comments would be timely and, hopefully, helpful to growers who are having a tough time figuring out what to plant next year,” Hall says.

The keynote address will be followed by another timely presentation by University of Nebraska Economist Ron Hanson. A highly regarded expert on farm estate planning, Hanson’s topic is, “Keeping your farm in the family for the next generation.”

A part of the tweaking of the conference scheduling that Hall mentions involves splitting up the traditional corn, cotton, soybean, small grain research and Extension updates presented each year by specialists in each crop at North Carolina State University.

Jim Dunphy, long-time soybean specialist at North Carolina State will provide his insights on last year’s crop and provide research updates on his work, designed to help soybean growers reach optimum production.

With prices expected to remain high, soybeans, especially planted in a double-crop situation with wheat, will likely be a top choice for North Carolina growers next spring and summer.

Ron Heiniger, corn specialist and weather guru at North Carolina State, will give growers an update on high yield tests and other research findings. Corn, like soybeans, is expected to be a popular crop of choice for North Carolina growers.

For those who missed Hanson’s first presentation, he will provide an encore, but slightly different presentation aptly entitled, “What if the “what if” actually happens in our family.”

Hot topics

One of the hot topics for growers at the annual January meeting is wheat production. This year North Carolina wheat growers are expected to plant a record crop — possibly close to a million acres.

Randy Weisz, North Carolina State small grain specialist, is the pied piper for many of the state’s grain growers, and his update on winter and spring care of wheat will likely be among the highlights of the conference.

Cotton will follow suit with one of the best known Extension specialists in the country, Alan York.

Now officially retired as the Reynolds Distinguished Professor of Weed Science, York hasn’t slowed down much and continues to conduct some of the most innovative research in the country on weed management systems, primarily for cotton.

An annual highlight of the conference is presentation of grower awards.

State award winners and area winners will be recognized by the various grower associations that participate in the conference.

For many growers this will be their first opportunity to meet new North Carolina State Dean of Agriculture, Richard Linton, who will help present the awards.

Historically, the All Commodities Conference attracts a high percentage of growers and a growing number of agriculture industry exhibitors, who participate in the Exhibit Hall component of the convention.

During the day and a half conference, growers will have ample opportunities to visit vendors and to view a number of poster exhibits, featuring research findings from North Carolina State University researchers.

The morning program on the second day of the conference will begin with an early riser session with the presidents of each grower association represented. These include: Jimmy Thomas, soybean growers; Burt Eure, grains growers; Donny Lassiter, cotton growers; and Jay Sullivan, corn growers.

In 2012, North Carolina saw a dramatic increase in grain sorghum acreage and a continued increase in oil crops, grown for Technology Crops International.

David Hull, a grain buyer with Murphy-Brown grain buyers, headquartered in Warsaw, N.C., will talk about his company’s renewed efforts to boost production of sorghum and other grains to be used for livestock feed.

Jeff Riddle, with Technology Crops International will discuss new opportunities for farmers to grow winter and summer oil crops for his company.

rroberson@farmpress.com

Tax Tips: 2012 Tax Decisions for 2013

 

Earlier this fall we shared some tax flexibility ideas, including the use of deferred payment contracts, from Andy Biebl, a long-time farm tax accountant with CliftonLarsonAllen. With higher tax rates likely in 2013, and 2012’s sands running out, we thought we’d offer a few more. The good news is most can be decided in the new year.

Under IRS Section 453(d)(1), any taxpayer can use the installment method to elect out of an installment deferral on any specific disposition of property, and Section 453(l)(2)(A) specifically allows farmers to use the installment method when disposing of property produced in the business of farming. You can elect out of the installment deferral by simply reporting the entire gain from the sale in the year in which the sale occurred, not when the later deferred payment occurs on your tax return. When making this decision, be sure to look into the benefit of farmers’ ability to income average, which may allow even more income to be absorbed at low rates.

If you’ve already prepaid expenses for 2013 in 2012, you can’t “take it back” and claim it in 2012 instead. But prepaid fertilizer can be amortized but you have to include all fertilizer expenses for a particular tax year.

If you bought equipment that became available for use in 2012, you must begin depreciation, but you don’t necessarily have to employ the first-year Section 179 deduction, which can be applied to either new or used equipment, or 2012’s additional 50% first-year bonus depreciation (only on new equipment). Note that tiling is included in the Section 179 depreciation rules if the farmer (not the landlord) made the investment. 

2013 Outlook: Farm Bill, Crop Production, Land Values, Livestock, Biofuels

 

2013 is setting up to be another interesting year in the agriculture industry, following a very profitable year in 2012 for most crop producers in the Upper Midwest, and a fairly negative profit year for most livestock producers. Following are some items that are likely to be on the forefront in the agriculture industry for 2013.

 

New Farm Bill

The current farm bill expired on September 30, 2012, and some programs will be discontinued without a new farm bill, or an extension of the current farm bill. A new bill was not completed by Dec. 31, 2012. This means that the likely scenario is that the current farm bill will be extended into 2013, allowing some existing farm programs and other USDA programs to continue at current levels. Congress would then finalize a new farm bill during the 2013 Congressional session. However, do not be surprised if a farm bill extension is linked to the fiscal cliff budget agreement, which could result in the elimination or reduction of direct payments for 2013, and contain other future farm program budget parameters.

The new farm bill will likely involve some major changes in the risk management (safety net) programs available to farm operators, and most likely will eliminate the direct payments that have been paid to corn, soybean and wheat producers since the late 1990s. Most crop producers are hopeful that a strong crop insurance program will be the cornerstone risk management program of the new farm bill. The Milk Income Loss Contract (MILC) program for dairy producers will likely be continued, or replaced with some similar type of risk management program. Other livestock producers also hope that some type of livestock assistance program is included in the new farm bill to assist with low profit years, such as 2012.

The next farm bill will likely lower the maximum acreage in the Conservation Reserve Program (CRP) from the current level of 32 million acres down to a maximum of 25 million acres in CRP, in order to increase crop production acreage in the U.S. There are currently approximately 27 million acres enrolled in CRP, which is down from 29.5 million acres in CRP, as recently as September 2012. The Supplemental Nutrition Assistance Program (SNAP), including the food stamp program, which will be a major part of the new farm bill, currently utilizes over 75% of the USDA annual funding allocation. There are many other USDA programs for conservation, rural development, and export enhancement that may be discontinued, unless they are reauthorized by the new farm bill.

 

Crop Production

The breakeven cost of producing corn at trend line yields will likely be close to $5/bu. or higher for many producers in 2013, and near $12/bu. for soybeans, which are increased compared to 2011 and 2012 levels. The expected 2012 breakeven prices compare to just over $3.50 for corn and near $8 for soybeans as recently as 2008. There has been some concern recently, as the current local forward prices for fall 2013 have declined significantly in the past few weeks, and are now near $5.50 for corn, and just above $12 for soybeans.

The extended period of higher corn and soybean prices in 2011 and 2012 has slowed demand for feed usage, biofuels production and for exports, which could put further pressure on grain prices in 2013. Cash rental rates for farmland have increased dramatically in the past two years in many areas of the Upper Midwest, and can be a large variable in the producer breakeven prices for corn and soybean production across the region. Farm operators need to look for ways to control crop expenses for 2013, as well as put together a good grain risk management plan that uses crop insurance and sound grain marketing strategies in order to achieve breakeven and profitable price levels for the coming year.

 

Land Values

Land values ended the year at record levels throughout most of the Midwest, including numerous farmland sales in southern Minnesota1 above $10,000/acre in recent weeks. Certainly not all farmland is selling at those rates, but most tillable farm land in the Upper Midwest is being sold at considerably higher levels than comparable land was a year ago.

Most recent land value surveys show that land values in Minnesota, Iowa and surrounding States are 20% or more higher than comparable land values were at the end of 2011. Land values in many areas have risen 40-50% in the past three years.

Excellent farm profits from crop production in 2012, along with continued low real estate interest rates, and high demand for farm land are likely to keep land prices strong again in 2013. However, a significant drop in grain prices and a reduction in farm profitability in 2013, along with a potential slowdown in the national economy, could cause land prices to moderate later in the year.

 

Livestock Production

Profit margins in the livestock sector were quite strong at the start of 2012, but declined very rapidly as feed costs soared by mid-year, as a result of the 2012 drought. Market prices for pork and beef also fell late in 2012 following significant liquidation of livestock due to low profitability and the effects of the drought.

Livestock profits are likely to remain quite tight during the first few months of 2013, due to continued high feed costs and lower market prices; however, livestock profitability should improve by the latter half of 2013, with improved market prices for pork, beef and milk expected, along with some reduced feed costs. Most analysts expect demand for milk and meat products to remain quite strong in the coming year, both for domestic and export markets.

The big question mark for 2013 will be what happens to feed costs, which will likely be impacted by the continuation or extent of any drought conditions in the U.S. that could again cause feed prices to increase dramatically, as well as cause further stress on pasture conditions for cattle producers.

 

Renewable Fuels

2012 ended with a considerable amount of uncertainty in the renewable fuels industry. Profit margins were very tight in the ethanol and biodiesel industries, and some production plants in the U.S. have slowed or ceased production. Ethanol profitability has been hampered in 2012 by a combination of high corn prices and low petroleum prices. In 2012, the U.S. Environmental Protection Agency (EPA) continued the Renewable Fuels Standards (RFS) as approved; however, there continues to be a push from many groups to reduce or eliminate the RFS standards. There is a growing anti-ethanol sentiment among environmental and hunger groups, livestock organizations, taxpayer groups, large food companies and some members of Congress. It is likely that 2013 will be a pivotal year for the future direction of renewable energy policy in the U.S.

Best wishes in 2013 to everyone involved in the agriculture industry!

Fiscal Cliff, Farm Bill 'Deal' Doesn't Offer Much

As a general rule, I like to think of myself as an optimistic person, working along the lines of Abraham Lincoln’s observation that most people are exactly as happy as they make up their minds to be.

I have to admit, that in spite of the shenanigans coming out of Washington to avert a plunge off the “fiscal cliff” and extend the Farm Bill leave me less than excited about the prospects for the coming year. I don’t like feeling pessimistic but I’m finding my usual store of confidence hard to locate.

Read the fine print and you learn that nothing of lasting substance was accomplished in the “fiscal cliff” deal. The deal averts a totally manufactured “crisis” in the short-term. But before the wheat breaks dormancy, we’re right back where we started.

When word of an “extension” of the 2008 Farm Bill hit was mailbox, my first reaction was “Really? This is the best they can do?” And close on the heels came reaction from others in a similar vein. Not a single commodity group is happy with this game of kick the can.

It seems to me that our elected representatives really love being mired down in an endless debate with absolutely no real resolution in sight. Why else make “decisions” that require an immediate resumption of debate?

Consider this: The full Senate passed a 5-year, comprehensive Farm Bill SIX MONTHS ago. The House ag committee passed its version of a Farm Bill, but could never get it to the floor. Now, we’ve extended the 2008 bill (sans a dairy title and other shortfalls) for nine months, guaranteeing that the same morass of idiocy that prevented a perfectly good bill from being voted on continues to rule. What do they expect to happen in the next nine months that didn’t happen in the last six?

One might hope that there have been people walking the halls sowing seeds of common sense and that those seeds will sprout and grow a bountiful crop. If I were my usual optimistic self, I would think that might be the case. As it stands, all I can say is “good luck and I hope you make it through the next year.”

 

 

2008 farm bill extended

2008 farm bill extended

The 2008 farm bill has been extended for nine months.

A plunge off the “fiscal cliff” was averted late Tuesday (Jan. 1) evening when the House passed “HR 8, the Tax Relief Extension Act”-- earlier passed by the Senate, 89 to 8 – on a 257 to 167 vote.The legislation, which contains the 2008 farm bill extension, is expected to raise taxes by some $620 billion by increasing tax rates on incomes over $400,000 for individuals and $450,000 for couples.

The fallback, contentious legislation alleviates immediate worries that dairy product prices will jump. It will also reportedly maintain direct payments.

Mississippi Sen. Thad Cochran explained his yes vote in the following statement: “Failure to enact this package would mean broad tax increases and across-the-board cuts that would be too great a burden for our nation and for Mississippi. As imperfect as it is, this plan will ensure that the income taxes for most families in Mississippi will not shoot upward this year. There is much more work to be done to responsibly implement spending cuts and other measures to reduce the federal deficit and national debt."

The legislation now heads to President Obama for his signature.

Much more coverage to follow.

Corn+Soybean Digest

Bee Threat at Planting

bee-risk-edith-munro

 

Colony Collapse Disorder (CCD) continues to keep honeybees in the headlines as beekeepers lose on average one-third of their hives annually. But CCD is not the only problem that affects bees. Bee populations in general, including bumblebees and ground-nesting solitary bees, are declining.

Purdue University research since 2010 identified one possible cause – dust from corn seed treatments. Researchers continue to examine the role of neonicotinoid pesticides in springtime bee deaths. Neonicotinoids such as clothianidin (Poncho) and thiamethoxam (Cruiser) are widely used as corn seed treatments.

Purdue Entomologist Christian Krupke has looked at why Indiana had persistent reports of bee kills at corn-planting time. “These were not abandoned hives like CCD, so we could test the dead bees to see what they had come in contact with.”

Talc dust spreads

Krupke’s lab sent samples to Brian Eitzer, Connecticut Ag Experiment Station, who screened for more than 100 pesticides and found neonicotinoids. That led Krupke to examine soils, dandelions; everything that a honeybee living near cornfields could come in contact with.

“We found neonicotinoids everywhere we looked…in the pollen, in the hives, in field soil where they had not been used for two full seasons. The largest single potential exposure is the talc dust that comes off of planters. It’s a form of pesticide drift that hadn’t been considered but could be important early in the season,” Krupke reports.

The challenge for growers is to minimize the impact of neonicotinoids on pollinators, he says. “We’re trying to nail down the physics of how this material moves in the environment so we can move on to solutions. Growers, manufacturers and researchers are looking for ways to lubricate seeds that don’t involve talc dust.”

One response he does not expect to see is a ban on neonicotinoids. “They are used so extensively that a ban would be a mammoth task affecting so many cropping systems and crops. The EPA is being very cautious. I don’t believe they will act unless they have a smoking gun.”

In the meantime, farmers can help by taking the same care with treated seed as they do when spraying, according to Iain Kelly, technical manager, Bayer Bee Care program and leader of CropLife America’s Pollinator Issue Management team.

“We think farmers are doing a pretty good job, but it doesn’t hurt to remind them of good management practices like making sure they clean [planting] equipment well away from sensitive areas and deal with any residue according to label recommendations,” he notes.

Bee friendly during planting

  • Follow manufacturer recommendations for using talc or graphite and avoid using more than recommended.
  • Avoid adding excess dust from the bottom of the seed container to the planter.
  • Minimize off-site dust movement from treated seeds.
  • Stay alert to wind speed and direction, particularly near flowering crops which could attract pollinators.
  • Incorporate treated seed into the soil at proper depths, especially at row ends and field corners.
  • Clean planters and seed boxes away from environmentally sensitive areas that might attract pollinators.

For more tips on good seed treatment management, download a pdf.

Not all is doom and gloom this holiday season

Hopefully, old planet earth is still spinning at this moment – due to a shortened Christmas schedule, this was written prior to Friday, Dec. 21, 2012, which is the ominous last day of the Mayan calendar, the December solstice and the first day I can renew a prescription for my allergy medicine.

Of course, we could very well escape the Mayan apocalypse without a scratch, which was supposed to have happened at 5:11 a.m. central time by the way, then walk right off something called a fiscal cliff.

Robert Wiedemer, who correctly predicted the collapse of the U.S. housing market back in 2008, possesses one of the darker minds of the fiscal cliff club. He is now saying the United States could face 50 percent unemployment, a 90 percent stock market crash and 100 percent annual inflation, starting as soon as 2013.

If this happens, I am willing to do light farm work for food.

On the other hand, economist Michael Swanson, senior vice president of Wells Fargo and Co., who spoke at the recent USA Rice Outlook Conference in sunny San Diego, Calif., recently, thinks the fiscal cliff is nothing more than a really bad metaphor.

“They make it sound like it’s an actual cliff,” Swanson said. “But if we raise tax rates and cut spending, what would happen to investor confidence if we could take this huge deficit down from historic levels?”

Swanson is bullish on U.S. agriculture. “When you look at the resource base that we have, and what we do with it, it’s incredible. U.S. agriculture is going to be a long-term, thriving competitor in a global economy that wants more food and fiber. Agriculture is doing extremely well, and it’s not something that we can outsource.”

Another positive Swanson sees are the technological changes in energy which have increased both domestic crude oil and natural gas production. “Those are two avenues that are going to be huge benefits for the U.S. economy on an ongoing basis. It’s going to close our trade gap and give us a huge cost advantage over a lot of our rivals around the world in most commodity production.”

That’s not to say there are not pitfalls out there, beginning with inflated land values, made possible by low interest rates and high commodity prices.

Swanson stresses that the future will be more about bushels than acres. Every farm situation may be different, he says, but if your goal is to increase production, consider that the cost of improving an acre to increase production has risen at a far lower rate than the cost of purchasing an acre to increase production.

Agriculture’s future looks brighter than many would think, as long as we don’t fall off a cliff or bump into another planet.

Happy New Year: Poultry Farmer Wins Court Case

A U.S. District Court judge has ruled in favor of a Maryland poultry and beef cattle farmer, Alan Hudson, declaring the Waterkeeper Alliance, Inc., its member Assateague Coastkeeper and its leader, Kathy Phillips, had an overall goal "...of using the CWA (Clean Water Act) to force poultry integrators, like Perdue, to seriously alter if not abandon their operations on the Eastern Shore {of Maryland}."

The judge further singed Ms. Phillips in Waterkeeper Alliance v. Alan Hudson et al. on December 20th when he said, "While no one could question the passion with which Phillips approaches that goal, the court observed in her testimony and her conduct a certain "ends justify the means" approach, where truth can be "spun" to achieve a desired goal."  

The poultry farmer and his family, along with his integrator Perdue, engaged in a three year legal battle beginning when Ms. Phillips, a Waterkeeper Alliance attorney, and a reporter for the Wall Street Journal flew over the Hudson poultry operation in October, 2009. Ms. Phillips took photographs during the flight and concluded there was a large uncovered pile of poultry manure near a chicken house on the Hudson farm. She concluded without visiting the property there was a channel with runoff coming from the pile going to a nearby drainage ditch.

The pile of material Ms. Phillips saw in the photograph was not chicken manure, but an uncovered pile of Class A bio solids from Ocean City, Maryland's sewage treatment plant awaiting spreading on the Hudson farm fields as fertilizer.

Ms. Phillips and her counsel filed a CWA Notice of Intent to Sue Mr. Hudson and his wife, despite the fact she never tested the pile of bio solids. The Notice of Intent caused the State of Maryland to immediately send in four state employees to investigate the Hudson farm and they, of course, confirmed the alleged pile of chick manure was in fact human manure or bio solids.

Three years later the court, after 10 days of trial, was not happy with what it saw and heard and advised the environmental plaintiffs that "When citizen groups take up that (CWA) mantle...they must do so responsibly and effectively. The court finds that in this action, for whatever reason, Waterkeeper did not meet that obligation."

Case resonates with large livestock farms

Even though the court was exceedingly harsh on the environmental groups' tactics, the case is important to CAFO (Concentrated Animal Feeding Operation) operators for other reasons.

In trial, Ms. Phillips and her expert witness changed their legal theory from water runoff from a chicken manure pile to testifying that pollutants in the waterways near the Hudson farm were present because "exhaust fans" were exhausting fecal bacteria, chicken litter and attendant pollutants into Maryland's waterways. They argued that the discharge of pollutants from the fans were a discharge of pollutants into ditches and needs a permit from EPA. (EPA supports this argument!)

The Court did not think much of the "exhaust fan" pathway argument. The Court chastised the experts and environmentalists for not taking samples of the water in certain ditches to establish whether the fans' exhaust materials were polluting the water. In fact the court said "...it borders on indefensible that plaintiff would not have conducted the straightforward testing and sampling that could have established a discharge from the poultry operation, if there was such a discharge."

The court goes on with language that is very important for all CAFO operators. "Without that sampling, the substance of Bell's opinion is nothing more than: poultry fans can emit dust; poultry dust can contain litter; poultry litter can contain certain pollutants; and, because those pollutants were found in the water exiting the Hudson farm, some of those pollutants must have come from poultry operations."

 What the court concluded in this case is that Waterkeeper, Assateague Coastal and Ms. Phillips failed "...to establish that there was a discharge from the poultry operation. On the issue of whether there was such a discharge, plaintiff had the burden of proof by a preponderance of the evidence."

The court went on to point out that it is possible for particles of chicken litter, fecal matter, dust and feathers to make their way out of poultry operations into waters of the state. This air deposition issue is not going away for CAFOs with fans ejecting particles and ammonia from production areas.

The sobering lesson from the court for all CAFOs is, it is possible that "...if plaintiff had done appropriate testing on the Hudson farm, they could have found evidence of that discharge." Mr. Hudson and his legal team won because the court found that even though such pollution is possible there must be an actual discharge supported by a preponderance of the evidence.

While the victory by the poultry producer and Perdue was a great Christmas present, it is premature to conclude that this case or this issue regarding fan exhaust is over.

Corps Begins Mississippi River Rock Removal

Corps Begins Mississippi River Rock Removal

As the calendar flips to 2013, the drought of 2012 continues to linger in Iowa and a wide area of the Midwest. Lack of rain is affecting water levels on the Mississippi River, which are expected to keep dropping over the next several weeks unless we get much needed rain or an awful lot of melting snow. Barge shipping of grain down the river to New Orleans and movement of fertilizer up the river to Iowa, Illinois and points north are being hindered by the shallow water levels on the Mississippi.

LOW WATER LEVELS: Continued drought could impede shipments of grain and fertilizer on the Mississippi River even more than has already occurred. As navigation channels get shallower the U.S. Army Corps of Engineers is working to ensure shipping lanes stay open this winter. These photos of the Mississippi River, taken by Josh Flint of Prairie Farmer magazine, show just how low the river is now. The rock formations are jutting out of the river at Thebes, Ill., about 130 miles southeast of St. Louis, Mo.

On December 27, the U.S. Army Corps of Engineers told shippers that the Mississippi River could be closed to barge traffic as soon as next week. The river must be at least 9 feet deep to maintain a channel for barge shipping. The latest forecasts indicate that the water could fall below that required minimum depth on January 3 or 4 in the area of Thebes, Ill., a tiny town along the river about 125 miles south of St. Louis, Mo.

Last week, contractors began working in that area of the river, a six mile stretch near Thebes, to remove rock pinnacles from the river bottom in an effort to keep the waterway open to barge traffic.

Months of drought have left water levels as much as 20 feet below normal
Michael Toohey, president and CEO of the Waterways Council Inc., said on December 27 the federal government must act now to avoid economic disaster on the river. Grain shippers have been pushing for more water from big dams on the northern reaches of the Missouri River to be released so that it flows into the Mississippi to keep the water level higher. The Army Corps of Engineers has resisted that request because it would cause problems for people and the environment upstream.

LOW WATER LEVELS: Continued drought could impede shipments of grain and fertilizer on the Mississippi River even more than has already occurred. As navigation channels get shallower the U.S. Army Corps of Engineers is working to ensure shipping lanes stay open this winter. These photos of the Mississippi River, taken by Josh Flint of Prairie Farmer magazine, show just how low the river is now. The rock formations are jutting out of the river at Thebes, Ill., about 130 miles southeast of St. Louis, Mo.

The Coast Guard has said barge traffic will likely be restricted further if the river’s depth dips to 9 feet. The river’s depth at St. Louis on December 12 was 12 feet.

Months of drought have left water levels as much as 20 feet below normal along a 180 mile stretch of the river from St. Louis to Cairo, Ill. which is the town at the southern tip of Illinois along the Mississippi River. The low water problem was worsened last month when the Army Corps of Engineers cut the outflow from the big dam at Yankton, S.D., on the upper Missouri River by two thirds. Thus, less water is flowing into the Mississippi from the Missouri River.

Barges on Mississippi River are carrying lighter loads because of shallow water
Barges on the Mississippi River are already carrying half to three-quarter loads and some barge operators say they’ll halt shipping if they face more restrictions from reduced water levels. Iowa State University Extension economist Chad Hart says a prolonged stoppage of shipping on the Mississippi could have an economic impact reaching into the billions of dollars, with a halt in movement of ag products such as grain and fertilizer, coal, petroleum and other goods that rely on the river for transportation.

Aggravating the situation with low water levels are those submerged rock formations that are now getting in the way as tow-boats pushing barges try to navigate the shallow waters. A spokesman for the Army Corps of Engineers says the Corps removed many of the rock pinnacles in the river between St. Louis and the southern tip of Illinois more than 20 years ago. But sonar technology wasn’t as advanced back then as it is now, so the Corps missed some of the rock formations when they did that work in the 1980s.

Complicating this situation are rock pinnacles affecting barge traffic
Last week contractors for the U.S. Army Corps of Engineers began the work of removing the rock pinnacles in the Mississippi River between St. Louis, Mo., and Cairo, Ill.. The rock removal operations will ensure the river channel will be safe to navigate should the water levels on the river drop further, according to Major General John Peabody, commander of the Army Corps’ Mississippi Valley Division, who spoke at a press briefing December 24. Corps officials have said they are “cautiously optimistic” there will be no significant disruptions to navigation on the Mississippi River this winter due to low water levels. They’ve said if there is any interruption to shipping, it will be short in duration.

“Due to the 2012 drought and historical low water levels on the river, the rock pinnacles have emerged and their presence reduces the depth and width of the shipping channel used by barges,” says Mike Peterson, a Corps spokesman at St. Louis. Rock pinnacles can damage barges when water levels drop too low.

Corps has hired two companies to remove the rock pinnacles from the river
The Corps in mid-December agreed to expedite the removal process of the rock pinnacles in order to mitigate the negative effects on navigation. The Corps has hired Newt Marine of Dubuque, Iowa, and Kokosing Construction Company, an Ohio firm, to rid a six mile stretch of the river of the rock pinnacles near Thebes, Ill. That town is across the river and not too far from Cape Girardeau, Mo.

The Corps also recently released some water from a reservoir located on the Kaskaskia River which is on the Illinois side of the Mississippi River. The Kaskaskia empties into the Mississippi south of St. Louis. The Corps released the water from Carlyle Lake, which flows into the Kaskaskia River, to raise the water level in the Mississippi River to support navigation over the rock pinnacles and in areas in need of dredging on the Mississippi River. The amount of water released raised the river level about 6 inches, and that won’t last long. The barge shipping industry has indicated that the water released has helped, but isn’t sufficient to avert a shutdown.

Shippers and farm groups are asking the Corps to release water from dams
Meanwhile, the barge industry, grain shippers, the Fertilizer Institute, American Farm Bureau and commodity groups such as the American Soybean Association and National Corn Growers Association are continuing to ask the Corps to release more water from the big reservoirs on the upper reaches of the Missouri River. They say that water is needed during the time when the rock pinnacle removal work occurs, to allow continued movement of barge traffic and shipping of the nation’s basic commodities.

U.S. Sen. Dick Durbin of Illinois said in a press conference last week that the Obama administration has assured him “every option is on the table” if blasting away the rock pinnacles fails to keep the Mississippi River open for barge traffic. Those options may include getting the White House to tell the Army Corps of Engineers to increase the flow of water from the big dams in South Dakota and Montana on the northern stretch of the Missouri River, thus increasing the flow into the Mississippi River. The blasting of the rock pinnacles and removing them from the river will likely take 60 days, which means January and February.

Fertilizer supplies for spring are a concern with river shipping slowed down
Of course, winter weather is another uncertain factor. A National Weather Service hydrologist said last week that as the weather turns colder and freezes the Mississippi River and the Missouri River to the north, that would likely further reduce the amount of water flowing downstream and could lower water levels even further.

What about the railroads? People involved in the grain shipping and fertilizer industries in Iowa and Illinois say they don’t expect rail will bail them out. The railcar capacity simply doesn’t exist, particularly for moving UAN and anhydrous ammonia fertilizer from the south where it is manufactured to the northern areas such as Iowa, Illinois, Minnesota and Wisconsin.

If Mother Nature doesn’t begin pouring rain on the Midwest soon, this shallow river shipping problem could extend well into 2013 and fertilizer could become difficult to secure this coming spring. As for grain shipping, barges ship a lot more grain south to New Orleans during the year than the railroads do. There aren’t enough railcars to make up the difference for grain shipping and fertilizer shipping if barges are stopped, says Jean Payne, president of the Illinois Fertilizer and Chemical Association.