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Mississippi River Closures Simulate Consequences of Poor Infrastructure

Mississippi River Closures Simulate Consequences of Poor Infrastructure

Groups say low water levels and river closures decreased cash corn prices by $0.45 on average last year

Due to shipping interruptions caused by low water levels on the Mississippi River last year, some farmers experienced a $0.45 decrease in cash corn price, according to a study funded by Illinois, Missouri and Indiana corn and soy checkoff programs.

The study, prepared by Informa Economics, shows not only that low water levels are a concern, similar issues could arise if waterways infrastructure – such as locks and dams – aren't up to par.

Though the study itself examines the effects of low water levels, it also served as a chance to document a "real world" event that simulated a more prolonged river interruption, explained Larry Hasheider, Illinois Corn Marketing Board chairman.

Groups say low water levels and river closures decreased cash corn prices by $0.45 on average last year

"This study is really about making lemonade out of lemons. Unfortunately we had some drastically low water on the Mississippi River, and with that we had shipping interruptions and demand destruction to our export markets. That was the lemon," he said.

The lemonade, he explained, came in when the situation allowed the groups to design a study that would demonstrate the consequences of a similar interruption due to a failure of the inland waterways system.

According to the study's findings, diversion to rail was at a 45 cent per bushel premium to barge rates.  This premium encouraged grain to be stored until the river market stabilized, or to be used elsewhere in the marketing chain.

“When you see a 45 cent hit on seven dollar corn that’s one thing, but at four dollar corn we’re in a different world,” Hasheider noted.

The study also highlights a push among Midwestern commodity groups to study water infrastructure and related transportation issues on a national level.

The U.S. Senate has already passed legislation that would increase funds to port and river maintenance projects, as well as rehabilitate locks and dams. Though the House has not released its text of a similar bill, Committee on Transportation and Infrastructure Chairman Bill Shuster, R-Penn., earlier this month announced that it would be on the docket for September voting.

The Informa study was presented during a public hearing held by the Mississippi River Commission on August 16 at Alton City Riverfront in Alton, Ill.

View the highlights of the study.

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