Low Water Levels May Plague Ag This Fall and Winter

From the Mississippi River to the Panama Canal, this year’s drought has resulted in low water levels that are likely to disrupt agricultural production and trade through at least the end of the year.

The Wall Street Journal reported in early August that water levels in the Mississippi River from St. Louis to Memphis were 10 to 20 feet lower than a year ago. After a brief spring flooding event earlier in the year, U.S. Geological Survey data shows that river levels have plummeted 20 feet since May.

American agriculture is heavily dependent on the aquatic highway of the Mississippi, which is traversed annually with barges hauling commodity crops like corn and soybeans south, and crop-protection chemicals, fertilizer, gasoline and diesel fuel north.

Dairy products, too, see a fair bit of barge transportation. Raw milk, cheese, butter, whey, yogurt, powdered milk, and ice cream mixes all rely in part on bulk transportation via Mississippi barges from some regions of the country. Considering one barge can carry the load of 70 fully loaded semi-trucks, it’s a very efficient means of transportation, when systems are operational.

But with the river’s current, low levels, barge traffic is being slowed by efforts to keep the river navigable. Last fall, under similar conditions, the Army Corps of Engineers dredged the Mississippi 12-18 hours a day to keep the water channel open. When the river is low, barges also carry lighter loads to stay afloat, increasing transportation rates.

Freights costs for Mississippi River transportation are running 3-4 times above normal, which hits farmers in both directions. They pay more to ship their goods down the river, plus additional premiums on the inputs upon which they rely to be shipped back up from refineries in the south.

Meanwhile, international trade is being hampered by a similar situation at the Panama Canal. According to RaboResearch, a special advisory was issued in July to adjust Panama Canal traffic and mitigate the impacts of the extended dry season. The number of vessels allowed through the canal daily was lowered from 36 to 32.

Gatun Lake, the man-made lake in Panama that is integral to the operation of the canal system, currently is about 7% below its 5-year-average water level. Nearly 35% of global maritime trade volumes pass through the Panama Canal annually.

A rainy October could restore the canal to normal passage rates. But if water levels remain low, RaboResearch predicted current measures will stay in place, resulting in lower throughput, shipping delays, and higher costs. If a vessel misses its booking appointment to pass through the canal due to backed-up traffic, it may have to wait up to 2-3 weeks for a new slot at the canal.

Rabo noted that the Panama Canal is a vital route for U.S. agricultural exports to Asia. In 2022, the U.S. sent more than 26% of its soybean exports and 17% of exported corn through the canal, much of which was destined for Asia. Analysts predict that if water levels at the canal remain low, U.S. grain exports will be heavily impacted.

Source: AgWeb.com