Some 60 per cent of U.S. soy exports depart from Gulf Coast terminals that draw supplies from barges traveling south on the Mississippi, the country’s most important grain waterway.

Heavy rainfall across the central United States brought relief to Gulf Coast grain shippers after the Mississippi fell to near-historic lows during peak export season for a third straight year.

Deeper waters are allowing crop handlers to supply exporters with more grain per barge, and to lash more barges together into tows for shipment down the river to the Gulf.

The pickup in barge movement came just as grain merchants are scrambling to move the second-largest U.S. soy crop ever. They want to move inventory before newly harvested Brazilian soy floods the market early next year.

Merchants are also concerned that U.S. President-elect Donald Trump will revive a trade war with top importer China and other key trade partners, raising fears that Beijing and other importers would retaliate by cutting purchases of U.S. grains.

Inspections of soybeans marked for export from Mississippi River terminals at the Gulf topped 1 million metric tons for a fifth consecutive week last week, according to weekly U.S. Department of Agriculture data published on Monday. The last time that happened over five consecutive weeks was in December 2020.

Last week’s tally included 663,272 tons of soybeans on 11 China-bound vessels, USDA data showed.

Those shipments add to a recent surge in Chinese imports of U.S. beans after October imports more than doubled from a year ago, Chinese customs data showed.

“The recent rains … definitely came at the right time to help the grain markets avoid a disaster,” said Matt Herrington, director of commodity research for World Perspectives Inc.

“Had the dryness and falling water levels gone on for another week or two, the markets would have started to see major impacts,” such as elevated barge freight costs, he said.

Instead, barge freight fell sharply this month, making U.S. soybeans more competitive globally, as the heavier loadings reduced the number of barges needed to meet demand.

Still, analysts warn, the immediate benefit to U.S. exports may be short-lived. Farmers in Brazil, the world’s top soybean supplier, are nearly finished planting what is projected to be a record-large harvest that could begin as soon as January.

Brazilian soybeans for shipment in February are currently offered at about $13 per metric ton cheaper than U.S. soybeans at the Gulf, according to LSEG data.

The improvement on the Mississippi River “does help, and this is the peak of our shipping season,” said Rich Nelson, chief strategist for analytical firm Allendale Inc. “It does not change the fact that Brazil has a price discount.”

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Low water levels are slowing export-bound barge shipments of grain and oilseeds from the Midwest farm belt for a third straight year, making U.S. exports less competitive in a world market awash in supplies – just as farmers are set to harvest a record soy and large corn crop and as prices hover near four-year lows.

The U.S. Coast Guard said in an email it has received reports and responded to several groundings over the last week along the Greenville-Vicksburg sections of the lower Mississippi River.

American Commercial Barge Line warned that customers should expect one to two day delays for river shipments “due to reduced navigable space in certain areas,” the company said on its website.

Sandbars are already starting to show on the Mississippi River at the Memphis, Tennessee, river gauge, according to barge sources. Last October, this stretch of the river fell to an all-time low of -12.04 feet, according to the National Oceanic and Atmospheric Administration’s National Water Prediction Service.

The water level at Memphis is lower than it was last year: It is forecast to drop to -7.5 feet by Sept. 18, NOAA data shows.

Towing and draft restrictions have been rolled out, which are limiting how many barges can move and how much volume can be loaded onto them, said Mike Steenhoek, executive director of the Soy Transportation Coalition. If conditions worsen, the Coast Guard said it may implement further vessel and tow restrictions.

Barge rates are soaring – making it more expensive for overseas buyers to source U.S. grain. Rates for barges coming from the St. Louis, Missouri, area were 65 per cent higher in late August than the three-year average, according to Steenhoek and USDA data.

Such low river levels come despite heavy rains during this year’s growing season, which resulted in flooding and excessively wet fields across wide swaths of the northwestern Midwest.

But now, abnormal dryness and drought conditions are intensifying across the southern Plains and Tennessee and Lower Mississippi Valleys, creating a rapidly developing flash drought situation, according to the U.S. Drought Monitor.

“The secret of our success on the global market has always been lower transportation costs,” Steenhoek said. “This further diminishes our competitive position.”

– Additional reporting by Tom Polansek

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The severe to exceptional drought choking the lower Mississippi River valley is expected to improve this winter as the El Nino weather pattern brings better rains to the region, NOAA said in its U.S. winter weather outlook.

But lingering drought in the upper Midwest and forecasts for normal to below-normal precipitation across basins that supply tributaries such as the Illinois and Ohio rivers could slow the Mississippi River’s recovery.

Low water has slowed export-bound barge shipments of grain from the Midwest farm belt for a second straight year during the busy fall harvest season, making U.S. exports of corn and soybeans less competitive in the world market.

“We are expecting improving drought conditions for the lower to middle Mississippi Valley during the next few months. But for the hydrological impacts such as low river levels and low ground water levels, that will be a little slower to recover,” said Brad Pugh, operational drought lead with NOAA’s Climate Prediction Center.

“The hydrological impacts could linger beyond the end of January,” he said.

The Mississippi River fell to an all-time low on Monday at the Memphis, Tenn. river gauge, eclipsing the previous low water record set nearly a year ago, according to National Weather Service data.

Shallow river conditions prompted barge shippers to restrict the amount of grain they haul to avoid getting stuck in the drought-parched waterway.

Still, areas of the lower Mississippi River have been closed to navigation at times over the past several weeks following vessel groundings or as U.S. Army Corps of Engineers crews dredged low spots to deepen the channel.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.

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Capinegro said the December corn contract has been unable recently to stay above US$5 per bushel.

“Basically it’s in no man’s land. I don’t know what’s going to drive it anymore,” he stated, noting a lack of fresh bullish news.

When it came to soybeans, Capinegro placed resistance for the November contract at around $13.20-$13.30/bu. (all figures US$).

“The [soy] complex is being led by meal, it has been for a good week and a half. If you want bullish beans, then you want meal to be the leader,” he explained.

As for wheat, Capinegro was flabbergasted by that complex’s erratic nature of late.

“One day up, one day down. It just drives you nuts,” he said.

One source of support for CBOT commodities has been low water levels on the Mississippi River.

“It’s hard to get any barges to move when you got that river that low,” he said, but noted levels improved somewhat. However, he said, dry conditions of the U.S. Midwest have meant insufficient water to bring the river much higher.

Also he pointed to the low water levels for vessels using the Panama Canal, which has slowed global traffic.

Capinegro said the trade has been keeping a keen eye on the weather in South America. He said northern Brazil has been wet while the south has been dry, with both causing problems for planting.

Markets have also been watching the lead-up to next week’s presidential election in Argentina.

“With their inflation and interest rates, their farmers are not selling. They want to see what happens in the election,” Capinegro said.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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Drought, which currently spans 59 per cent of the country, is expected to continue or worsen in the middle and lower Mississippi River valley as well as in much of the West and the Great Plains, the National Oceanic and Atmospheric Administration’s (NOAA) Climate Prediction Center said in its winter (December-February) outlook.

Above-average precipitation, however, expected in the Midwest and the Ohio River valley may provide some relief to the drought-parched waterway later in the winter, NOAA said, citing the effects of a third consecutive winter of La Nina, a climate phenomenon that alters weather patterns.

Water levels on the Mississippi River dropped to historic lows this autumn, at times halting barge shipments of grain, fertilizer, coal and other commodities on the major shipping waterway and revealing a century-old shipwreck.

Some 60 per cent of U.S. grain exports exit the country via the Gulf Coast. Crucial shipments of fertilizer, farm chemicals and road salt that move up the Mississippi River ahead of the winter have also been disrupted.

“Across the lower Mississippi Valley, we are favouring continuation of below-normal precipitation,” said Jon Gottschalck, chief of the Operational Prediction Branch of NOAA’s Climate Prediction Center.

“That would certainly, if the prediction is realized, lead to continued low water levels and exacerbate drought conditions there.”

NOAA forecasters are also predicting drought conditions would persist or worsen in the West and in the southern Plains farm belt, where farmers are struggling to plant their winter wheat crop due to excessively dry soils.

Nearly 90 per cent of Kansas, the top U.S. wheat-producing state, is under some level of drought, the worst in at least eight years, according to National Drought Mitigation Center data.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.

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While the war in Ukraine continues to rage on, negotiations persist between the United Nations and Russia in Moscow to extend a soon-to-expire deal allowing Ukrainian grain shipments on the Black Sea.

Terry Reilly, grains analyst for Futures International in Chicago, said reports that talks between the two parties were progressing are putting additional pressure on wheat prices.

“There is still uncertainty over the Black Sea situation, but it looks like some of the tensions might be cooling a bit,” he said, adding that while wheat prices are coming down, the trade is still waiting on assurances that the agreement can be renewed next month.

“A lot of these shippers need to know ahead of time if (the deal’s) going to be extended,” Reilly said. “I think we’re seeing a lot of mixed views right now.”

Meanwhile, severe drought in the U.S. Midwest has caused water levels on the Mississippi River to fall to record lows, halting barge traffic.

“It’s keeping importers away, because they’re not sure if they can secure (soybeans) and corn in a timely fashion,” Reilly said. “It’s negative to the market because it slows the exports.”

He also mentioned a relative lack of Chinese demand for U.S. corn as well as favourable weather conditions in Brazil and Argentina as other factors for declining corn prices.

Reilly predicts prices for corn, wheat and soybeans to trade sideways to lower during the next week.

“We don’t know what’s going on in the Black Sea and the next headline could easily change the direction (where prices will go),” he said. “But my general consensus is that harvest pressure will limit any gains in the market.”

— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.

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The supply chain snarl comes just as harvesting of corn and soybeans, the largest U.S. cash crops, is ramping up and as tight global supplies and strong demand for food and fuel have sent inflation soaring.

Around 100 tow boats hauling some 1,600 barges were lined up for miles waiting to pass through one trouble spot near Lake Providence, in northeastern Louisiana, that has been largely closed since late last week, shipping sources said.

At least two other sections of the lower Mississippi have also been closed at times, disrupting the flow of grain to U.S. Gulf Coast export terminals, where some 60 per cent of U.S. corn, soybean and wheat exports exit the country, they said.

The U.S. Army Corps of Engineers is dredging the river to deepen the shipping channel to allow some cargo to pass. But shippers fear that without substantial rain the jam will persist well into the busiest grain export period of the year. Products such as road salt are also hauled north ahead of winter.

“Mother Nature hasn’t been very helpful, and there’s not a lot of relief in sight in the weather forecast,” said Merritt Lane, CEO of barge operator Canal Barge Co.

Shippers have been loading less cargo per barge so vessels sit higher on the water, and towing companies have reduced the number of barges per tow by nearly 40 per cent as the low water conditions narrowed the navigable channel.

Many U.S. Gulf exporters have pulled offers for corn and soybeans loaded in October and November as it is unclear if they can source enough grain, threatening already sluggish export sales.

“We can’t commit to new sales right now,” one exporter said.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.

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The Coast Guard said the river is open to all vessel traffic without restrictions, after traffic was halted on Tuesday because of a fracture in the Hernando DeSoto Bridge that carries cars and trucks on Interstate 40 over the river.

The fracture and disruption in river shipments put a spotlight on infrastructure needs as President Joe Biden seeks congressional approval for a US$2.25 trillion infrastructure bill.

“Based on information provided to us by the Tennessee Department of Transportation, the Coast Guard has determined that transit under the I-40 bridge is safe for maritime traffic,” said Coast Guard Capt. Ryan Rhodes, captain of the Port of Memphis.

The reopening will begin to ease a jam of 62 vessels with 1,058 barges that were waiting to pass through the closed area, according to the Coast Guard.

Clearing the backlog may take close to 48 hours, said Mike Steenhoek, executive director of the Soy Transportation Coalition, an agricultural industry group.

The river closure rattled the farm sector because global corn and soybean supplies are tight and prices are near eight-year highs due to strong demand.

Almost all grain barges must pass beneath the DeSoto bridge on their way to Gulf of Mexico export facilities near New Orleans after being loaded along the upper Mississippi, Ohio, Illinois or Missouri rivers, according to the coalition.

“It is my hope that this situation will further galvanize efforts to produce a comprehensive infrastructure investment strategy that addresses the needs of both urban and rural America,” Steenhoek said.

— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.

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The shutdown fueled concerns about shipping U.S. grain and soy to export markets at a time when global inventories are slim and prices are near eight-year highs. U.S. corn futures sank more than five per cent in a setback from the lofty prices.

At the spot where the river is closed, 26 vessels with 430 barges are waiting to pass north and 21 vessels with 341 barges are in the queue to go south, said Petty Officer Carlos Galarza, a Coast Guard spokesman.

A day earlier, a total of 411 barges carrying crude oil, dry cargo such as crops, and other materials were backed up in both directions.

The Tennessee Department of Transportation must finish investigating the bridge before a decision is made to reopen the river, Galarza said.

Tennessee officials hope to “have a decision for river traffic” in the next day or so, said Nichole Lawrence, a spokeswoman for the state Department of Transportation. She said a timeline has not been determined and the bridge is still under inspection.

The Coast Guard stopped all traffic on the river near Memphis on Tuesday between mile markers 736 and 737 after a fracture was discovered in the Hernando de Soto Bridge that spans the river.

Almost all grain barges must pass beneath the bridge on their way to Gulf of Mexico export facilities near New Orleans after being loaded along the upper Mississippi, Ohio, Illinois or Missouri rivers, according to the Soy Transportation Coalition, an agricultural industry group.

Grain traders said they expect river traffic to resume within days. However, shippers are not booking barges for this week and next week because the closure has left them uncertain barges will be available, barge sources said.

— Reporting for Reuters by Tom Polansek in Chicago; additional reporting by Julie Ingwersen.

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The barges can’t move — or get crucial nutrients to corn farmers for the spring planting season — because river locks on the main U.S. artery for grain and fertilizer have been shuttered for weeks. High water presents a hazard for boats, barges and lock equipment.

Railroads have also been plagued by delays from winter weather and flooding in the western Midwest, further disrupting agricultural supply chains in that country’s breadbasket.

The transportation woes are the latest headache for a U.S. agricultural sector reeling from years of slumping profits and the U.S.-China trade war, and they threaten to cut the number of acres of corn and wheat that can be planted this year.

The shipping delays follow months of bad weather in the rural Midwest, including a “bomb cyclone” that flooded at least one million acres (405,000 hectares) of farmland last month and a record-breaking April snowstorm.

“Our barges are a long way from where we need them in the upper Midwest,” said Gary Halvorson, senior vice-president of agronomy at CHS. “We really don’t think that any rail line will be at its preferred service rate until summer.”

Agricultural retailers rely on barges and trains to resupply distribution warehouses across the Farm Belt. But river flooding has delayed the seasonal reopening of the northern reaches of the Mississippi River to barge traffic. The latest National Weather Service river forecasts suggest one of the river’s southernmost locks could remain closed well into May.

Production hit

Reduced or poorly timed fertilizer applications can hurt yields, potentially denting this year’s U.S. farm profits, which are already predicted to be about half of their 2013 peak, according to the latest U.S. government forecast. Delayed shipments can also mean lost sales for farm suppliers and higher demurrage penalties, or late-return charges, on stalled barges and rail cars.

CHS, one of the largest publicly traded U.S. agriculture suppliers, said this month cited poor weather as a key reason for a US$8.9-million drop in agricultural profits during its fiscal second quarter.

Agribusiness giant Archer Daniels Midland said severe weather and flooding would cut its first-quarter profit by US$50 million to US$60 million while DowDuPont said flooding would slash first-quarter profits in its agriculture division by 25 per cent.

Fertilizer producers such as Nutrien, Mosaic and Yara International also lost sales due to bad weather in the fourth quarter of last year and first quarter of this year. Mosaic announced last month that it would cut U.S. phosphate fertilizer production by 300,000 tonnes for the spring season due to poor weather and large inventories left over from the fall.

Farm retailers such as CHS and privately held Growmark may see additional losses through the spring season as the tighter planting window limits the application services they provide, according to CoBank analyst Will Secor.

Farmers scrambling

Higher nutrient costs could have growers applying less than optimal amounts, said Purdue University agronomist Bob Nielsen.

Some farmers could shift from corn to soybeans, which can be planted later and require fewer fertilizer applications. But soybeans will continue to face uncertain demand as long as the U.S. and top buyer China remain locked in a trade war.

“Right now my plan is to plant more corn because the price of beans is so low,” said Don Batie, a farmer near Lexington, Nebraska.

The weather problems started last autumn, a period when some farmers treat fields after harvesting in preparation for the following spring. But wet weather prevented fall fertilizer applications, and an exceptionally snowy winter in many areas slowed or halted winter field work.

More recent storms have threatened to narrow the limited spring window for field treatments.

“When you add to it this resupply constraint of not being able to move barges up the Mississippi, it puts us in a precarious position,” said Kreg Ruhl, manager for crop nutrients division at Growmark, the U.S.’s third-largest agriculture retailer in terms of revenue.

Prices rising

Retail fertilizer prices have started rising in parts of the Midwest and are likely to rise further as local supplies are depleted and retailers scramble to resupply.

In Iowa, the top U.S. corn-producing state, the price of the common fertilizer urea was up 20 per cent in late April from a year ago, and anhydrous ammonia was up 27 per cent. Both hit their highest early-spring levels in three years, according to U.S. Department of Agriculture data.

Without timely barge deliveries, CHS will lean on its rail network that brings imported supplies from Galveston, Texas, to any of the 29 rail hubs it owns in places like Sioux Falls, South Dakota; Marshall, Minnesota; and Minot, North Dakota.

Higher U.S. fertilizer prices and strong demand from other countries could help producers such as Nutrien, Mosaic and Yara recover some recent profit weakness in upcoming quarters.

For farmers and fertilizer retailers, however, uncertain fertilizer deliveries will likely weigh on agricultural markets through the planting season.

“We’re doing our very best to make sure that our retail network is supplied,” said CHS’s Halvorson.

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