Mississippi barge rates dropping despite little improvement in river levels

Soy Transportation Coalition director says farmers diverting product from weak export market.

The post Mississippi barge rates dropping despite little improvement in river levels appeared first on FreightWaves.

The water levels are still low on the Mississippi River and barge movements continue to remain restricted, but the rates to move those barges are declining.

The weekly grain transportation report published Thursday by the U.S. Department of Agriculture reported that the grain transport indicator for barge traffic on the Mississippi fell to 326 for the week ending Wednesday. That 326 is a percentage applied to a basis cost of 100 set in 2000. 

A week before it was 366. The indicator was 556 for the week ended Sept. 27 and 549 for the subsequent week.

“Normally, restrictions cause spot rates to increase, as was observed in third quarter 2022,” the USDA report said. “However, this year, except for the last few weeks, spot rates have neared the prior 5-year average because of low demand from slow export sales.”

This is occurring even as there is little sign of improvement of Mississippi River water levels at the key measuring point of Memphis, Tennessee, where water levels in recent days fell to minus 11 feet. American Commercial Barge Lines (ACBL), a key barge operator on the river, said the reading of negative 11.8 feet on Monday was a record low.

That number is a measurement against a base level. It has since rebounded back to a level slightly higher than minus 11, but when it got underneath that number it was less than the water levels of a year ago. And at that time in 2022, the index for moving grain via barge on the river exceeded 1,000.

Mike Steenhoek, the executive director of the Soy Transportation Coalition, whose members are highly dependent upon the river to move their products to market, particularly those in other countries, acknowledged the divergence seems odd. 

But he said diversion of product to other places is a key reason why the enormous barge rates of last year aren’t repeating themselves this year. 

“I think it’s kind of settled a bit into a kind of equilibrium, where there has been an understanding that we’re down,” Steenhoek told FreightWaves. Earlier increases in barge rates were “a market signal that says, ‘Don’t deliver to the river.’”

And that is what has happened, he said. There has been diversion of grain shipments to rail and to storage where farmers have that capacity. 

“They’re saying, ‘Well, hopefully the river levels will rebound in another couple of months,’” Steenhoek said of farmers putting that product into storage. 

But another reason a surge in barge rates has not occurred has been the weak export market referred to by the USDA. Demand for soybeans and corn abroad has been tepid this year, and that’s pushed demand into the domestic market, according to Steenhoek. 

“The farmers are gravitating to the domestic market, the beans are getting processed and then maybe sold into the livestock market or going into biofuels,” he said. 

ACBL has made some changes in its restrictions, but they aren’t major. For the most part, the same restrictions that were in place at the end of September are in place now.

For example, in its latest list of restrictions, loading drafts were reduced by 28% northbound and southbound between the Gulf and Cairo, Illinois— where the Ohio River joins the Mississippi — and Vicksburg, Mississippi, south of Memphis. They also were reduced 24% for barges going from Vicksburg to the Gulf.

As of Oct. 10, the reduction was 28% northbound from the Gulf to Cairo and 24% southbound from Cario to the Gulf, so an additional 4 percentage points of reduction have been tacked on to the southbound movement.

Steenhoek said other restrictions are in place at other companies and that ACBL’s were largely in line with the broader industry.

ACBL also said it was restricting tow sizes to five barges across, which is a 17% to 38% reduction in capacity. That limit has been in effect for several weeks.

There is some hope for the future that the worst may be behind the low water levels on the river. Between Oct. 4 and Friday, the level on the Mississippi at St. Louis rose about 2 feet. However, the projections in coming days are for renewed declines.

The weekly drought monitor published by the University of Nebraska-Lincoln and a pair of U.S. government agencies is showing some sign of improvement on top of the data for St. Louis. The  Drought Severity Coverage Index for the area that it defines as the Midwest declined to 155 in the latest report published Thursday, down from 168 a week earlier. That area is mostly in the Mississippi watershed.

In the region it calls High Plains, which includes the Dakotas, Kansas and Nebraska, all in the Mississippi watershed, the index dropped to 85 from 92.

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The post Mississippi barge rates dropping despite little improvement in river levels appeared first on FreightWaves.