Mississippi River barge delays could affect consumer prices
There’s a link between historically-low water levels on the Mississippi River and food prices at your dinner table, but don’t go canceling holiday meals just yet. The huge barge back-ups that only recently began to abate is among several factors likely to raise food costs, according to supply chain experts. Shoppers probably won’t feel the worst impacts for months.
“The current state of the economy is probably the biggest contributor to price increases, but this doesn’t help,” said Pawan Joshi, a vice president with supply chain software company e2Open.
Ben Lerner, a vice president with the American Waterways Operators in Arlington, Va., said under normal conditions, it might take a barge loaded with agricultural product 14 days to make the round-trip between Cairo, Ill., and New Orleans, a route strangled by pinch points throughout October and early November. Even now, that trip time has doubled.
Growers would be well advised to work with their grain and fertilizer representatives to plan for longer lead times and potentially higher shipping costs, said Ben Doane, barge freight manager at CHS — the Inver Grove Heights-based farmer-owned business cooperative — in a recorded interview released by CHS on Nov. 8.
Barge rates in some northern markets hit historic highs of over $100 per ton at the time, at least double what’s typical.
Since then, rains have brought up water levels in the lower river, said Sean Duffy Sr., executive director of the Big River Coalition, a New Orleans-based trade association that advocates for port industries south of Baton Rouge, La. Delays are still common, but “we’re in better shape than we were a month ago,” said Duffy, in an interview Monday.
River transportation industry experts say it’s more than just farmers and barge operators who should be alarmed by low water levels and widespread drought, given that 60 percent of all grain exported from the United States is shipped on the Mississippi River through the Port of New Orleans and the Port of South Louisiana, according to the National Park Service.
Impacts for consumers
What’s that mean for consumers?
The impacts won’t be immediate. In general, transportation costs are a small fraction of the sticker price at the grocery store, averaging 4 cents of every consumer dollar spent on food, said David Ortega, associate professor at Michigan State University’s College of Agriculture and Natural Resources.
While processing, wholesale and retail trade are bigger cost drivers, Mississippi River back-ups aren’t helping on top of fallout from the war in Ukraine, pandemic-related supply chain delays and other climate-related food supply issues, Ortega said.
Still, many of the products common to holiday meals have been hanging out in warehouses or stockrooms for weeks, if not months, and are readily available in the Midwest.
A paralyzing drought
Midwestern droughts strangled the lower Mississippi River for weeks, dropping the nation’s primary commercial waterway last month to lows not seen since 1988 and heavily disrupting the country’s main artery for commercial crop exports.
At various points throughout last month, as many as 2,700 barges and vessels were queued in Kentucky, Mississippi and Tennessee, waiting for Coast Guard clearance in areas where barges overloaded for low water conditions had run aground. Receding waters revealed hundreds of miles of sandy riverbed, a 100-year-old shipwrecked steamboat in Baton Rouge and discarded cars.
Emergency dredging in pinch points tied up commerce for 12 to 72 hours at a time, said Duffy, and required the most heavily-loaded barges to effectively step aside. Those conditions have since improved, but as recently as mid-November, the U.S. Army Corps of Engineers was still overseeing emergency dredging in parts of the lower Mississippi River where tow barges were grounding.
“This is really pretty crazy,” said Roger Viadero, chair of the Environmental Science Ph.D. Program at Western Illinois University. “The last time we were in drought conditions like this was in 2012, and then in 2019 we had massive flooding, and now record low water. Having more extremes like this … is just where we’re at now.”
Joshi, who is based in Dallas and earned his doctorate in industrial engineering at the University of Wisconsin-Madison, said the river back-ups have impacted shipments of iron ore and Midwestern grains heading south toward New Orleans for global export, as well as fertilizers, fuels, chemicals and heavy equipment heading north to equip Midwestern farms.
Those delays will eventually trickle down to consumers in the form of constrained supply and higher costs, but it’s difficult to predict exactly how much and when.
“When the waterway goes down, you can’t load the barges as much, and the waterway becomes narrow,” Joshi said. “When the channel is high, it’s wide, so you can have barges side by side. When the water level starts going down, it not only gets narrower, it gets shallower. You’re not carrying 1,000 tons. You’re carrying 750 or 500.”
Global supply chains
With an eye toward crops, “these systems are not designed to store a lot of stuff,” Joshi said. “If you can’t transport them down to the right places, they’re stored in warehouses, with some amount of perishability.”
Supply chains are sometimes mistakenly thought of as one-way streets, with products flowing from one country to another. In reality, they’re quite often circular, with imported raw materials to Asia quickly exported to the western world again as finished or near-finished products.
In other words, rubber from western Africa and southeast Asia heads to Japan, where it’s mixed with chemicals brought in from North America to make Bridgestone automotive tires for shipping to Europe and the United States. The same holds true for North American lumber, which is shipped by barge to Asia, only to return as IKEA kits or fully assembled furniture.
A delay in one corner of the world can impact the entire circle, limiting production on both sides of the Pacific Ocean and raising prices for everyone. The same holds true on the Mississippi River, which remains one of the most affordable channels for shipping bulk goods, especially agriculture.
“I think less about what it will affect immediately. I think about it longer term,” Joshi said. “If you’re not able to move the right grain to the Middle East, or metal and ore, if that goes out slower, it then comes back as a finished good at a higher price.”
Shifting transportation of bulk goods from the river to the road might beat a logjam on the Mississippi, but it’s a pricey alternative.
On the river, “a gallon of fuel moves about 500 tons of grain for 100 miles,” Joshi said. “If you compare that with roads, it’s about 10 miles. It’s in that range, because it doesn’t fit on a single truck. You’re probably talking about 15 to 20 trucks. (The river) is not just a cheap mode of transportation. It’s how much freight you can move, and how quickly can you move it.”
Snow in Minnesota this month bodes well for water levels downriver this season, but future droughts are almost a given. Are droughts part of nature’s natural cycle or something more sinister, like evidence that the climate is changing? In Joshi’s view, the answers are yes and yes.
“You look at the weather patterns, and this cannot be a fluke,” he said. “If you rewind the clock far back enough, you’ll see that these are cyclical trends. There were always droughts. But the cycles are getting shorter and shorter.”
For environmental scientists, extreme weather makes only one thing easy to foresee, and that’s more uncertainty.
“It would be great if we had a crystal ball that said it’s going to be more drought, or more flooding. But it’s going to be a mixed bag,” Viadero said. “Unfortunately, there’s no way to predict what’s going to happen next year. The uncertainty is the thing that’s really kind of a killer, particularly for folks in the upper Midwest.”