Garciliaso de la Vega may have exaggerated. As historian of Hernando de Soto’s explorations, in 1543 de la Vega described a great flood on the Mississippi River stretching “20 leagues on each side of the river,” and lasting 80 days. Forty leagues is roughly 120 miles, and we can’t know how de la Vega arrived at his number, but it was an impressive flood by any measure. The Great Flood of 1927 was estimated to “only” stretch 80 miles across.
The Mississippi River is a 2,300-mile marvel of nature that drains 41% of the contiguous states in a basin covering more than 1.2 million square miles. When inundated from its tributaries, the river’s flow rate at St. Louis has reached 800,000 to 1 million cubic feet per second (cfs), as in 1993, but during dry times has fallen as low as 25,000 to 30,000 cfs.
The Mississippi is America’s barometer — reflecting long-term conditions, as well as short-term events. And this season the river warned us we’re in trouble. Scientific American noted in a November article: “Rising temperatures, persistent drought, and depleted aquifers on the southern Great Plains could set the stage for a disaster similar to the Dust Bowl of the 1930s … ”
The extreme drought of 2012 slowed the Mighty Miss to 60,000 to 75,000 cfs at St. Louis by November, and dropped water levels to a record low at Memphis. This was even before the U.S. Army Corps of Engineers began its mandated winter reduction in the discharge rate out of the Gavins Point, SD, reservoir. Cutting the reservoir discharge from 37,500 cfs to 12,000 cfs further slowed the flow rate on the Missouri River and lowered the water level on the Mississippi below St. Louis.
By late-December, the water level south of St. Louis and north of where the Ohio River joins the Mississippi dropped low enough to expose dangerous rock “pinnacles” — and shut navigation altogether in that stretch. The Corps has begun to blast the pinnacles, but it’s a complex job and navigation will remain a day-to-day problem. America’s barometer could turn into a “minefield” for barges.
Soybean exports by late November 2012 had already hit a record high 600 million bushels, against record total sales of 1 billion bushels (for that early in the crop year) — sales that are largely expected to be shipped by late winter with a large percentage being shipped from the Gulf.
Merchandisers everywhere have a major interest in the water levels on the Mississippi. Too much water or too fast a flow and barges can’t move properly and freight costs rise. Too little water and shippers have to reduce the load on barges to cut the draft level — how low the barges ride in the water — and often must cut the number of barges a single tow can handle. Inefficiency raises freight costs and that affects logistics and basis.
Gulf loadings of corn, soybeans and wheat run 35 to 60 million bushel/week, and southbound barge counts can run 200 to 1,000/week (10 to 50 million bushels). Barge freight is traded as a percentage of a base rate and rises or falls quickly when river conditions change. The short-term implications of river disruptions can impact basis far and wide as logistics and costs change. One consolation: The problems in 2012 were the worst north of where the Ohio River joins the Mississippi at Cairo, although the river could hit record lows as far south as Memphis.
Here’s what could occur:
- Barge lines can move south to the Ohio River or Lower Mississippi.
- Loadings would shift to those regions, which in turn supports basis levels there.
- Load restrictions push barge freight higher and weigh on upriver basis.
- Illinois River locations would see basis weaken as loadings slow.
- Surrounding domestic markets can rise or fall as river basis changes.
- Exporters turn to unit or shuttle trains to source a larger percentage of the corn and soybeans for the Gulf, which in turn can support subterminal basis at origin.
- More Asian sales could be diverted to the PNW, supporting PNW basis values.
- Secondary rail freight values should begin to rise on the increased demand for trains.