Falling water on the lower Mississippi River is adding cost to the fall grain export movement, and new research from the University of Arkansas Division of Agriculture shows farmers in the South are among the most likely to absorb it through weaker local basis.
American Commercial Barge Line said in a Friday river update that it expected the Memphis gauge to reach 0 feet Sunday. At that level, ACBL said it would put its low water protocol in place and assess low water surcharges under contract terms. The company has already cut tow sizes by 13%, or five barges, pending horsepower classification. Loading drafts had not yet been reduced between the Gulf and Cairo, Illinois.
The Memphis gauge read 5 feet on Oct. 19 and was forecast to fall to minus 4.2 feet by Nov. 4, according to a Division of Agriculture crop update. The record low at Memphis, minus 12 feet, was set in 2023.
"It's something that bears watching during the peak U.S. grain export window," said Scott Stiles, extension economics program associate for the Division of Agriculture.
Rates already elevated
Barge costs were running high before the latest drop. The St. Louis spot rate was $26.87 per ton for the week ending Oct. 13, up 34% from a year earlier and 15% above average, according to the Thursday Grain Transportation Report from USDA's Agricultural Marketing Service. Third-quarter St. Louis spot rates averaged $25.67 per ton, up 50% from the second quarter.
The agency said harvest demand normally lifts third-quarter rates, but low water on the Mississippi added pressure for the fourth year in a row, along with high diesel prices. Rates eased in the most recent week, with St. Louis at $23.62 per ton for the week of Oct. 20, still 20% above last year but 9% below the three-year average.
Who pays when the river drops
The study, published in the journal Agribusiness, tracked how barge cost increases pass through the grain marketing system to local basis, the gap between cash and futures prices. The research comes from Yuan Zhang, a postdoctoral fellow, and Eunchun Park, an assistant professor, both in the Department of Agricultural Economics and Agribusiness and the Fryar Price Risk Management Center of Excellence, with collaborators from Utah State University and North Dakota State University.
Using elevator-level cash bids, barge freight data and river levels, the researchers found that higher barge rates weaken both corn and soybean basis. In the most exposed corn counties, including parts of Arkansas, Louisiana, Kentucky and Tennessee, more than half of a barge rate increase reaches the farmgate.
In the hardest-hit areas, a $1-per-bushel rise in barge freight was associated with corn basis declines of about 60 to 71 cents and soybean basis declines of about 49 to 53 cents. Corn growers near processing plants or in areas with more competing buyers were less affected. For soybeans, distance from river export facilities did more to soften the impact.
"The timing of the current low water levels is particularly concerning," Zhang said. "With large volumes of newly harvested grain entering the market, transportation demand is already high."
Arkansas harvest nearly done
Arkansas growers have largely avoided the squeeze so far. Corn and rice harvests were finished and soybeans were 87% harvested as of USDA's Oct. 19 Crop Progress report, Stiles said.
"The Mississippi River has not posed an issue for our growers this fall," Stiles said. "However, a lengthy stretch of low river levels could hamper export movement of soybeans and other grains in the weeks ahead."
Export flows remain heavy. About 1.5 million metric tons of grain left the Mississippi Gulf in the week ending Oct. 15, Stiles said, with soybeans making up 65% of the total. How far basis weakens will depend on how long the river stays low and how deep the Memphis gauge falls below zero.
