Tuesday, July 31, 2012

The Shrinking Mighty Mississippi River

Last year it flooded, this year it’s dry as a bone– the Mississippi River is experiencing one of the worst droughts in over 50 years.  The river is a primary transportation means for much of the US agriculture, petroleum, steel, coal and other bulk commodities. In fact, according to the American Waterways Operators, about 60% of the US’s grain exports and one-fifth of its coal are transported along the nation’s inland waterway system.

How bad is it? Near Memphis, Tennessee, the river is about 13 ft. below its normal depth. In Vicksburg, Mississippi, it’s more than 20 ft. below. Overall, the river is about 13 ft. below normal for this time of year — that’s 55 ft. below last year’s flood levels.
As a result, barge, tugboat and towboat operators have had to change how they move goods up and down the river. Many have had to lighten loads for fear of getting stuck.  As the drought worsens, the river gets narrower and shallower. The narrowness is forcing barges to sail more closely past each other, often slowing their speeds. In some sections of the river only one-way traffic has been able to move through.  

So far, the Mississippi remains navigable. The Army Corps of Engineers is busy dredging stretches of the river to ensure that the Mississippi stays at least 9 ft. deep throughout. Ironically, the money for the dredging operations is coming from a relief act worth $20 million that was passed to help repair damage from last year’s flooding.
Still, the result of lighter loads and moving at slower speeds will likely drive up transportation costs. According to the American Waterways Operators, transporting goods via waterways costs $11 a ton less than by rail or truck. However, if those goods are moved to other modes of transportation, the costs for consumers will likely rise.

Higher food and gas prices are expected thanks to not only increasing transportation costs but also the damage the drought has brought to farms throughout the US Midwest. The US Agriculture Department expects US food prices to rise as much as 3.5% this year and as much as 4% in 2013. Of particular concern is the fact that the US is the world’s largest exporter of corn, soybeans and wheat. Markets around the world are growing worried that food costs will soar because imports will be expensive.
The outlook is not good as weather forecasters expect little relief.  Many bulk shippers will probably need to switch to rail and truck until water levels recover to normal. However, additional costs will be passed along to the final customer – a burden that will prove increasingly hard in an economy that is beginning to displays signs of strain.