Mississippi River Closures Reduce U.S. Soybean Farmers’ Profitability

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A tanker barge that recently struck a bridge and leaked thousands of gallons of oil near Vicksburg, Miss., cost shippers nearly $15 million in three days, according to a U.S. Army Corps of Engineers official. The spill delayed more than 2,000 other barges and reminded U.S. soybean farmers how important the U.S. inland waterway system is to their success. Rivers are used to move soy from the field to domestic crushers or exporters, so low levels, lock closures and other disruptions affect soybean farmers’ overall profitability.

“Closures on the inland-waterway system impact farmers’ competiveness with other world markets,” says Steve Jones, U.S. Army Corps of Engineers Mississippi River navigation manager. “Ultimately, farmers absorb the increased shipping costs of soybeans destined for export, so farmers’ profits are reduced.”

Eighty percent of soybean shipments occur between harvest and the following February, so any major disruptions hinder the timely delivery of the product to foreign markets.

With more than 1.8 billion bushels of U.S. soy exported during the 2011-2012 marketing year, continuous improvement to our transportation system is essential in order to meet overseas demand.

During the oil spill, the Mississippi River closed completely for three days and was restricted for four additional days. With the spill impacting 139 tows at an operating cost of approximately $35,000 each, per day, on the lower Mississippi River, Jones estimates the oil spill cost approximately $14.6 million.

Jones says farmers and other shippers, not the end-users, pay those extra costs.

“Although the oil spill cost the shipping industry millions of dollars, the total commodity value paid for by the end-users likely remains the same due to competition from other world sources,” says Jones. “So, in order to stay competitive, farmers eat up the extra shipping costs.”

In addition, the bulk of fertilizer is transported by rail and barge, so disruptions in the waterway system contributes to increased fertilizer prices.