Drought continues to plague the Mississippi River with portions closed for dredging. Waters in Memphis, Tenn., fell to a reading of negative 10.79 feet late on Oct. 17, below the previous record low of negative 10.70 set in 1988, according to National Weather Service data.
Part of the river near Hickman, Ky., was shut for dredging after barges grounded. The site reopened later in the week for one-way traffic, with 74 vessels and 943 barges waiting to move, Bloomberg reported on Oct. 19. However, there were at least two other river closures at the time; one at Memphis with 33 vessels and 499 barges stalled, and another at Battle Axe/Tunica with 20 vessels and 322 barges in the queue.
“This is the most severe we’ve ever seen in our industry in recent history,” Mike Ellis, CEO of American Commercial Barge Line told CNBC. “That’s a significant impact to our supply chain. We can’t get the goods there.”
Forecasters see no or little near-term relief. “We are seeing some signs of a little bit of rainfall with the cold fronts working their way through, but nothing that will get us out of the low-water situation,” said Jeff Graschel, a hydrologist at the Lower Mississippi River Forecast Center.
“There is no rain in sight, that is the bottom line,” Lisa Parker, spokeswoman for the US Army Corps of Engineers Mississippi Valley Division, told the Wall Street Journal. “The rivers are just bottoming out.”
Fertilizer industry players pointed to the impacts on the market. “The river is getting to be a big deal,” said one source. “Many barges cannot make it to the docks. We can but it’s a struggle. I think product will tightened up because of it. With the barge/low river problems, we are starting to see a disconnect to the NOLA prices, much like the large grain prices spread on basis. We see price lists that quote a price subject to barge arrival. It is easy to be cheap when you are out.”
Market sources told Green Markets they were relying on their contract freight rates and trying their best to stay out of the spot market for freight. “There is much higher spot rates as well as a reluctance from barge operators to even quote,” said one player. “It’s a mess out there.”
“Spot barges really aren’t available,” added another, saying he had heard rates to St. Louis as high as $100/st.
Ironically, grain spot barge rates from St. Louis dropped to $72.58/st for the week of Oct. 18, down from its peak of $105.85/st for the week of Oct. 11, according to USDA’s Grain Transportation Report, which attributed the drop to some grain shippers delaying deliveries until later in the year. Nonetheless, it said grain spot rates remain up 130% from last year and up 260% from the three-year average.
The disruptions couldn’t come at a worse time for US crops, particularly soybeans. American farmers need to ship them now because it’s the only window they have to dominate world sales. If they fail, domestic inventories will likely stay bloated because Brazil will soon begin harvesting its mammoth crop and flooding global markets with product.
“The US is losing the opportunity to sell as much as they can before Brazil’s harvest, and all signs point to a record Brazilian crop so far,” said Victor Martins, Senior Risk Manager at HedgePoint Global Markets in Brazil.
If the US can’t export enough soybeans, that is bearish for prices on the futures exchange in Chicago. US prices are a world benchmark, meaning that the oilseed in other areas of the world can be priced off of the Chicago exchange. Ultimately, cheaper soy means some relief could be on the way for high food prices, since the oilseed is used in everything from cooking oil to animal feed.
There are already signs the US is losing sales, with top buyer China booking cargoes from Brazil and Argentina instead of the US, an unusual move for this time of year.
Another wildcard that’s hurting US exports is Argentina. At least 8 million tons of soybeans were sold in a few days by Argentinean exporters after the local government allowed farmers to receive a better exchange rate. “Argentina basically ‘came out of nowhere’ in this market and dumped a lot of ‘cheap’ soybeans that China jumped in and bought,” said Arlan Suderman, Chief Commodities Economist at StoneX.
US sales could also get worse. If shipments to China are pushed back far enough behind schedule, buyers may cancel and switch to Brazil, according to Doug Houghton, an Analyst at Brock Associates Inc. in Milwaukee.
Reports that China is buying US cargoes for arrival in Asia in February is one area where American soybeans are doing well. That is a possible hedge in case Brazilian production isn’t as plentiful as forecast. Last year, a drought in December reduced the nation’s output to the lowest since the 2018/19 season. Last week, China booked 13 cargoes for December and January shipment from the US, according to several market sources.