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Freight Rates Heading Higher as River Levels Drop Lower

Getting into the harvest season means it’s the predominant period for exporting U.S. soybeans. Mike Steenhoek, executive director of the Soy Transportation Coalition, says the inland waterway system is running at very low levels.

He says, “We’re watching a sequel to the historically low water levels in 2022, and this is something that we don’t want to be witnessing and experiencing. When you look at water levels today throughout the river and compare them from where we were last year at this time, we’re actually a tad bit lower in most locations. So, we’re clearly entering this very critical season – our harvest and export season – from a position of weakness.”

He says the lower levels are already impacting barge transportation. Steenhoek, “You’re seeing barge companies limit the amount of freight – soybeans, and grain, in our case – out of the concern that if they load to a full capacity, you run the risk of scraping the bottom and maybe even getting grounded. That’s something that we did witness last year, and so it’s a concern. You have a supply-demand phenomenon occurring because you’re going to have a given amount of freight having to be accommodated by a now-diminished supply of barge transportation. You can’t load as much per barge, and we can’t put as many barges together to form one unit because the shipping channel’s more narrow. So, you’ve got an imbalance between demand and supply, and so the inevitable result of that is the upward pressure on barge rates.”

Steenhoek says this emphasizes just how persistent significant drought can be. He says, “It does take a sustained amount of rainfall over a lengthy period of time. You can’t just ameliorate that with one significant rainfall. So, we already were entering into this year with dehydrated soil. Now obviously, we’ve picked up some rains the spring and well into July, but we’re now in a position where any additional rainfall that does occur will largely be absorbed into the soil, which is critical for crops. But what that means is we’re not in a position for a lot of that water to be residual and go into our streams and rivers to make an impact on water levels.”

The good news is there are alternatives for shipping grain. The bad news is they’re more expensive.

Steenhoek says, “There are options B, C, and D, and for some farmers, that means just simple storage until you’ve got a more opportune condition on the river. It may be driving it to a more livestock-intensive area or a rail loading facility. There are options B, C and D, but you need to keep in mind that there’s a reason why there are options B, C, and D versus option A because that’s not the optimal route. So, there will usually be an added cost associated with that.”

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