A sharp drop in water levels on the key Mississippi river in the USA due to recent droughts has been forcing barges to reduce loads by up to 40% to pass through shallower waters, AgriCensus reported market sources as saying.
With the USA approaching the peak of its corn and soyabean season, the issue has led to an increase in barge costs at the US Gulf grains and oilseeds export hub, according to the 30 September report.
The Gulf is the main export hub in the USA for grains and oilseeds with most volumes arriving through the Mississippi river in barges loaded inland.
“[This] is a very large issue,” Futures International senior grain and oilseed commodity analyst Terry Reilly told AgriCensus.
Costs to transport grains and oilseeds down the Mississippi river have soared nearly 80% since the beginning of September and over 150% when compared to costs reported in the beginning of August, according to data from the US Department of Agriculture (USDA).
Rainfall was needed to ease transportation problems in the Mississippi river, the report said, and US exporters could face problems if water levels did not rise in early October.
At the time of the report, the forecast did not offer much prospect of enough rain to make a difference, Grain Service Corporation vice president Diana Klemme told AgriCensus.
“What is really needed are heavy rains from Saint Louis north to get the overall flow rising,” Klemme said.
“Expect barge freight to remain high through the first half of October [which will be] a drag on basis upriver and/or push Gulf basis levels higher.”
Klemme added that “the difference between cash bids for September/first half of October and December are now big enough that farmers and elevators will look to hold back as many bushels as they have room for – which in turn will only slow US export shipments further near term.”
If higher barge costs pushed FOB Gulf premiums higher, Brazil could overtake the USA in terms of spot price competitiveness with more export demand shifting to South America just a month after an incentivised exchange rate policy had bolstered Argentine soyabean shipments, the report said.
“If logistics make US prices less competitive or if importers feel insecure with the country’s loading capacity Brazil could… benefit,” Brazil’s Agrural senior analyst Daniele Siqueira told AgriCensus.
Although Brazil did not have the capacity to cover the large volumes usually exported from the USA through the last quarter of the calendar year, Siqueira said that several million tonnes of soyabeans could shift from the USA to Brazil due to the Mississippi issues.