Wintry weather across the US Midwest has frozen parts of the Mississippi and Ohio rivers – adding to the problem of low water levels caused by drought conditions and impacting traffic along a key transportation lane for commodities, World Grain wrote.
As a result of low water levels, the draft capacity on barges had been reduced, leading to increased freight and transportation costs to export markets out of New Orleans, Louisiana – known as the centre Gulf, the 29 January report said.
Increased freight costs had lowered interior prices relative to world export values, Guy H Allen, senior economist with the International Grains Program at Kansas State University, was quoted as saying.
“Restricted draft reduces capacity through the supply chain pipeline, so freight rates have gone up, for both rail and road,” he said.
“We’ve got a pretty strong export programme, particularly for corn. It’s running at a record pace this year.”
According to National Oceanic and Atmospheric Administration (NOAA) data, Mississippi River water levels at St Louis dipped below the “low threshold” of 3.2 cu ft.
On 22 January, the water level made a partial recovery, remaining around 7.687M cu ft/second for a few days.
NOAA’s official forecast for water levels at St. Louis showed the level declining in late January and dropping below the low water threshold on 1 February and holding steady until mid-month.
The water level on the Illinois River – a primary grain loading point typically open all year-round and a pricing point for commodities traded on the Chicago Board of Trade – made a partial recovery on 22 January, remaining around 7.687M cu ft/second for a few days.
At the time of the report, the Illinois River was almost closed from Havana, Illinois, to the north, which had significantly slowed loading, Allen said.
“Shippers can move commodities by train, but it’s a bit more expensive and it’s not as efficient as the river, particularly with the big demand,” he added.
As of 28 January, river freight was “a disaster,” according to a trader who noted near-stoppage of loading commodities was delaying shipments of corn, soyabeans and soft red winter wheat.
Some river freight capacity had shifted rail markets, leading to increased rail car costs.
“The rail car market, like the barge market, trades so that when demand goes up, prices go up, both in barge and rail freight, though barges are probably more the dynamic, liquid market,” Allen said.
