Low Mississippi water levels raise red flags for US soybean, corn exporters

29 Aug 2023 | Eduardo Tinti

Low water levels in the Mississippi waterway in the US are again raising red flags for the country’s Gulf export hub, a key source of soybean and corn exports, trade sources have told Agricensus.

Water levels are near historical lows for August/September and weather models calling for dry conditions through the coming weeks are adding further concerns and feeding into barge premiums that have risen sharply since the end of last week.

“I suspect that freight is the driving factor [for rising barge premiums], with freight sellers perhaps nervous that water levels could continue to drop with the forecast for the first half of September remaining dry for most of the Midwest,” Grain Service Corporation’s vice president Diana Klemme told Agricensus.

The situation in the Mississippi barge market has the potential to jeopardize US Gulf’s export competitiveness on an FOB and CFR basis as higher costs are passed downstream.

Soybean FOB front-month premiums in the Gulf hub increased 17 c/bu between Wednesday and Monday while CFR China premiums for beans originated in the Gulf lifted 30 c/bu during the same period.

Corn premiums also spiked in the Gulf with the FOB front-month basis up 17 c/bu between Wednesday and Monday.

The spike in barge premiums at the end of last week recalled disruptions linked to low water levels at the end of 2022 that brought significant headwinds to US exporters during the country’s main export window last year.

Concerns around low Mississippi water levels coupled with disruptions linked to low water levels in the Panama Canal could also jeopardize export prospects from the US Gulf, with businesses potentially shifting to Brazil and to the US Pacific Northwest (PNW) hub.

“If barge freight gets high enough… it could definitely raise the cost of shipping corn and soybeans from the Gulf,” Advance Trading’s Larry Shonkwiler told Agricensus.

Shonkwiler added that low water levels in the Panama Canal, where waiting times have increased to an average of 21 days, add to the mix and could hamper the US Gulf’s export competitiveness for both corn and beans.

“While one would think that Brazil more or less has a lock on Chinese and other Asian business this fall for corn and, to a lesser extent, beans, low water for both the Mississippi River and the Panama Canal could really shift export demand to the PNW,” Shonkwiler said.