Mississippi barge operators react to surplus grain production

   Changes in crop-growing patterns and navigational limitations on the Upper Mississippi River system have done more to fundamentally alter how barge fleets operate than low-water levels caused by a two-year drought, according to a top agricultural economist.
   Water levels in the Mississippi delta have fallen three or four feet, reducing the navigable channel in some spots to less than eight feet and forcing barge operators to load less cargo to ensure safe passage.
   To avoid having to light-load during normal times, many tow companies that carry grain are increasingly loading further down river, south of Chain of Rocks near St. Louis where they can move without having to transit locks and dams on the Upper Mississippi, Ohio and Illinois rivers, Ken Eriksen, senior vice president at Memphis-based Informa Economics, said Wednesday at FTR Associates’ annual freight conference in Indianapolis.
   While the water level below St. Louis on the Mississippi and Cairo on the Ohio normally is 13 to 14 feet, barges going through locks and dams further north are limited to a nine-foot draft even though most equipment built since 1996 has 12 to 14 feet draft.
   Carriers, motivated by a desire to maximize each load, are concentrating service further south to support a shift in agricultural production in the past five years during which farmers in southern Illinois, Mississippi, Kentucky, Arkansas and Missouri are planting more acres of corn and soybeans instead of cotton. The transition has been aided by sophisticated center-pivot irrigation systems.
   “The barge industry says, ‘Why do I want to go through a lock when I can get greater efficiencies lower. Not only that, but I can get greater turns because I’m not having to through the locks and don’t have to travel as far,” Eriksen said during a panel discussion.
   There is more available supply of grain in the Lower Mississippi, while in Minnesota and other northern areas there is less of a surplus to move on the Mississippi and Illinois River for export. Barge operators still haul grain from those regions, but charge a premium to cover the opportunity cost of carrying 15 percent less cargo than capacity, Eriksen elaborated later.
   The tank barge industry has been less effected by the low water on the Mississippi, he said. Tank barges typically have a smaller draft and require smaller tow power units because they move in two- or six-pack configurations. Fuel and chemicals are higher-value products, which means solid margins can still be achieved even if a barge has to leave some volume behind to ride higher in the water, he said.
   The challenges of moving freight on the Mississippi and its tributaries is exacerbated by the federal government’s slowness to maintain and repair locks and dams that have exceeded their 50-year design life, raising the concern of industry and local officials about the potential for a major failure that could shut down traffic on the nation’s busiest commercial waterway.
   Every year unscheduled closures of the locks increases. According to the Army Corps of Engineers and the Government Accountability Office, the hours of scheduled and unscheduled lock closures because of mechanical failures have increased since fiscal year 2009, with 61 preventable lock closures of more than 24 hours and 37 lock closures of more than seven days in 2010.
   The poster child for the dysfunctional approach to waterways investment is the Olmtead lock and dam on the lower Ohio River. It was first authorized for repair in 1986 and money was appropriated in 1988. Rehabilitation is not expected to be completed until 2020, during which time the project’s estimated cost has ballooned from $770 million to $3.3 billion.
   Part of the problem is that Congress does not appropriate money for projects at one time. Instead, the projects must compete for federal dollars in the annual appropriation process.
   The barge industry and inland waterway users contribute half of the money allocated for Army Corps’ civil works projects on the inland waterways through a diesel fuel tax that is kept in a trust fund.
   Congress is debating a new Water Resources Development Act for the first time since 2007. The Senate in May passed a bill reauthorizing budget priorities and policies for inland waterways and harbors. The House Transportation and Infrastructure Committee last week forwarded its version of the WRDA reauthorization to the full House. Congress has allowed all of the user fees to be dedicated to the Olmstead project, leaving other projects without necessary funding. In its current form, the WRDA reauthorization would instead fund three-quarters of the Olmstead work through appropriations of taxpayer money and the remainder from the Inland Waterways Trust Fund to avoid the requirement that 50 percent of money for waterways projects come from the trust fund.