When the Democrats took the House of Representatives in the election of 2018, it appeared that one of the very few things that Congress and the president might agree on would be infrastructure spending. It now appears that that is not going to happen, which is especially bad news for agricultural shippers. One aspect of American transportation infrastructure that is commonly overlooked is the system of internal waterways that host barge traffic for agricultural commodities and other goods. But the important network is rapidly diminishing in its capabilities to handle bulk shipping. This is especially pertinent in a time when, as FreightWaves has been reporting, American agricultural producers must be able to take every advantage possible, especially when it comes to efficient shipping.
Last month, agribusiness consulting group Agribusiness Intelligence released a report, ”The Importance of Inland Waterways to U.S. Agriculture.” It claims that the continued aging of the U.S. internal waterways infrastructure will cost the United States over $72 billion in additional GDP in the next 25 years if the current lack of funding continues. Furthermore, the report states that it will negate the creation of over 75,000 new positions in agricultural transportation in the United States in general.
“U.S. agriculture has long been the envy of the world, not only for its yields, but also due to its ability to move grains, soybeans and other products to the global marketplace in a competitive, efficient and reliable manner thanks to a robust and expansive inland waterways transportation infrastructure,” stated the lead author of the study and senior vice president of Agribusiness Intelligence’s consulting unit, Ken Ericson. “However, that infrastructure is quite old – many of the locks are 80 years of age and far exceed their 50-year designed lifespans. The U.S. inland waterways infrastructure needs major rehabilitation and construction to restore it to its full capability, to forestall major disruptions, and provide opportunities for growth,” he added.
The extensive network of locks, dams, levees, dredges and all other waterway infrastructure was constructed and is still maintained by the U.S. Army Corps of Engineers. But at the current funding rate, the Corps is finding it difficult to maintain the infrastructure and absolutely prohibitive to upgrade or grow the vital infrastructure. This problem has continued to present itself in vessel delays, which have increased from 35% in 2010 to almost 50% in 2017, which is adding cost to shippers who use the routes.
The active U.S. inland waterway network at risk comprises the river systems of a large part of the middle of the continent, including the upper and lower Mississippi Rivers, the Arkansas River, the Missouri River, the Illinois and Ohio river systems, the Tennessee River, and the Gulf Intracoastal Waterway. The rivers all funnel down through one of the most productive agricultural regions in the world to the Lower Mississippi River and exit into the Gulf of Mexico south of New Orleans. The area of southern Louisiana extending from Baton Rouge, through New Orleans, and all the way to Myrtle Grove handles over 57% of all U.S. exports of corn, which in 2017 was valued at $4.8 billion and almost 60% of U.S. soybean exports, which were worth almost three times as much at $12.4 billion in the same year. Though these products do not represent the percentage of GDP they used to, they are still important bargaining chips in international affairs.
“The U.S. is in direct competition with Brazil for its agricultural export business, particularly for corn and soybeans – two of our largest exports. Therefore, infrastructure investments can have a tremendous impact upon a farmer’s profitability,” Erikson said. “Multinational corporations, including Chinese companies, are making significant investments in the Brazilian grain and soybean transportation and handling systems. While U.S. farmers currently have a cost advantage, if not addressed, U.S. infrastructure problems will erode that advantage, making U.S. grain and soybeans less competitive in global markets.”
The flip side of the dire scenario, the report states, is that if the inland waterway system is fully funded to meet its needs, the input to U.S. GDP would expand around 40% to $250 billion and employment would increase 20% to almost half a million jobs. It is estimated that every $1 spent in waterways activity results in an additional $1.89 in economic activity across the rest of the nation.