Dec. 7 (Bloomberg) -- In typical times, corn delivered to St. Louis is loaded onto barges, flowing south down the Mississippi River. With drought-starved river levels near historic lows, these aren’t typical times.
This year, part of the Midwest’s crop is heading the opposite direction, packed onto trucks for a 100-mile trip north to a grain elevator in Waverly, Illinois, where it moves to Burlington Northern Santa Fe trains for delivery to cattle producers in Hereford, Texas.
“You don’t usually see a lot of corn from St. Louis coming up here,” said Garry Niemeyer, an Auburn, Illinois, farmer and chairman of the National Corn Growers Association. “That’s where we are.”
The Mississippi at St. Louis may drop to the point at which barge traffic is restricted as early as Dec. 26, according to the National Weather Service. The U.S. Army Corps of Engineers today rejected a request from members of Congress to raise levels by releasing water from reservoirs on the Missouri River, which joins the Mississippi at St. Louis. The Corps said it expects the Mississippi to remain navigable.
If the Mississippi is closed for any length of time, shipments will back up from Missouri to Minnesota, Niemeyer said.
Already suffering aftershocks from the worst drought in 50 years, farmers are improvising, searching for alternative ways to move and sell corn, soybeans and other grains. It’s too expensive to use rail cars or trucks to ship grain more than 600 miles from St. Louis to export terminals in New Orleans.
They’re looking for local buyers or seeking to sell to ethanol plants. Farmers along the Kaskaskia River in southern Illinois may drive hundreds of miles south to Cairo, where the Ohio River empties into the Mississippi and barges are moving normally.
Many farmers may get another blow if fertilizer can’t move north by barge in time for spring planting.
If the river at St. Louis closes, the bottleneck affects everything north of the city, said Richard Calhoun, president of Cargo Carriers, the logistics subsidiary of Minneapolis-based Cargill Inc.
Ohio River facilities in Louisville and Cincinnati -- theoretically accessible by rail or truck -- won’t really take much because they don’t have the equipment to move grain from rail cars to barges, Calhoun said. No one in those locations has invested in it, because it’s rarely needed, he said.
Cargill, a 147-year-old company with 140,000 employees in 65 countries, is expecting restrictions on future sales to worldwide markets, Calhoun said. Employees will be working with customers as best they can to find alternative markets.
“At some point we’re going to have to say, we can’t do that,” Calhoun said. “This is the time of the year where we are typically the supplier of the world.”
There aren’t a lot of options other than the river for most farmers in the region. Rail is more expensive with limited capacity to move more grain. About 96,000 rail cars of grain move from St. Louis each year, Niemeyer said. An additional 80,000 would be needed to move all the grain that now goes by barge, he said.
Trucking offers even less of an alternative, with a just-in-time delivery structure that doesn’t leave a lot of slack.
After the 2008 U.S. recession, investors demanded efficiency from trucking and rail companies, so there’s not a lot of extra capacity for farmers who may need it now, said Shorty Whittington, president of Grammer Industries Inc. a transportation-services company in Grammer, Indiana.
“When you start slowing down inputs coming up the river, you stop that funnel going for the exports, and you stop certain segments, you change the price of the product drastically.” Whittington said. “It’s a humongous problem.”
Trucking companies aren’t going to invest in new capacity during a Mississippi River closing because some timely rain could eliminate the problem, Whittington said.
“Who’s going to come out of the woodwork for a short time period?” said Whittington, a former chairman of the American Trucking Associations. “Who’s going to make an investment to take care of the problem that might not be there?”
Corn and soybeans are already piling up at the Gateway FS grain elevator in Evansville, Illinois, said Steve Walter, the facility’s manager. When the elevators are full, farmers will have to find other options, he said.
Gateway, a farmer-owned cooperative with grain elevators and barge-loading facilities serving five Illinois counties, buys from local farms and sells grain to Bloomington, Illinois-based Growmark Inc. for export.
On the Kaskaskia River, where Walter loads shipments that will head down to the Mississippi and New Orleans, river levels are normal. Still, Gateway is already loading barges for 8-foot draughts instead of 9 feet. That means they’re shipping 44,000 bushels at a time instead of 53,000 or 54,000.
“Every five barges you damn near lost one,” Walter said.
Farmers who haven’t really begun to focus on how to respond to river restrictions will have to start doing so very soon, Walter said. If the Mississippi closes, he said things will start to get “pretty ugly” in two or three weeks.
A lot of farmers will have bills and taxes due around the first of the year, and won’t have a lot of options, Walter said. They may truck grain to St. Louis, about an hour away, and hope to sell to Cargill and other companies in that area, although they’ll make less money that way, he said. Some farmers will store crops on their farms and take loans against their value.
Gateway FS is trying to set up a limited local market selling corn to hog producers, Walter said, which may move 20,000 to 30,000 bushels a day -- compared with 150,000 bushels a day by barge. There’s no local market for soybeans.
If a river closing lasts long enough, Gateway FS will look into moving soybeans by truck to Cairo, about 100 miles south. That will be expensive and time-consuming, with farmers or their employees carrying grain on farm-owned tractor-trailers.
Greg Guenther, a Belleville, Illinois, family farmer, said his corn yields this year are the lowest in 35 years -- about 90 bushels an acre, or half his average. Guenther expects he’ll be trucking his crop to ethanol plants if Cargill and Bunge Ltd. terminals in St. Louis stop accepting local grain.
“This is typical ag -- things go up, things go down,” Guenther said. “You figure it out.”
If barge traffic is curtailed longer, Guenther may drive his own tractor-trailer to Cairo, a 300-mile round trip. Doing that it will take a whole day to deliver two loads, compared with five a day to St. Louis, he said. The bigger worry is getting the nitrogen he’ll need to plant corn in the spring, because the fertilizer price can spike.
And unless there’s a lot of snow this winter and rain next spring -- a big if -- next year’s river levels may make this year’s difficulties seem tame, Guenther said.
“We’ll get through this,” Guenther said. “Next year, it’s a whole different ballgame.”
To contact the reporter on this story: Jeff Plungis in Washington at email@example.com
To contact the editor responsible for this story: Bernard Kohn at firstname.lastname@example.org