Jan. 14 (Bloomberg) -- Matt Lagarde manages a fleet of towboats in Louisiana and watched with dread as a drought last year seared crops across the farm belt 1,000 miles upstream on the Mississippi River.
Now the effects of the worst dry spell in 70 years are making their way to the river’s delta, said Lagarde, 41, who has worked on the nation’s busiest waterway for half his life.
“Things just look fairly dismal over the next couple of months,” said Lagarde, with AEP River Operations LLC in Convent, 57 miles west of New Orleans. “In the next couple of weeks, you’re really going to see things start to tighten out.”
Though rain has been plentiful in Louisiana, operators all along the Mississippi have lost work as diminished crops sap export tonnage and low water narrows the channel and jams up barges. AEP, a unit of American Electric Power Co., has had to shift workers around as it idled boats. It is working through January without the usual profit from the previous year to tide it over, Lagarde said.
Louisiana, a state sustained by river commerce, is braced for the impact as barge traffic slows in the shallow water. About 7,000 jobs in the state -- more than any other -- would be at risk if record-low water forced shipping to halt, according to the American Waterways Operators, an Arlington, Virginia-based industry group.
About $2.8 billion worth of cargo, including coal, fertilizer and crude oil, moves along the river in a typical January, the group estimates. Barges carried about 388,000 tons of grain on the river in the week ended Jan. 5, a 24 percent drop from a year earlier, the U.S. Department of Agriculture reported Jan. 10.
“Many shippers moved product in early December, anticipating navigation difficulties due to low flows,” the agency said in its weekly “Grain Transportation Report.” An unusually large amount of grain is traveling to New Orleans by rail or being stored in silos until the river rises, it said.
While grain shipments have declined, barge owners have had enough residual work from the harvest and shipments of other commodities to keep business afloat, said Lagarde.
“There’s no question that this has the potential to be a crisis,” John Little, terminals manager in the New Orleans area for International-Matex Tank Terminals, said in a phone interview. The company, which stores liquid products including vegetable oil that are delivered by barge, has no plans to dismiss workers for a “short-term blip like this,” he said.
If the current situation lasts beyond May, it will cease to be short-term, he said.
The National Weather Service on Jan. 9 forecast that the river at St. Louis will fall to about 9 feet by the end of the month, a level most towboats can’t navigate safely, according to the Waterways Operators. The U.S. Army Corps of Engineers has completed the first phase of emergency work to keep the river open, excavating rock obstacles near southern Illinois.
“If the Corps can maintain a 9-foot navigation channel through the spring, the shipping industry is grateful for the news,” Debra Colbert, senior vice president for the Waterways Council Inc., a public policy group that includes shippers and ports, said in an e-mail. The expedited rock removal and the possibility of precipitation “may just have averted a closure of the nation’s busiest waterways transportation artery.”
Cargo conditions on the Mississippi River are far from normal. American Commercial Lines Inc. can’t send barges from Louisiana to St. Louis to fetch 200,000 tons of coal because the vessels can’t reach the docks there, according Doug Faust, a licensed towboat captain who manages marine operations for the company in New Orleans.
“If the water falls out and shuts down the river, they’re trapped,” Jeff Kindl, vice president of Gulf operations for American Commercial and chairman of the local port safety council, said in an interview after a council luncheon at the New Orleans Yacht Club on Lake Pontchartrain.
The company, based in Jeffersonville, Indiana, has lost about $27 million in revenue and foregone business since the drought began and has idled boats and workers, he said.
“We’re not hiring where we normally would be hiring,” Kindl said.
Canal Barge Co. in New Orleans may consider restricting bonus pay and raises if conditions persist, Chief Executive Officer Merritt Lane said in an interview at the company’s downtown headquarters. He said he wants to avoid furloughs that would cost him experienced workers.
The barge operator, which transports oil to refineries upriver for companies including Exxon Mobil Corp. of Irving, Texas, has experienced shipping delays, according to Lane.
“It hurts our customers because it’s completely disrupting their business,” he said. “Ultimately it’s clear that the consumer gets hurt. There’s going to be either scarcity or higher prices.”
Unlike in New York and New Jersey, where cargo handling is clustered among a handful of waterfronts, the work in Louisiana is spread among an array of complexes dotting the river for more than 100 miles (161 kilometers) north of the Mississippi River delta.
Much agricultural cargo is unloaded with the help of machines at the Port of South Louisiana, which stretches for 54 miles along the river between New Orleans and Baton Rouge. There the goods are transferred to grain elevators operated by companies including Archer-Daniels-Midland Co. of Decatur, Illinois.
Cargo in 20- and 40-foot-long shipping containers goes through the Port of New Orleans. Longshoremen arrive at a hiring yard near the wharves there at 6 a.m. and 4 p.m. daily seeking work.
“The stevedores haven’t been affected yet because there’s a lot of inbound cargo” from the Gulf, said Frank Morton, director and founder of Turn Services Inc., an affiliate of stevedoring company Associated Terminals Inc. which manages and repairs barge fleets.
“The problem is the uncertainty,” Morton said. “How long are we going to be able to do this?”
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