As farmers watched their fields dry up last summer, some may not have realized that another critical resource was also in peril — the Mississippi River.
It wasn’t until after harvest, when the United States exports the most soybeans, that the agriculture industry took notice that its battle with drought wasn’t over.
Lower river levels increased the cost of moving goods, as barges had to lighten their loads to pass through shallower water.
“The drought really highlighted some concerns that are common among those of us who use the rivers to move our products,” explains Keith Tapp, Kentucky soybean farmer and soy checkoff farmer-leader. “These rivers matter to farmers’ profitability, and it’s important to do everything we can to keep the traffic on them operating smoothly and efficiently.”
Historically, the rails, roads and rivers in the United States have provided U.S. agriculture with a competitive edge. This web of options for moving products from areas of surplus to areas of deficit has been reliable, efficient and affordable. But these pieces are aging and in desperate need of repair and upgrades to meet today’s standards of larger shipments and larger vessels.
Sound the alarm on locks and dams
The inland-waterway system grabbed attention this winter as the lack of precipitation took its toll on shipping. The situation on the Mississippi showed the importance of the country’s 25,320 miles of inland waterways to the U.S. economy.
But the problems along the U.S. waterways go beyond the recent drought. Many of the locks and dams that harness the rivers were built in the 1930s and are well beyond a usable life span of such structures. The age of the locks and dams shows in the increasing hours of unplanned closures for maintenance.
Unplanned closures on the Ohio River have tripled since 2000. These closures don’t just waste time, but they can get expensive, too. This past fall, Lock 27 on the Mississippi River closed for five days for emergency repairs. The U.S. Army Corps of Engineers estimates that a closure such as this could cost $2.8 million per day.
A major shutdown or disruption in river transport would cause a lot of headaches for companies that use these bodies of water to move commodities, such as soybeans, from the Midwest to export position in New Orleans. But it’s going to be the farmers and the buyers who pay the price.
“The real problem is anytime you go away from the most efficient and effective way of doing something to the next-best way, you typically encounter a higher cost,” says Rick Calhoun of Cargo Carriers, a business of Cargill, Inc.
Lower prices to farmers
Calhoun explains that cost most often impacts the bottom line of the seller or the buyer, meaning lower prices farmers receive for their crops or higher prices paid by consumers. But it’s not just the price shifts that concern Calhoun — it’s the ability of the United States to continue to compete on the global level.
“It’s important for the United States to get our infrastructure up to where we can actually participate on the world stage and be a part of the growth of the world’s exports,” adds Calhoun, who oversees the 1,300 barges that Cargill uses in combination with trucks, rails and ocean-going vessels to move products. “Let’s make sure we don’t get behind.”
Private investment supports rails
When it comes to railway movements, it’s not so much the actual rails that draw concern from ADM’s president of transportation, Scott Fredericksen. It’s the lack of cooperation, which he says hinders market accessibility.
“There are only seven Class I railroads in the United States,” explains Fredericksen. “They need to work with the short-line railroads, stakeholders, local industries and each other to provide fluidity and greater market access.”
In addition to the lack of cooperation, another hurdle is what Fredericksen refers to as “white-paper barriers,” which prohibit some rail lines from carrying certain commodities in specific geographic areas. These barriers and the inability to switch between some lines inhibit competition and, in turn, can lead to an imbalanced market.
Lifting these barriers could help U.S. railways to make the most of their own investments. According to a recent USB-funded study, in 2011 alone Class I railroads spent a total of $23 billion to maintain and improve their infrastructure. These private investments have helped to ease concerns that users of the rails, such as ADM, might have.
Some soy-checkoff studies have suggested that rail traffic could increase if another major mode of transportation, such as the inland waterways, became unavailable. Already railroads heading to the Pacific Northwest, where soy bound for China is exported, are moving 68 percent of soybeans transported by rail.
With exports to China expected to double by 2020/2021, rail carloads of soy could increase by 36 percent. Hopefully U.S. railroads and investments will be able to keep up with this anticipated growth.
“I’m optimistic about what U.S. railroads provide and what they will provide in the future,” adds Fredericksen. “Being as there’s only a few of them left, if there were no barriers and no constraints on market access, we’d all be better off and the United States would grow and the railroads would grow proportionally, too.”
Maintaining the advantage
For generations, the U.S. transportation system has been the one that other countries have looked to as the example of how it’s done. Now, they have begun to look at their own transportation needs and are making investments to expand ports, repair rails and make other improvements.
These improvements and investments are one area where competitors could match and perhaps even eclipse the United States.
“It’s so important that we as soybean farmers continue to talk about how we need our rivers, locks, roads and railways all to function together,” adds Tapp. “Transportation is an important part of U.S. soy’s competitive edge on the world stage.”
The U.S. transportation infrastructure has long been a great advantage for U.S. soybean farmers. The reliability of these pieces has allowed shipments to get out to end users in a timely manner.
But because of the vastness of the United States, farmers need all of the pieces to be competitive and must take advantage of the opportunities of a growing global population and growing global demand for quality soy products.
“We’ve got great seed technology, great farming practices, some of the greatest farmland in the world, but if we don’t have an infrastructure that parallels that, we’re not going to get the full promise of what we could for the country,” says Calhoun.
For additional information from the United Soybean Board, go to http://www.unitedsoybean.org/.