WATERWAY FLOWS AGAINST THE AMERICAN GRAIN
As the US is the world’s leading grain exporter, barge hold-ups are proving prohibitively costly
America’s worst traffic jam this autumn occurred on the Ohio River, where a line of about 80 kilometres of boats hauling grains and other products turned into a waterborne car park, as ship captains waited for the river to reopen.
Such delays are worsening on the nation’s waterways, which are critical to commerce for the United States, the largest grain exporter in the world. Of the country’s US$40 billion in annual grain and soya bean exports, about 60 per cent is moved by barges on rivers, including the Ohio.
The shutdown, caused by worn or missing sections of a dam, snarled traffic from early September into early November through Locks & Dam No 52 near Paducah, Kentucky. It was the second shutdown in two months at No 52, which is among the country’s busiest locks, with about $22bn a year of commodities flowing through it, according to Reuters.
The lock is one of many choke points along 38,000km of waterways used to transport everything from grains to consumer goods to coal. It is a system increasingly under strain. Surging shipments of soya beans and corn – because of record harvests – are overwhelming parts of the antiquated network and causing more frequent and severe back-ups, according to farmers, shippers, grain merchants and barge operators.
Reverberations have cut across the US agricultural supply chain – and international markets. This autumn, delays in moving crops downriver bumped up grain prices at export terminals along the Gulf Coast, opening up an advantage for global competitors such as Brazil.
Most of the country’s 239 locks have exceeded their half-century design lives, and nearly half of the vessels that use the nation’s inland waterways now experience delays, according to the American Society of Civil Engineers.
The average delay per lock has nearly doubled on the waterways since the beginning of the century, rising to 121 minutes in 2014 from 64 minutes in 2000, the group said. A National Waterways Foundation study in October said a major lock failure in the Midwest could cost shippers $1.5bn per year in added costs and overwhelm existing rail and road capacity. Every barge can hold as much grain as 16 rail cars or 70 trucks.
The delays in Ohio and elsewhere are boosting prices for key goods including soya beans, and eating away at the nation’s competitive edge against rival exporters like Brazil.
US soya bean export prices normally drop in the autumn, as newly harvested supplies flood the market. But the delays caused prices to rise, making it harder for the US, the second-largest soya bean exporter, to compete with Brazil, which ranks first.
In mid-August, the price of soybeans loaded for export at US Gulf Coast terminals was about $14 per tonne below the cost of soya beans loaded at Brazil’s Paranagua port, according to industry data. By mid-November, the US. advantage had been cut to less than $4 per tonne. Brazil’s soya beans have a higher protein content, and therefore attract a premium.
China, the top soy importer, is expected to buy twice as many soya beans from Brazil in the fourth quarter as it did last year, much of it at the expense of US shipments.
Export markets are key for farmers and grain processors owing to rising crop yields. In the past two decades, US corn output has outpaced domestic use by 20 per cent, and soya beans by more than 70 per cent. “Being near the river used to be an advantage, but now having to wait on dams and infrastructure is more of a liability to farmers,” says Marc Bremer, a farmer in Metropolis, Illinois.
Mr Bremer sells most of his corn and soya beans to facilities known as elevators, which receive and store grain and load barges on the Ohio River. This autumn, he lost up to $30,000 in revenue when prices tumbled because disruptions caused crop stockpiles to swell at these facilities. He says he may delay buying new farm equipment as a result.
The logjams hit local grain buyers – the elevators – who cut bids on crops to the lowest levels since the Port of New Orleans was
shuttered by Hurricane Katrina in 2005. Elevators, including those owned by Bunge, Cargill and Archer Daniels Midland, typically fill barges with corn and soybeans en route to the Gulf of Mexico. But the backup meant they were unable to ship out supplies, also overwhelming their storage.
Along the river in Shawneetown, Illinois, Bunge piled soybeans outside on the ground, putting them at risk of damage from rain or animals because the elevator’s bins were full because of the backlog, local farmers say.
An employee of Bunge’s elevator says it took this step because of “market conditions”.
Randy Anderson, a farmer from Galatia, Illinois, says he was told to hold back prearranged deliveries of crops to the Bunge elevator. Instead, he was forced to take time away from harvesting to load the crops into his own storage bins.
“That could have been time I could have been in the field,” he says. “That’s a hidden cost.”
The effect was also felt by shipping companies, which earn more money the more trips their barges make. The barge operator Campbell Transportation Company of Pittsburgh estimated a loss of $1 million in revenue in September and October because of the delays.
“This was the difference between a small profit and a big loss,” says Peter Stephaich, the Campbell chief executive.
Lock No 52 is emblematic of the nation’s crumbling transportation infrastructure coast to coast – including locks, ports, highways and railroads, The New York Times has reported. Before he came to power, the US president Donald Trump pledged to spend $1 trillion on infrastructure, with much of the money to come from the private sector possibly with a proposed tax credit offered in return.
Even with a tax credit, though, companies building roads or locks would want a return on their investment – most likely in the form of toll collection, Mike Toohey, the president of the Waterways Council, an advocacy group for the river shipping industry, said in . His industry is “not in favour of a toll”, he said.
Replacing Locks and Dam No 52 and nearby No 53 on the Ohio River has been on the US army corps of engineers’ to-do list for about 30 years, even as its backlog of other projects has grown, according to Reuters.
Known as the Olmsted Locks and Dam, the replacement is set to finally be completed next year. Its cost has risen to about $3bn from an original estimate of $775m.
In the meantime, the short-term work to fix the dam continues. Divers working in pitch-black water needed a week to repair the largest hole in the 90-year old dam, one of the last on the river made of wooden slats. Repairs to three other worn and corroded sections may be completed this month.
For the seven-man crew of the
Oliver C Shearer, one of 70 towboats hauling hundreds of barges carrying goods, the delay at Locks & Dam No 52 means killing time.
But there is only so much paperwork, repairs, or waxing the chequerboard floor of the vessel that the crew can do.
“You start beating your head against the wall,” Michael McCloud, the boat’s captain, said in October as he looked out at idle barges on the Ohio River from the vessel’s bridge.