Consumer prices likely to rise due to I-40 bridge closure

by George Jared ([email protected]) 570 views 

Consumer prices are impacted by the shipping and transportation costs for products, and those prices will likely rise due to the I-40 bridge closure on the Mississippi River on May 11. In recent days, pictures have surfaced that show possible damage to the bridge as long as five years ago.

The Hernando de Soto Bridge connecting West Memphis and Memphis was closed after transportation officials found a complete fracture in one of its primary support beams. The 3.3-mile bridge, with its two distinctive steel arches, carries more than 41,000 vehicles a day, according to the Tennessee Department of Transportation.

The same day, the Coast Guard closed the river to barge traffic that would pass under the bridge. The Coast Guard reopened the waterway May 14. At the time, there were 62 vessels and 1,058 barges in the queue.

Both the bridge and the Mississippi River it spans are major conduits of food and other agriculture-related traffic. Harvested grain finds its way to Mississippi River ports for export downriver through New Orleans, while inputs such as fertilizer also make their way inland by river. A typical barge can hold 55,000 bushels of grain, according to the University of Arkansas Division of Agriculture.

The May 13 Grain Transportation Report noted that “for the week ending May 8, 633 grain barges moved down river — 195 more barges than the previous week” and mentioned a record year-to-date barge movement of grain, driven by strong corn export demand.

The May 20 Grain Transportation Report issued noted that barge grain movements were down 13% from the previous week. For the week ending May 15, which coincided with the Mississippi River closure, 535 grain barges moved down river — 98 barges fewer than the previous week. There were 804 grain barges unloaded in New Orleans, 5% more than the previous week.

“Corn movement out of the Gulf of Mexico is really strong right now compared to say wheat or soybeans,” said Scott Stiles, extension economist for the Division of Agriculture. “In Monday’s Grain Inspections report, with information for the week ending May 13, almost 40 million bushels of corn were inspected for shipment out of New Orleans, compared 7 million bushels of soybeans and nearly 4 million bushels of all classes of wheat.

“Half the corn shipments were headed for China,” he said. “For the 20/21 marketing year, China is our number one export market for corn. Normally, Mexico is our top market.”

Hauling agricultural commodities isn’t free. Barge freight lines contract out their barges to firms that need transport grain to the Gulf of Mexico. These contracts secure the cost and use of barges from one week to three months out.

Andrew McKenzie, an agricultural economist with the University of Arkansas System Division of Agriculture, co-authored a 2018 paper on barge freight contracts, an area that hasn’t received much analysis.

In “The cost of forward contracting in the Mississippi barge freight river market,” the authors wrote that while the “level of price risk associated with grain transportation is not as large as the price risk associated with buying and selling cash grain, the costs of transportation are still significant enough to materially affect a firmʼs profitability.”

“Bottom line, the Mississippi River is hugely important to U.S. commodity supply chains related to exports,” McKenzie said. “When barge freight rates increase due to various demand and supply issues these higher costs are absorbed into price bids to farmers.”

“Had the river been closed for a longer length of time – we could have seen price impacts, with markets north of the bridge/river closure seeing price fall because of excess supply and markets south of the bridge/river closure experiencing price increases due to excess demand to lower supply,” McKenzie said.

“Given that most grain inventory is likely held north of the river – the biggest price impact would have been negative,” he said.

The Arkansas Trucking Association last week estimated the closure would cost the trucking industry $2.4 million a day as traffic has to be routed elsewhere.

“Using GPS data, we can discern that a previous 8-minute drive is now averaging 84 minutes. This additional transit time at $1.20 a minute for 26,500 trucks is costing the trucking industry more than $2.4 million each day that the bridge is closed,” said Shannon Newton, president of the Arkansas Trucking Association.

“Freight is like water,” Newton said. “It will continue to flow. Our industry will continue to make deliveries. But if the additional expense is prolonged, it is likely to be passed on to consumers.”

The ATA also cautioned that shippers should prepare for longer transit times and surcharges until the flow of traffic is restored.

The Tennessee DOT has a two-phase plan in place for repairing the bridge. The first step will be to add two 18,000-pound steel plates on either side of the fracture to make it stable for the second phase of repairs. Phase II involves removing and replacing the damaged beam. TDOT said repairs could take several months but better estimates will be available as repairs progress.

No vehicles will be allowed on the bridge during the phase one repairs. Officials are not sure if limited vehicle traffic will be allowed during the second phase.

TDOT said it has dedicated two inspection teams and drones to work on the Interstate 55 Mississippi River Bridge, downstream from and in sight of the damaged bridge, and is using an overabundance of caution in reviewing new footage and previous inspection reports to verify the safety of the older bridge.

Memphis has served as a major distribution hub for the country since it was founded by General Andrew Jackson in 1819. In addition to the river, the city is one of the few in the country served by five class one railroad lines, and it has an international airport. West Memphis is the connection point for I-40 and I-55, the two major highways that connect the east and west coasts and connect Canada to Mexico and all points in between.

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