Northeast Arkansas abnormally dry as Mississippi River levels drop

The Delta region experienced an unprecedented drought in 2022 with water levels on the Mississippi River dropping to historic lows. The warm dry weather caused input costs to spike and barge traffic on the river, the primary way farmers ship their goods, was at times stymied or halted.

The region isn’t in a drought yet, but much of Northeast Arkansas is abnormally dry, according to the U.S. drought monitor. It hasn’t rained in the region since May 20, and there is little chance for precipitation during the next week, the National Weather Service reported.

Highs will soar into the 90s as a dry spring careens toward what could be a drier than normal summer. The U.S. Geological Survey reported the river level in Memphis has dropped by eight feet since May 26.

Another impact to farmers when it comes to drought is “basis.” It’s the difference between the cash price and the futures price for a given crop.

Last October, as record-low river levels brought barge traffic to a standstill, soybean basis fell to $1.25 under harvest futures prices. It was a full dollar below the already-low five-year average for growers trying to sell cash crops in a futures-favoring market at harvest time.

In April, Mississippi River levels were recorded at a U.S. Geological Survey gauge in McGregor, Iowa, spiked to 23 feet and brought what is typically a healthy basis of 25-cents above futures price down into negative territory before rising back to zero, as reported from the buying point in Elaine.

Hunter Biram, agricultural economist for the University of Arkansas System Division of Agriculture, said the correlation between barge traffic and basis for soybeans and other crops for export largely hinges on grain elevator operators.

“Since there are fewer barges moving, grain elevator operators are concerned about getting grain from the elevator to the barge, which carries the commodity to the port of New Orleans, ultimately for global export,” Biram said. “They don’t want to have a bunch of grain stockpiled that they can’t send off anywhere.”

To disincentivize growers from delivering grain, he said, elevator operators will reduce the basis they’re offering, often starkly.

Biram said he and other researchers are only beginning to examine data from recent stoppages on the river to determine if there’s a reliable correlation between the events over the long haul.

Buying points on the Mississippi River aren’t the only options available to growers in Arkansas and the surrounding region. There are also inland options, including crush facilities that make biofuels and livestock feed, for example. But individual growers must make their own calculations, which often boil down to the cost of transport weighed against the going cash price.

Biram said growers’ top option alternative to selling a crop at an unsatisfactory price is naturally on-farm storage, although the current financial climate has complicated the issue.

“Whenever I was on the road this winter, I encouraged the construction of grain bins,” Biram said. “That decision isn’t as straightforward now because we’re in a high-interest-rate environment, with operating loans at 9%. We’re trying to calculate whether a higher basis in the springtime is enough additional money to offset the interest payment for those grain bins. That’s the decision a farmer faces.”

Additionally, grain storage may not be a particularly good fit for soybeans, as compared to some other grains. Jeremy Ross, extension soybean agronomist for the Division of Agriculture, said soybeans’ high oil content makes long-term storage problematic.

“You can really run into some issues if the conditions aren’t just right in the bins,” Ross said. “A lot of producers go directly from the combine to the truck to the elevator with their soybean crop.”

Ross said that while growers did respond to an industry-wide push encouraging on-farm storage a few years ago, much of that construction has been to accommodate rice and corn.

“You can retain those two commodities and get better prices in the winter months, especially if you’re going local,” he said. “Some of the poultry feed mills, for example, only have enough on-site storage to run the plant for maybe two days, so they rely on farmers to have on-farm storage and keep grain coming into their poultry plants through the winter months.”

While there’s no telling what summer has in store for growers in Arkansas and elsewhere, the state’s soybean growers have at least enjoyed a near-ideal planting season. According to a U.S. Department of Agriculture planting progress report published Monday (May 30), 83% of the state’s planned soybean acreage has been planted — significantly higher than the state’s five-year average of 61%. Ross said that owed largely to the dry fall, during which many growers were able to complete large amounts of field preparation immediately following harvest.

“I knew going into the season that we were really ahead of where we typically are during that time of the year,” he said. “I’ve talked to more farmers who said they got more April-planted beans this year than ever before. There were some growers who said they’d never planted beans in April but managed to get a significant portion of their acreage planted in April.”

By planting during what is considered the “early planting window” in April, Ross said, growers maximize their yield possibilities.

“Again, this is all dictated by what Mother Nature gives us for the next four months,” he said. “But if we have a little more moderate summer, maybe catch a break here and there in the fall with some cooler conditions, all our data show you can really maximize the yield with early-planted crops.”

Futures prices for soybeans have fallen somewhat from recent highs, from more than $15 a bushel into the $12 range. Many input costs such as fuel, fertilizer and pesticides are at or slightly above pre-pandemic levels.

Ross cautioned, however, that if everything goes growers’ way this summer, scheduling will be crucial come harvest time.

“When you plant an early crop, that crop is going to come off early, too,” he said. “April-planted beans are going to be coming off in September. We’ve had a lot of quality issues in the last several years in the state, and a lot of that is due to the soybean crop sitting in the field after maturation. Once a crop has matured, there’s really nothing good that can happen to it.”

“So I’ve really been emphasizing that we need to have combines ready to go,” he said. “What we gain in yield from planting early, we can lose that and more in quality, if we’re not out there in a timely manner to get the crop harvested.”