Low Mississippi River levels impacting ag commodity prices as harvest progresses

For the second year in a row, the Mississippi River is at record low levels as harvest in the Delta looms. The river levels have and will impact the movement and prices of crops as they are removed from fields. Corn basis has already dropped.

The river was at minus 4.1 feet in late August and was predicted to drop to minus 5 feet by Sunday (Sept. 10). The Climate Prediction Center predicts that temperatures throughout the Delta Region will be above average for the remainder of the month. Precipitation is predicted to be normal on the western side of the river but is predicted to be below average on the eastern side.

The scenario is reminiscent of the 2022 harvest when the Mississippi River dropped to record lows, bringing barge traffic to a halt.

“I don’t know if we’re going to see what we saw last year, but the river is lower than we were this time last year,” said Hunter Biram, extension agricultural economist for the University of Arkansas System Division of Agriculture. “The river is at negative 4 feet this year, where it was a zero this time last year.”

“It is low enough to where barge freight rates are going up and that’s going be the key indicator to help us determine where basis is going to be,” Biram said.

“Basis” is the difference between a local cash price and the futures market price.

“According to the Agricultural Marketing Service, where they measure the barge freight rate at Memphis, it’s 40% higher than the three-year average and it’s actually already 10% higher than where it was last year,” he said.

Biram said that the barge freight rate is one of two major costs a grain buyer will have to incur, the other being the price the buyer pays for grain from the farmer.

Corn is the first key commodity to head to the elevators during harvest. About one-fourth of the corn crop had been harvested as of the end of August, according to the U.S. Department of Agriculture’s National Agricultural Statistics Service. Rice was at 11% by the end of the first week of September.

Corn and rice will be the first Arkansas ag commodities impacted by barge movement and prices.

“Grain buyers may not be able to control the barge freight rate, but they are able to better control the price they pay for grain,” he said. “And that’s where the weak basis stems from. I have already heard reports that there has been some very weak basis being offered on corn right now.”

Basis for corn set to be delivered in September to elevators at Osceola and Helena is 32-cent and 20-cents under the nearby September corn futures contract, respectively. This is a much weaker basis compared to the five-year average basis of around 4-cents over at these locations, implying basis is nearly 40-cents weaker than normal, Biram said.

“Corn has been hit hard on both futures and local cash prices. We have seen futures prices fall from a February average of $5.94 per bushel in the spring to $4.97 per bushel at close on Aug. 28,” he said.

“The increase in barge freight rates is already showing up in relatively weak basis across east Arkansas with some basis being reported as low as 50-cents under the nearby September futures contract for corn,” Biram said. “Basis at grain elevators along the Mississippi River in places such as Helena, Osceola and West Memphis have reported a monthly average of nearly 40-cents under for the month of August.

If the river levels don’t improve as the harvest progresses, producers may have to consider other options, Biram said.

“The best solution is to store grain and sell in the winter once the seasonal supply glut passes,” he said.