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Dredging up money for soybean farmers

Article cover photo
A study estimates Iowa farmers would annually earn over $71 million more for their soybean crop if dredging the lower Mississippi River occurs. (Photo: Joseph L. Murphy/Iowa Soybean Association)

By Matthew Wilde, ISA senior writer

 

Deepening the lower Mississippi River by 5 feet could put tens of millions of dollars in the pockets of Iowa soybean farmers, according to a study recently released by the Soy Transportation Coalition (STC).

More revenue is sorely needed, growers say, as they grapple with plummeting prices due to China’s 25-percent tariff on U.S. soybeans. If the U.S.-China trade war persists, finding opportunities to mitigate losses and enhance profitability are critical.

Dredging the 256-mile stretch of the Mississippi from the Gulf of Mexico to Baton Rouge, Louisiana to 50 feet would do just that, the report indicates.

“The administration knows we are hurting and the victim of trade negotiations,” said Warren Bachman, an STC board member and farmer from Osceola, “This would help all of us. U.S. soybeans would become more competitive in the world marketplace.”

There’s a growing effort among Mississippi River stakeholders, including agriculture, to promote deepening the shipping channel to accommodate bigger ships. That would cut transportation costs for soybean buyers and make the commodity more desirable and valuable.

Informa Economics IEG, which conducted the checkoff-funded study on behalf of STC, estimates Iowa farmers would annually earn over $71 million more for their soybean crop if the dredging project occurs. Farmers in 31 evaluated states will annually receive an additional $461 million.

The return on investment is excellent, according to STC Executive Director Mike Steenhoek.

The U.S. Army Corps of Engineers initially estimated the Mississippi River dredging project would cost about $200 million. The corps maintains the vital transportation artery.

Sixty percent of U.S. soybean exports and 59 percent of corn exports make their way down the Mississippi on barges to the gulf to be loaded on ships.

“If our nation desires to make our farmers more competitive in a turbulent marketplace, this investment would be an excellent place to start,” Steenhoek said. “May we have the will to do so.”

STC officials say the study will be useful in future trips to Washington, D.C. to lobby lawmakers to provide funding for inland waterway improvements.

Bachman, who’s also an Iowa Soybean Association (ISA) District 8 director, said the study proves investing in transportation infrastructure is one of the best and quickest ways to help farmers.

“All too often, infrastructure investment is allowed to become a theoretical issue,” Steenhoek added. “The STC research clearly explains how this single infrastructure enhancement will have tangible benefits to individual farmers in individual states throughout the country.”

Iowa would especially cash in as the nation’s second largest soybean producer. And, due to its proximity to the river.

The lower Mississippi River is currently maintained at a minimum 45-foot depth. This allows Panamax-size ships capable of holding 2.1 million bushels of soybeans to navigate the waterway to be loaded.

A 50-foot minimum depth would allow Cape-size vessels, which hold 400,000 to 500,000 more bushels, to transit the channel. The ships can now go through the expanded Panama Canal instead of having to travel around Cape Horn of South America — hence their name — to reach Asia, the Pacific Rim and other destinations.

More soybeans can be shipped quicker and cheaper using Cape-size vessels, which eventually trickles down to farmers.

Research shows that shipping costs for soybeans from Mississippi Gulf export terminals would decline 13 cents per bushel ($5 per metric ton) if the channel is dredged to 50 feet. That would impact interior basis — the difference between the local price a farmer receives and the market value established by the Chicago Board of Trade.

Basis levels would narrow about 10 to 20 cents per bushel across the state as a result, the study indicates. That means more income for farmers.

Robb Ewoldt, an STC board member from Blue Grass, likes that idea. Every bushel of soybeans he harvests is sold to one of multiple export terminals on the Mississippi River only miles away from his farm.

Typically, basis levels are 25 to 35 cents per bushel under futures prices, which is excellent compared to other parts of the state, he said. Narrowing that gap by 10 cents or more would be even better.

“It’s something to look forward to, if the government eventually funds the work,” Ewoldt said. “It makes economic sense. When you improve the efficiency of transportation, that will be passed along to farmers.”

That’s even true for farmers 150 miles away from the Mississippi River like Bachman. The report said the areas with more pronounced negative basis will be crowded out by more favorable basis territory.

The study shows a pre-dredging basis of 40 to 49 cents from September through November just west of Des Moines and 30 to 39 cents after dredging.

“Our cost of production keeps going up so we need more income,” Bachman said. “Anything we can do to make that happen is a good thing.”

The full study can be accessed via the STC’s website at www.soytransportation.org.

Contact Matthew Wilde at mwilde@iasoybeans.com.

 

For media inquiries, please contact Katie Johnson, ISA Public Relations Manager at kjohnson@iasoybeans.com or Aaron Putze, ISA Communications Director at aputze@iasoybeans.com

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