Soybean farmers invest $2 million in dredging research, planning07/18/2019 | Soybean Exports, Transportation, Soybean News, Ag Awareness, Economics
By Bethany Baratta, ISA senior writer
Just four miles from Robb Ewoldt’s farm in Blue Grass, the Mississippi River serves as a link between his farm and customers around the world. Downstream, a 256-mile stretch of that same river from Baton Rouge, Louisiana, to the Gulf of Mexico accounts for 60 percent of U.S. soybean exports and 59 percent of U.S. corn exports. It’s an integral piece of infrastructure not only for Ewoldt, but the entire U.S. soybean industry.
U.S. soybean farmers understand the importance of that infrastructure. That’s why they are investing money in a project that would deepen the river’s lower channel from 45 feet to 50 feet, thereby reducing shipping costs and increasing the potential for larger soybean shipments to customers around the globe. The United Soybean Board (USB) recently announced a $2 million budget allocation to help offset the costs of research, planning and designing of the dredging project.
“Using checkoff dollars in the initial stages for this project is going to benefit all soybean farmers in the upper Midwest,” Ewoldt said.
“Even areas quite far removed from the Mississippi River, like western Iowa and the Dakotas, benefit because of modal competition. The rail industry then has less exclusivity over a geographic area, so they’re going to have to fight more for business, and that’s a good thing,” Steenhoek said.
Areas in Iowa with positive or slightly negative basis (or the difference between the local price a farmer receives and the market value established by the Chicago Board of Trade) will expand if the lower Mississippi River is dredged to 50 feet, according to research by Informa Economics IEG. The areas with more pronounced negative basis will be crowded out by more favorable basis territory. This will result in Iowa soybean farmers receiving more than $71 million more for their soybean crop per year, Informa predicts.
“In my area, the study showed a 10- to 12-cent basis improvement because of the savings on transportation costs going to Asia, Europe, or other markets,” Ewoldt said. He serves on the board for the STC and ISA.
Research from Informa Economics IEG shows that shipping costs for soybeans from Mississippi Gulf export terminals would decline 13 cents per bushel if the lower Mississippi River is dredged to 50 feet. A deeper river will allow both larger ships and current ships to be loaded with more revenue-producing freight, according to STC.
“If we have good infrastructure to save money or time to make us more competitive, that’s what we need,” said Warren Bachman, an STC board member from Osceola. “If we can get the bigger ships in, that will give us access to bigger markets and lower the shipping rate.”
Steenhoek said the $2 million USB soybean checkoff investment will be combined with approximately $21 million in federal funding and $7.5 million in funding from the State of Louisiana to initiate the first year’s work of the project.
The overall project is estimated to cost $245 million and could take up to eight years to complete. The project is broken down into three phases. Two of the phases will be cost-shared between the federal government (75 percent) and non-federal sources (25 percent). The State of Louisiana has been designated as the obligated non-federal entity.
The phases include:
- Dredging from Venice, Louisiana (approximately Mile 10 Above Head of Passes [AHP]) to the Gulf of Mexico. Removing this bottleneck would provide a 50-ft. deep channel to approximately Mile 154 [AHP] of the river. A substantial number of soybean and grain export terminals are located within this portion of the river. The estimated cost of this phase is $100 million. Given a 75 percent federal and a 25 percent non-federal cost share, the federal obligation would be $75 million, and the non-federal obligation would be $25 million.
- Dredging from Mile 154 AHP to Baton Rouge, Louisiana (Mile 232 AHP). The remaining soybean and grain export terminals would be included in the 50-ft. shipping channel upon completion of this phase. The estimated cost of this phase is $65 million. Given a 75 percent federal and a 25 percent non-federal cost share, the federal obligation would be $48.75 million, and the non-federal obligation would be $16.25 million.
- The relocation of pipelines buried under the northern portion of the shipping channel. The estimated $80 million cost of doing so would be split evenly between the State of Louisiana and the pipeline owners, according to the STC.
While the State of Louisiana has provided its initial $7.5 million allocation of matching funds, the federal government has yet to approve the $21 million to activate the project.
USB worked through the U.S. Department of Agriculture (USDA) to approve the budget allocation. Behind the scenes, STC worked with the U.S. Army Corps of Engineers to determine the checkoff-compliant activities which could help move the project forward. Congress had already approved the project; the U.S. Army Corps had already completed a benefits-to-cost study which showed that for every $1 invested in the project, there would be a $7.20 kickback in benefits.
The USB allocation shows that U.S. soybean farmers are interested in continual improvement despite a tough year for production, Steenhoek said.
“During this time of market uncertainty and frankly, turmoil, within the soybean industry, soybean farmers can either be passive in how much they’re promoting their industry, or they could be aggressive. This $2 million investment is a clear indicator that soybean farmers want to be aggressive. They’re saying it’s time to explore each and every opportunity to try to provide value to soybeans and reduce some of the costs of getting this project from point A to point B,” Steenhoek said.
Congressional approval for the funding of this project would send a clear message to soybean farmers and the rest of the world.
“The tariff situation has impugned the United States’ reputation of having the most cost-effective, reliable supply chain through no fault of soybean farmers,” Steenhoek said. “Funding this project would send a dynamic message to our customers that we (the United States) are exploring opportunities to shave 13 cents off the per-bushel delivered price, and we’re willing to invest in long-term infrastructure and our markets.”
Contact Bethany Baratta at email@example.com.
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