Low river, lower prices: Mississippi disruptions hit Southern farmers hardest
By John Lovett
University of Arkansas Division of Agriculture
Fast Facts
- Low Mississippi River levels can raise barge freight costs, weaken local grain prices
- Arkansas producers may face some of the strongest impacts from river disruptions
- Higher barge freight rates weaken both corn and soybean basis
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Newsrooms: With Arkansas soybean harvest close to finish, Mississippi River at Memphis shrinks
again
FAYETTEVILLE, Ark. — When water levels drop on the Mississippi River, the economic consequences can travel far beyond the riverbanks.
Research published in Agribusiness by agricultural economists with the Arkansas Agricultural Experiment Station and collaborating institutions showed that parts of Arkansas and other Southern states are among those most exposed to the impacts for corn and soybean prices when the river is low.
The study examined how increases in barge transportation costs are passed through the grain marketing system and ultimately affect local grain basis, the difference between local cash grain prices and futures prices.
The research is from Yuan Zhang, a post-doctoral fellow, and Eunchun Park, an assistant professor, both with the department of agricultural economics and agribusiness and the Fryar Price Risk Management Center of Excellence, along with collaborators from Utah State University and North Dakota State University.
The experiment station is the research arm of the University of Arkansas Division of Agriculture. The Fryar Center is housed within the department of agricultural economics and agribusiness.
Timing is everything
The current Mississippi River conditions suggest that the potential persistence of low-water challenges can affect navigation and commerce. The U.S. Army Corps of Engineers’ August "State of the River" outlook noted that low-water trends seen in recent years could continue this year without normal to above-normal rainfall in key river basins.
“The timing of the current low water levels is particularly concerning,” Zhang said. “With large volumes of newly harvested grain entering the market, transportation demand is already high.
“Low river levels can further constrain barge capacity and increase shipping costs, putting additional downward pressure on local grain basis,” he said. “This means farmers may receive lower cash prices for their crops at a time when many are making important marketing decisions.”
The Mississippi River serves as a critical export corridor for U.S. agriculture. According to the study, a substantial share of Midwest corn and soybean exports move by barge through the Mississippi River system to export terminals along the Gulf Coast. When river levels fall, navigation restrictions can slow barge traffic and raise shipping costs.
Using elevator-level cash bids, barge freight data and river-level information, researchers estimated how transportation-cost shocks are passed through to farmers. Their analysis found that higher barge rates weaken both corn and soybean basis, effectively reducing local cash bids.
The effects were not uniform across the country
Further analysis published in a Southern Ag Today article based on the study found that the strongest impacts occurred in Southern states along the lower Mississippi and Ohio river corridors. In the most exposed corn counties, including parts of Arkansas, Louisiana, Kentucky and Tennessee, more than half of a barge rate increase reaches the farmgate as weaker basis. A $1-per-bushel increase in barge freight rates was associated with corn basis declines of about 60 to 71 cents, and soybean basis declines of about 49 to 53 cents in the most affected areas.
The study also found that local market conditions matter. Corn producers located near processing facilities or in areas with greater competition among grain buyers tended to be less affected by transportation-cost increases. For soybean producers, distance from river export facilities played a larger role in moderating impacts.
Researchers said the findings can help farmers better understand basis risk and help policymakers evaluate the economic value of maintaining and improving transportation infrastructure.
“If low river levels become a persistent problem, transportation disruptions may need to be treated as a recurring source of price risk rather than occasional events,” Zhang said. “Our research shows that these impacts are not evenly distributed across regions or commodities.
“Understanding these differences can help farmers make more informed marketing and storage decisions, while highlighting the importance of transportation infrastructure and alternative shipping options,” he said. “The research underscores the importance of the Mississippi River not only as a transportation artery, but also as a factor shaping farm-level profitability across Arkansas and the broader Mid-South.”
To learn more about ag and food research in Arkansas, visit aaes.uada.edu. Follow the Arkansas Agricultural Experiment Station on LinkedIn and sign up for our monthly newsletter, the Arkansas Agricultural Research Report. To learn more about the Division of Agriculture, visit uada.edu. To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit uaex.uada.edu.
About the Fryar Center
Established in 2020 through a generous gift from Dr. Ed and Michelle Fryar, the Fryar Price Risk Management Center of Excellence is housed within the Department of Agricultural Economics and Agribusiness at the University of Arkansas.
The Center advances the University's land-grant mission through research, teaching, and outreach focused on critical risk-management challenges facing agriculture and the broader food and fiber system. While the Center places particular emphasis on industries important to Arkansas agriculture, its faculty and programs address risk-management questions with national and global relevance.
About the Division of Agriculture
The University of Arkansas Division of Agriculture’s mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, the Division of Agriculture conducts research and extension work within the nation’s historic land grant education system.
The Division of Agriculture is one of 22 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on three system campuses.
Pursuant to 7 CFR § 15.3, the University of Arkansas Division of Agriculture offers all its Extension and Research programs and services (including employment) without regard to race, color, sex, national origin, religion, age, disability, marital or veteran status, genetic information, sexual preference, pregnancy or any other legally protected status, and is an equal opportunity institution.
Mary Hightower contributed to reporting of this story.
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Media Contact:
John Lovett
U of A Division of Agriculture
Arkansas Agricultural Experiment Station
(479) 763-5929
jlovett@uada.edu