Numerous barges have run aground on the lower Mississippi River, and grain barge shipping rates are soaring to historic highs this week, as drought has dropped inland waterways to levels not seen in decades.

And with little rain in the forecast, the low water levels are hampering already sluggish grain exports at the U.S. Gulf Coast, where some 60% of U.S. corn, soybean and wheat exports exit the country.

The logistical snarls come as the Midwest harvest progresses and the busiest crop export season starts, in a year when tight global supplies and strong demand for food and fuel are helping propel inflation to soaring highs.

“The projections for the water levels are going down, which means this situation is going to get worse,” said Mike Steenhoek, executive director for the Soy Transportation Coalition. “Unless we get a significant amount of rainfall soon, this season is going to be a challenge.”

Barge travel has long been one of the most cost-efficient means of getting commodity crops into the global market.

But cracks are showing. Shipping lines have sharply reduced barge drafts so that the vessels sit higher on the river, effectively cutting tonnage per barge by a quarter or more, shippers and traders said.

Tow boats on the lower Mississippi are forced to reduce the number of barges per tow by nearly 40% to squeeze through drought-parched shipping lanes, they said.

That has some grain elevators scrambling to find alternatives for moving their crops for export, according to sources at three river elevators. Some grain sellers are looking at rail freight, or scouting ports outside of New Orleans, they said.

The Mississippi River at the Memphis, Tennessee, gauge was at the eighth-lowest level on record on Thursday and was likely to challenge an all-time low set during the drought of 1988 by mid-October, according to a National Weather Service forecast.

One barge shipper said at least 10 boats have run aground south of Cairo, Illinois, in the past week, while others are carrying less cargo.

“Guys that thought they would be loading 12-foot drafts are now loading 9-1/2 or less, so you just lost at least 500 tons per barge,” he said.

That loss of volume and the slowed navigation has spiked barge shipping costs and made U.S. crops less competitive globally. The U.S. dollar near a 20-year high has further dampened demand.

Brazil, the world’s biggest soybean supplier, has overtaken the United States as the most competitive shipper of the oilseed to top importer China, the head of rail company Rumo RAIL3.SA said on Thursday.

Barge freight at the busy U.S. Port of St. Louis hit a record-high $49.88 per ton this week, up 58% from a year ago, the U.S. Department of Agriculture (USDA) said.

Since the start of this month, grain barge unloads at Louisiana Gulf Coast export terminals were 39% below the five-year average, USDA data showed.

Fulfilment of the arrangement on grain exports from the Ukrainian ports, recently reached after continuous effort with the intermediation of the United Nations, has just begun, however, it means also significant increase in transport prices.

War means additional risks
Mr Oleksandr Kubrakov, Ukrainian Minister for Infrastructure, has indicated that successful grain exports via seaways require not only subsidies, but also additional guaranties. Additional insurance guaranties are required to export grain from the Ukrainian Black Sea ports, because the Russia’s war against Ukraine causes additional risks which deter many carriers.

London has traditionally been the world’s largest ship insurance centre, the city where the insurance company’s “Lloyd’s” headquarters are located, therefore Great Britain should undertake the main role in drawing up insurance guarantees, notes “Politico”.

Ukrainian famers have done their job

Despite the extreme war conditions, grain crop in Ukraine promises to be good. Farmers, frequently risking their lives, completed sowing in timely manner and now are rushing for harvesting. Russian invaders have managed to plunder grain elevators in the occupied territory.

Ukraine hopes that, with the help of the British government, it will successfully ease the concerns expressed by ship captains as to the navigation in the Black Sea, where a number of mines have been placed since the beginning of hostilities.

Moscow has promised not to attack grain carrying merchant ships en route from Odessa and other Ukrainian ports, which have been blocked since the Russian invasion six months ago. During this time, grain prices in the global market have rapidly increased, because Ukraine is one of the largest grain exporters.

Russian strike against Odessa less than a day after signing the deal shows that ease the concerns expressed by ship captains as to the navigation safety in the Black Sea are justified, and that owners will not send their ships to the Ukrainian ports without additional insurance guaranties.

Coordination centre in Istanbul

Turkey has officially opened in Istanbul the Ukrainian joint coordination centre for cereal export, establishment of which was provided for within the framework of the arrangement reached with the UN support. The centre will employ civil and military staff from Ukraine and Russia, as well as representatives of Turkey and the UN. Their main task will be to ensure that Ukrainian ships with cereal cargoes safely move along certain routes, as well as to conduct inspections that the ships en route to and from the Black Sea do not carry prohibited weapons.

“Staff of this centre is aware that they are in the spotlight of the entire world”, said Mr Hulusi Akar, Turkish Minister for Defence, in his opening speech. “We hope that the contribution of the centre to human needs and peace will be as huge as possible.” According to the Turkish minister, Ukraine and Russia provide one third of the global wheat exports.

Suspension of deliveries from both of the large cereal exporting countries – Ukraine and Russia – is one of the factors contributing to the price rise, which has made the food imports in the world’s poorest countries unaffordable. During the hours following the signing of the deal on Ukrainian wheat exports, global prices fell rapidly.

Analysts are of opinion that reaching navigation security will be the decisive factor to begin grain exports from the Ukrainian ports.

Prior to the war launched by Russia, cost for transportation of a ton of grains from Ukraine on board a ship was 30 US dollars, now the fee could reach around 200 US dollars due to the dramatically increased risk.

It is very important for the Ukrainian government to begin grain exports to use the income for reconstruction of the national economy stricken by the war.

Rolands Petersons

Ukraine’s navy confirmed on Wednesday that work had started at three Ukrainian Black Sea ports aimed at preparing for the resumption of grain exports.

“In connection with the signing of the agreement on the unblocking (by Russia) of Ukrainian ports for the export of grain, work has been resumed in the ports of Odesa, Chornomorsk and Pivdeny,” the navy said on Facebook.

“The departure and arrival of ships to seaports will be carried out by forming a caravan that will accompany the lead ship.”