Drought Having Impact on River Barge Shipping Rates

By CnAgri2012-07-24 19:23:28 Print

Dry fields is not the only problem that this summer's drought is causing. Lower water levels are impacting the cost of barge shipping for fertilizers coming up the rivers and grain going down rivers, as well as many other agricultural goods going up and down the rivers.

According to Ag Professional, the price paid to farmers is much less than the board of trade price as the basis increases due to river transport cost.

"With the drought now dropping water levels on nearly the entire river system, barge rates have begun to pop," it was noted in the Friday Doane's Agricultural Report. "Barge rates bottomed out the last week of June and have jumped sharply since, rising 16 percent last week alone to put the rate on the Illinois river above the rolling three-year average, for the first time since last October."

Supply and demand is not the only element that sets barge rates, but supply effectively becomes tighter when more barges are needed to hall the same amount of weight. And when river levels drop, barges cannot be as fully loaded as when river levels are average or higher.

River rates also have an impact on railroad shipping rates because the railroads are going to take advantage of charging more because there isn't a cheaper river option.