Posted July 11, 2019
United Soybean Board looks to study benefits of deeper river channel to enhance soybean farmer profits.
A new project approved by the United Soybean Board (USB) sets the foundation needed to improve the draft of the lower Mississippi River from 45 ft. to 50 ft. USB has approved funding to support environmental assessments (research) and education of dredging the Mississippi River bottom located near the Port of New Orleans, La.
The 256-mile stretch of the Mississippi River from Baton Rouge, La,. to the Gulf of Mexico accounts for 60% of U.S. soybean exports, along with 59% of corn exports – by far the leading export region for both commodities. There is a growing effort among Mississippi River stakeholders, including within agriculture, to promote the dredging of the lower river shipping channel from 45 ft. to 50 ft. in depth. A deeper river will allow larger ships to be utilized and currently utilized ships to be loaded with more revenue-producing freight.
The overall project is estimated to cost $245 million and would occur in three phases. Two of the phases will be cost-shared between the federal government (75%) and non-federal sources (25%). The state of Louisiana has been designated as the obligated non-federal entity. The three phases are:
- Dredging from Venice, La. (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% federal/25% 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, La. (mile 232 AHP). The remaining soybean and grain export terminals would be included in the 50 ft. shipping channel upon completion of this phase, which is estimated to cost $65 million. Given a 75% federal/25% 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.
“Every decision we make at USB is led by the driving interest in improving market opportunities for U.S. soy,” USB chair Keith Tapp said. “Our exploratory research on deepening the Mississippi River ship channel has the potential to improve global competitiveness and capabilities, which, in turn, makes it easier to deliver our product to customers and enhance farmer profitability.”
According to a report by the Soy Transportation Coalition, the change would increase the competitiveness of the leading export region for U.S. soybeans. The current depth of 45 ft. on the lower Mississippi River is typically dredged to at least 47 ft. to ensure that vessels do not hit the bottom of the riverbed.
The report concludes that deepening the channel to 50 ft. will allow a load increase from 66,000 to 78,000 metric tons, saving upward of $20/mt when loading greater volumes onto one ship. The savings are expected to translate to a margin of 13 cents/bu. for barge river elevators exporting soybeans and could increase revenues by $461 million.
USB is providing $2 million to help offset the research, education and promotion costs related to the project. The American Soybean Assn., the Soy Transportation Coalition and several state soybean groups are also partnering to carry the project beyond USB’s initial investment. The physical work to dredge the river would ultimately be paid by state (25%) and federal (75%) governments. Project work would begin after federal funding is secured.
The $2 million USB is allocating will help offset planning, design and research costs, combined with approximately $21 million in federal funding and $7.5 million in state funding from Louisiana to initiate the first year’s work of the project (commencing the deepening of the river from Venice to the Gulf of Mexico). While Louisiana has provided its initial $7.5 million allocation of matching funds, the federal government has yet to approve its approximately $21 million in initial funding.
“The Mississippi River is the top exit spot for U.S. soy,” Tapp said. “Maintaining and expanding our international customers will require enhancing each link in the supply chain. This is a great example of the entire soy industry working together to reach a shared goal that carries significant benefits for all farmers.”
“If I had to select a single infrastructure enhancement that would provide the most benefit to the greatest number of U.S. soybean farmers, deepening the lower Mississippi River would be my choice,” explained Mike Steenhoek, executive director of the Soy Transportation Coalition.