Deepening Lower Mississippi River to enhance key link in Iowa soybean farmers’ supply chain

August 6, 2020 | Bethany Baratta

Iowa soybean farmers are one step closer to reaping the rewards of a more efficient supply chain. The recent signing of a partnership agreement officially kicked off the project of deepening the lower Mississippi River.

“This agreement means years of hard work are finally paying off,” said Robb Ewoldt, a board member for the Soy Transportation Coalition (STC) and secretary for the Iowa Soybean Association’s (ISA) board of directors.

There’s been a desire to deepen the lower Mississippi River for decades, says STC Executive Director Mike Steenhoek. The more coordinated effort began with the passage of the Water Resource Development Act of 2016, which changed federal cost-share from a 50-50 federal/non-federal cost-share commitment to a 75-25 cost-share.

“The passage of the Act made it much more feasible for Louisiana to commit to the project, and it became a much more concerted effort to organize and get stakeholders on board,” Steenhoek said.

A study commissioned by the STC illustrated the benefits to farmers of deepening the 256-mile stretch of the Mississippi River from Baton Rouge, Louisiana, to the Gulf of Mexico. This area accounts for 60% of U.S. soybean exports and 59% of U.S. corn exports, the leading export region for both commodities.

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 as 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.

Completion of the dredging project means a 10- to 12-cent basis improvement for Ewoldt, who farms near Davenport.

“That’s big, especially looking at the economics of farming today,” Ewoldt said. “Any time you can add 10 to 12 cents on your beans you’re going to take it because there’s a fine line between profit and loss.”

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.

That’s expected to help the United States maintain its competitive advantage in the export arena.

“We hear about the investments in infrastructure in Brazil, and if we want to be serious about maintaining our competitiveness, we can’t be lackadaisical, we have to be aggressive,” Steenhoek said. “And this is a good example.”

Dredging begins soon

The first phase of the three-phase, $245 million project is slated to begin in late summer-early fall 2020 and is expected to be completed by fall 2021. This includes dredging from Venice, Louisiana (approximately Mile 10 Above Head of Passes [AHP] to the Gulf of Mexico. This would provide a 50-ft. deep channel to approximately Mile 154 [AHP] of the river.

“That’s going to be really key in improving the economics of shipping,” Steenhoek said. There are 14 soybean and grain export terminals on the lower Mississippi River terminal between Baton Rouge and the Gulf of Mexico, 11 of which are located in the first phase of the project.

 “You’re going to be able to put an additional 500,000 bushels of soybeans per vessel on each ship. And in a tight-margin environment, more revenue-producing freight per vessel improves the economics and competitiveness.”

Collaboration

The effort to bring the dredging project to fruition was the result of collaboration and coordination between several state and government entities led by the Soy Transportation Coalition.

ISA and six other state soybean organizations founded the STC in 2007 after a series of meetings determined there was a need and a desire to have a soybean-led organization focused on transportation, according to ISA CEO Kirk Leeds.

“STC was formed as a response to comments and desires by farmer leaders,” Leeds said, noting that former ISA District 6 Director Ed Ulch made the initial ask about what ISA could do to address transportation and infrastructure concerns and improve the competitiveness of U.S. soy.

 Over time, the United Soybean Board became a financial supporter and the American Soybean Association has become a critical partner.

Today, the coalition is supported by 13 states, encompassing 85% of total U.S. soybean production. Also, the National Grain and Feed Association and the National Oilseed Processors Association serve as ex-officio members on the Soy Transportation Coalition's board.

ISA has assisted STC in reaffirming the importance of the dredging project on local, state, and national levels.

“Having Iowa soybean farmers engaged in this project and promoting this project was really key,” said Steenhoek.

Utilizing investments through Advocate membership, ISA helped elevate the project, engaging Iowa Governor Kim Reynolds, Iowa Ag Secretary Mike Naig, Senator Joni Ernst, and others in the state and on Capitol Hill to rally support for the project. STC worked with various other stakeholders in the project, including the U.S. Army Corps of Engineers, to heighten awareness and necessity for the project.

“We showed that we can work with other organizations to bring the ag coalition together and get something done in Washington, D.C., that will allow them to dredge the Mississippi River deeper and be of benefit for Midwestern farmers,” Ewoldt said.

“It all comes down to the collaborative approach started by farmers, reaching out and collaborating with local, state, and federal agencies to launch major improvements. Improvements that will yield long-term positive benefits,” Leeds said.

Through Steenhoek’s leadership, STC secured approval through the USDA to utilize Checkoff funds and a $2 million United Soybean Board (USB) allocation to help offset the costs of research, planning, and designing of the dredging project.

“This is a great example of how Checkoff dollars are used to increase profitability for farmers by tightening up the basis,” Ewoldt said.

Next steps

The next steps in the lower Mississippi River project include the relocation of pipelines buried under the northern portion of the shipping channels and completing the dredging in the miles between Mile 154 AHP to Baton Rouge, Louisiana (Mile 232 AHP). The project is expected to be completed in 2024.

Leeds says ISA will continue to support the work of the STC in improving infrastructure and thereby the competitiveness of the U.S. soybean sector.

Among the most recent projects on the radar:

• Exploration of a barge facility on the Missouri River;
• Researching lower-cost ways to improve the structural integrity of bridges in Iowa.

“Infrastructure will remain a critically important strategy for Iowa’s soybean farmers,” Leeds said. “This dredging project is an example of the value of collaboration and what can happen when organizations stay focused on and keep working together.”

Contact Bethany Baratta at bbaratta@iasoybeans.com.

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