The Upper Mississippi River (UMR) and Illinois Waterway (IWW) is a primary corridor for U.S. grains and oilseeds to reach export ports at the Gulf of Mexico. A total of 36 locks and dams — 28 on the UMR and eight on the IWW — are maintained at a 9 ft.-deep navigation channel for barge transportation.
However, A majority of the UMR-IWW locks were built in the 1930s and have surpassed their designed life span. As such, U.S. grain and oilseed producers have frequently raised concerns about the navigational efficiency of these aging and constrained waterways.
Congress authorized the Navigation & Ecosystem Sustainability Program (NESP) in 2007 to address the capacity constraints on the most congested segments of these waterways. However, implementation of NESP has been delayed due to a lack of pre-construction and construction appropriations from Congress.
The U.S. Department of Agriculture just released a report on the economic impact of the hypothetical closure of locks on the UMR and the Illinois River. The report, titled “Economic Impacts Analysis of Inland Waterways Disruptions on the Transport of Corn & Soybeans,” was commissioned by USDA and conducted by the University of Tennessee.
The study examined the economic impacts of UWR-IWW navigability on U.S. corn and soybean stakeholders and certain sectors of the transportation industry if long-duration disruptions were to occur because of significant lock closures for major unanticipated repairs.
Specifically, the net changes in economic surplus of the corn and soybean sector were estimated, along with shifts in transport modes for grain flows, regarding potential disruptions of the lock system in the next decade. Changes in the economic surplus of the corn and soybean sector take into consideration a loss in profit by the producer and increased purchase costs incurred by the consumer resulting from increased transportation costs.
The study considered hypothetical disruptions if lock closures were to occur at Mississippi River Lock 25 and the Illinois River La Grange Lock, since those locks are representative of the entire system and are of significant importance to the agriculture sector.
The two locks were analyzed independently, and various potential changes in rail rates were incorporated in the disruptions scenarios: (1) no change, (2) an increase of 5% and (3) an increase of 15%. The study looked at how traffic is diverted by a lock closure and the revenue shifts between the modes as a result of reduced navigation. Overall economic impacts were measured by combining the transportation sector impacts with the effects on the corn and soybean sectors.
One key finding was that corn and soybean exports at Gulf of Mexico ports would be reduced by as much as 5 million tons — a 9% decrease — when Lock 25 is closed for the fall quarter. The reduction in exports would expand to nearly 8 million tons, or 13%, when the closing horizon extends to the whole marketing year. Disruptions at the La Grange Lock also would lower corn and soybean exports at Gulf ports, but with relatively less scale.
The study suggested that Pacific Northwest ports are the major alternative routes to the international markets when Lock 25 or La Grange is closed if rail rates do not increase. “Exports from the Atlantic Coast emerge as an important substitute port area if rail rates elevate after lock closure,” the report noted.
Aggregate economic activity related to grain barge transportation would decrease by $933 million, or 40%, if Lock 25 is closed from September to November. The reduction reaches nearly $2 billion if the lock is unavailable for the marketing year.
When closures occur, however, economic activity associated with rail transportation increases from diverted corn and soybean shipments. “The positive economic impacts surpass the loss of economic activity of barge and truck transportation when rail rates are raised,” the report said.
However, the economic surplus of the corn and soybean sector would decline by $171 million for a fall closure and $747 million for the marketing year when Lock 25 is inaccessible and by as much as $549 million per year when the La Grange Lock is closed, the report found.
A decline in the economic surplus of the corn and soybean sectors due to a closure of Lock 25 could cause a decrease of more than 7,000 jobs, $1.3 billion of labor income and about $2.4 billion of economic activity (total industry output) annually, the report suggested. Similarly, closing the La Grange Lock for one year alone could result in a reduction of 5,500 jobs, $900 million in labor income and $1.8 billion of economic activity annually.
The report concluded that UMR and IWW are important transport arteries for the U.S. corn and soybean sectors and the national economy and said it is crucial to maintain the navigability of the UMR-IWW systems for U.S. food and farm products.
“Federal agencies and industrial groups should work closely to expedite implementation of the NESP in the near future,” the report said.