The U.S. Department of Agriculture released a report this week on the economic impact of the hypothetical closure of locks on the Upper Mississippi River 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 to corn and soybean stakeholders and the transportation industry if long disruptions were to occur due to lock closures for major repairs.
The study considered hypothetical disruptions if lock closures were to occur at Mississippi River Lock 25 and the Illinois River La Grange Lock during the 2024-25 time frame. These locks were selected because they 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 into the disruption scenarios: (1) no change, (2) an increase of 5% and (3) an increase of 15%. The report 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.
According to the report, changes in the economic surplus of the corn and soybean sectors 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 found that corn and soybean exports at Gulf of Mexico ports would be reduced 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, with relatively less scale.
The study suggested that Pacific Northwest ports are the major alternative routes to 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.
The study did find that economic activity associated with rail transportation, on the contrary, would increase 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 sectors 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 when the La Grange Lock is closed, the report found.
A decline in the economic surplus in the corn and soybean sectors due to the closure of Lock 25 could cause a decrease of more than 7,000 jobs, $1.3 billion in 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.