U.S. Markets closed
  • S&P Futures

    3,975.75
    +5.50 (+0.14%)
     
  • Dow Futures

    33,878.00
    +7.00 (+0.02%)
     
  • Nasdaq Futures

    11,637.75
    +21.50 (+0.19%)
     
  • Russell 2000 Futures

    1,838.50
    +5.70 (+0.31%)
     
  • Crude Oil

    77.26
    +0.02 (+0.03%)
     
  • Gold

    1,745.50
    +5.20 (+0.30%)
     
  • Silver

    21.09
    +0.18 (+0.86%)
     
  • EUR/USD

    1.0362
    +0.0017 (+0.1658%)
     
  • 10-Yr Bond

    3.7030
    +0.0120 (+0.33%)
     
  • Vix

    22.21
    +1.71 (+8.34%)
     
  • GBP/USD

    1.1993
    +0.0028 (+0.2339%)
     
  • USD/JPY

    138.6630
    -0.2380 (-0.1713%)
     
  • BTC-USD

    16,278.98
    +144.50 (+0.90%)
     
  • CMC Crypto 200

    383.30
    +3.01 (+0.79%)
     
  • FTSE 100

    7,474.02
    -12.65 (-0.17%)
     
  • Nikkei 225

    28,013.72
    -149.11 (-0.53%)
     

Mississippi drought: 'We need rain to fill the river,' supply chain expert says

Agriculture Transportation Coalition Executive Director Peter Friedmann joins Yahoo Finance Live to discuss receding Mississippi River levels amid drought and how it's affecting agricultural supply chains.

Video Transcript

DAVE BRIGGS: Cargo volume, meanwhile, a mess on the Mississippi. How vital is the Mississippi River for US commerce? Well, between 2015 and 2019, 95% of corn, 94% of soybeans, and 45% of wheat moved by barge through the Mississippi River. Now we have dangerously low water levels, threatening the flow of grain exports. Peter Friedmann is the executive director of the Agricultural Transportation Coalition. Good to see you, sir. I want to dive into the economics in a moment. But how do you characterize these dangerously low water levels in the situation you're seeing?

PETER FRIEDMANN: It's having a devastating impact on the flow of some of our major agricultural commodities, both impacting the domestic market, but also impacting our ability in our country to be a good dependable supplier to the world of these agricultural commodities.

SEANA SMITH: Yeah, and Peter, talk a little bit more about the economic implications of this because, like Dave said, half of US grain exports travel down the Mississippi. When you see an issue like this, what does this potentially do to prices?

PETER FRIEDMANN: Well, it'll increase the prices. Look at the difficulty here. Unlike the international ocean containerized cargo, these are bulk commodities. They travel north, south, from the northern part of the Midwest down to the Mississippi River, the mouth of the Mississippi River, to bulk ships that carry corn and soybeans, grains in bulk, huge commodity volumes all over the world. And those are products that are depended upon by the rest of the world.

And in many cases, they can substitute the sourcing from other countries. But in most cases, they cannot substitute. They cannot find these volumes elsewhere. So what happens is the pricing goes up because you're not only buying grain or soybeans from the United States. You're buying grain and soybeans delivered to the place you need them in Africa and South America and Asia and so forth.

So the delivery cost is skyrocketing because you can't get the product down the river. And the difficulty is that unlike these containerized cargoes that go over the East Coast or the West Coast and you can move around, there is no alternative, no realistic alternative, to the barge movement of these massive volumes of commodities.

I can give you an example. One barge, just one barge holds the equivalent of cargo of 138 trucks. We're talking about the biggest semi trucks that you see on the highways. One barge, 138 of those trucks. And typically, the barges go in four barge tows. They're called four tows-- four barges. That's 550 huge trucks.

And you see there are thousands of these barges that are on the sand, sitting on the bottom, not moving. So that's thousands of barges. We do not have hundreds of thousands of extra trucks sitting around or hundreds of thousands of extra truck drivers sitting around, able to carry that cargo. So it's going to sit there until we get some rain.

DAVE BRIGGS: Those pictures are just stunning. Is it as simple as a lack of precipitation? And what can be done?

PETER FRIEDMANN: Well, first of all, it has to be recognized. Some people would say that, well, if it doesn't go in barge, can it go by rail? Because rail can also carry large volumes. Difficulty is that the barges and our river system go north to south. And most of our railroads go east and west. So there is not a simple replacement of rail for barge.

The situation is really dependent upon, as you show, you have precipitation. And what we have with agriculture is you certainly have farmers who know that while people living in cities, sometimes, we think we're insulated from Mother Nature. We're not. Farmers know it. This happens. And we need rain to fill the river and get the depth we need to move those barges.

SEANA SMITH: And Peter--

PETER FRIEDMANN: Really alternative.

SEANA SMITH: Yeah, Peter, you need a lot of rain in order to fill that river. Any estimate just on how long this problem could potentially last?

PETER FRIEDMANN: There are some people saying that it could be three weeks. But, you know, again, it's Mother Nature. And predicting that is a profession, I guess, but it's not a science. So we're thinking three weeks. There will be some areas that will fill faster. One of the kind of interim solutions is that you load the barges with less grain, less soybeans, less corn. And so they'll be lighter, and they can float on less water. And I think that's what we're going to be seeing first. Again, that dramatically increases the cost of transportation by moving less cargo with each barge movement.

The other thing that's happening is that there are huge storage facilities being developed. And you just got to place the stuff on the ground. Corn can handle storage on the ground. Soybeans are more delicate. So we're going to be seeing and expecting some damage for that cargo. And when you ship damaged goods, you get less money for them. So that's another downstream expectation, even once the water fills these rivers.

SEANA SMITH: Massive, massive economic implications here. Peter Friedmann, great to have you. Thanks so much for joining us.

PETER FRIEDMANN: Thanks for having me.