U.S. farmers have enjoyed a competitive advantage in accessing global markets with their products, but continued under-investment in the aging inland waterways system will limit U.S. agricultural exports and put more than $72 billion in additional GDP and 77,000 new jobs at risk, a new report from Agribusiness Intelligence found.
That independent report, Importance of Inland Waterways to U.S. Agriculture, was commissioned by the USDA’s Agricultural Marketing Service earlier in the year from Agribusiness Intelligence.
“The U.S. is in direct competition with Brazil for agricultural export business, particularly for corn and soybeans—two of our largest exports, therefore, infrastructure investments can have a tremendous impact upon a farmer’s profitability,” said Ken Eriksen, senior vice president of Agribusiness Intelligence’s consulting business and lead author of the study.
“Multinational corporations, including Chinese companies, are making significant investments in the Brazilian grain and soybean transportation and handling systems,’ Erickson said. “If not addressed, U.S. infrastructure problems will make U.S. grain and soybeans less competitive in global markets.”
The U.S. inland waterways system in the study included navigable areas of the upper and lower Mississippi River, the McClellan-Kerr Arkansas River, the Missouri River, the Illinois and Ohio River systems, the Tennessee River, and the Gulf Intracoastal Waterway.
These waterways, built during the 1920s and 1930s, feed the Center Gulf, Mississippi River export grain complex of elevators that extend from Baton Rouge, La., through New Orleans, handling 57% of U.S. corn export volumes valued at $4.8 billion, and 59% of U.S. soybean exports valued at $12.4 billion.
While there’s little direct movement of Michigan grains on the major inland waterways identified in the report — the potential economic fall-out would still impact Michigan farmers, according to Michigan Farm Bureau Field Crops Specialist, Theresa Sisung.
“Michigan is the United States’ 19th largest agricultural exporting state, sending $2.7 billion in domestic agricultural exports abroad in 2017,” Sisung said. “In 2016, Michigan grain and grain product exports were valued at $362.1 million – 20.2% of the overall Michigan grain and grain products production value.”
One waterway in Michigan important to the movement of commodities, as well as to the national security of the U.S., is the St. Mary’s River at Sault Ste. Marie, connecting Lake Superior to Lake Huron. For vessels to traverse the 21-foot difference between the two lakes, they must go through the Soo Locks, which first opened in 1880.
Managed by the U.S. Army Corp of Engineers, the Soo Locks are in dire need of an additional 1,200’ lock to accommodate larger freighters. Currently 70 percent of the vessels passing through the Soo Locks complex are limited to using the Poe Lock — the only one of the four locks able to handle today’s 1,000’ or longer freighters.
Roughly 7,000 ships hauling 86 million tons of cargo pass through each year, made up mostly iron ore for steel production, but also coal, grain and limestone.
A Department of Homeland Security report in 2015 estimated that a six-month closure of the Poe Lock would likely temporarily reduce gross domestic product by $1.1 trillion and would result in a loss of an estimated 11 million jobs within the first year in the U.S., and up to 16 million jobs across North America.
The America’s Water Infrastructure Act of 2018, authorized $922 million for the construction of a second 1,200-foot lock for the passage of freighters at the Soo Locks in Sault Ste. Marie.
Many of the locks in the Agribusiness Intelligence study are 80 years of age, far exceeding their 50-year designed lifespans, according to Eriksen. “The U.S. inland waterways infrastructure needs major rehabilitation and construction to restore it to its full capability, to forestall major disruptions, and provide opportunities for growth,” he said.
Currently, appropriated funds do not enable the U.S. Army Corps of Engineers to keep pace with barge-volume traffic, let alone growth or infrastructure maintenance and improvements needs, the study found.
As a result, the percentage of vessels delayed on all waterways has increased from 35% in 2010 to 49% in 2017, which, in turn, adds to the total shipping cost. The report estimates that by 2045, if inland waterway infrastructure is fully funded to meet the volume, maintenance and upgraded needs, employment will increase 20 percent to 472,000 jobs and the contribution to U.S. GDP would expand 39 percent to nearly $258 billion.