Bloomberg News

Low Mississippi’s Ripple Effect Imperils 20,000 U.S. Jobs

December 03, 2012

Low Mississippi’s Ripple Effect Threatening 20,000 Jobs in U.S.

Potash is unloaded from a river barge at Growmark Inc.'s Bussen Terminal along the Mississippi River in St. Louis. The rush is on to keep customers supplied, workers employed and commerce alive in communities that rely on the nation’s busiest waterway. Photographer: Whitney Curtis/Bloomberg

The trucks begin lining up early at the Growmark Bussen Terminal south of downtown St. Louis, their driver-side doors bearing the names of farm towns such as Ste. Genevieve, Missouri, and Bunker Hill, Illinois.

They come to get fertilizer made in Russia, the Middle East and other places that was shipped to the Gulf of Mexico and then up the river. The farms are rushing to get their supplies before dropping water levels may shut the flow of cargo, which would threaten next season’s crops.

“Worst-case scenario, we run very short of supplies when they’re needed for planting,” said Joe Dillier, plant-food director for Bloomington, Illinois-based Growmark Inc. His company is stockpiling as much urea and potash as it can in its warehouse.

The rush is on to keep customers supplied, workers employed and commerce alive in communities that rely on the nation’s busiest waterway. The usual dry season, combined with the worst drought in 50 years, may push water levels so low in coming weeks it will halt traffic in a section south of St. Louis, near the river’s midpoint. Shippers want President Barack Obama to declare a state of emergency.

“Given the number of jobs at stake if commerce on the Mississippi is crippled, and especially given the ripple effect on local economies up and down the river, the administration cannot afford to remain silent on this critical issue,” said Tom Allegretti, president of American Waterways Operators.

Job Risks

At risk are more than 20,000 jobs -- from dockworkers to truckers and coal miners -- and $130 million in wages and benefits if the river is closed for two months, the group estimates. More than $2.3 billion of agricultural products, $1.8 billion in chemicals and $1.3 billion worth of petroleum products normally ship in December and January, the group said.

The ripples would spread from the banks of the river -- where rocks that haven’t been exposed to air in decades are drying in the sun -- out to fields and factories of the Midwest. That includes companies such as Knight Hawk Coal LLC of Percy, Illinois, about 66 miles (106 kilometers) southeast of St. Louis.

The family-owned Knight Hawk employs 400 people and has another 300 contractors, including about 140 truck drivers. The company has never had layoffs since it opened in 1997, said Andrew Carter, vice president of sales and distribution.

Reduced Volume

A blocked Mississippi could change that.

“We’re hoping we can only make a 30 percent cut in our volume,” Carter said. “That involves trucking 100 miles to the Ohio River instead of 25 miles to our dock. That’s probably going to double my costs” and endanger jobs, he said. Rail is also an unsatisfactory alternative because of higher freight costs, he said.

The disruption comes just as farmers are focusing on getting their crops out of grain bins and into global markets and preparing for planting early next year, said Jack McCormick, who raises corn, soybeans and wheat near Ellis Grove, Illinois, about 50 miles southeast of St. Louis.

Because the 2,300-mile-long Mississippi River is such a cheap and dominant transportation route for the area, local farmers send “almost all our crop to export,” he said. “When a country buys grain, it comes from here.” This is in contrast to Iowa growers, for example, who may sell corn to an ethanol plant in their state or a Nebraskan supplying Nebraska ranchers.

Increased Costs

The loss of river traffic both drives down revenues, as grain elevators don’t want products they can’t sell, and it raises costs, he said. Trucking it toward Cairo, Illinois, where the Mississippi would stay open, rather than the nearby Kaskaskia River tributary to the Mississippi will add about a dime in expense a bushel to corn that’s selling for about $6 a bushel. “Diesel’s costing $4 a gallon,” he said.

The longer that fertilizer shipments are disrupted, the more a Mississippi shutdown will affect next year’s planting, said Kirk Liefer, who grows corn, soybeans and wheat near Red Bud, Illinois, 20 miles (32 kilometers) north of Ellis Grove.

The Army Corps of Engineers is dredging downstream from the Growmark Bussen Terminal, hauling up silt to keep the channels as open as possible. Lawmakers and shippers have appealed to the agency to go further, to blast the massive limestone rock formations, known as pinnacles, that stud the riverbed near the Illinois towns of Thebes and Grand Tower and obstruct vessels at low water. They also want the limit on water released from the Missouri River to be raised to permit more to reach the Mississippi.

Legal Mandates

The Army Corps maintains it’s following legal mandates on Missouri water flow, though it has agreed to complete a review of what can be done by this week. It has also pledged to hasten the pinnacle removal project that had been scheduled to begin in February.

White House spokesman Jay Carney said last week that President Barack Obama is exploring “all possible options” to maintain traffic. Lawmakers including U.S. Senators Tom Harkin of Iowa and Richard Durbin of Illinois, both Democrats, have called for the administration to take action.

Officials from states along the Missouri River wrote their own letter to Obama last week, arguing the Army Corps has no authority to increase that river’s flow to help the Mississippi. Such a release “will undoubtedly have a negative impact on the people and many businesses in the states we represent,” wrote the entire North Dakota congressional delegation, along with its governor and officials from South Dakota, Montana and Kansas.

Different Projections

Without action, the Mississippi will be too shallow to navigate in coming days, though projections differ. The Army Corps says navigation will be impaired by Dec. 11 and a record low-water mark will be set on Dec. 22. The American Waterways Operators and the Waterways Council Inc., a trade group based in Arlington, Virginia, says traffic will be impaired Dec. 10 from St. Louis south about 180 miles (290 kilometers) to Cairo, where it meets the Ohio River.

The U.S. Department of Agriculture last week lowered its forecast for farm profits by 6.7 percent to $114 billion because of rising costs, mainly for livestock feed. River disruptions further lower profits by raising transportation costs for farmers who already lost crops to this year’s drought, which may continue at least through February, according to the government, Liefer said.

Dry Soil

“It’s in the back of everyone’s mind. We’re going into our second consecutive winter without a lot of water in the soil,” Liefer said. “Everything the river brings up here is vital.”

Faced with unpalatable alternatives, some suppliers may simply decide not to move products at all. Without barges, there may be no viable alternative to moving grain downstream or fertilizer north, said Jon Samson, executive director of the American Trucking Associations’ Agricultural and Food Transporters Conference. The economics means such bulk freight may end up sitting in storage until the river reopens, he said.

“If their barges are stuck, there’s no place to go with their feed,” Samson said. “The cost of moving it by truck, as opposed to barge, from the North Midwest, all the way down to Louisiana is going to be exponentially more.”

Those choices will be made case-by-case, based on everything from the pace of government action to rainfall, Dillier said.

“We’ll be making those decisions over the next couple weeks,” he said. “Not being able to get to St. Louis is a big deal.”

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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