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River levels keep state crop prices up

By Glen Chase

This article was published December 13, 2012 at 12:40 a.m.

— As farmers along northern stretches of the Mississippi River worry about low water halting barge traffic, river access has been readily available to growers in Arkansas who are seeing premium prices for the corn and soybeans they ship south.

“We are loading barges every day here at Helena right on the river,” said Robert Goodson, an extension agent with the University of Arkansas Division of Agriculture for Phillips and Lee counties.

Until this week, barges were being loaded to about 70 percent of capacity because of river conditions, Goodson said. But even with the low-water conditions, Arkansas farmers were able to get their crops to market because most grain elevators in Helena-West Helena are adjacent to the river.

“Everyone in our area seems to be making a real good profit, especially corn, not soybeans quite as good,” said Goodson. He said corn is being sold within 20 cents of the price set on commodities futures markets.

Last week, the U.S. Army Corps of Engineers rejected shippers’ requests to increase the flow of water from the Missouri River to deepen the Mississippi north of Cairo, Ill., a move they said was necessary to keep the nation’s busiest waterway open for barges.

The Corps of Engineers estimates that water levels near St. Louis will drop to about 9 feet by Dec. 26, Bloomberg News reported Wednesday. Since most barge traffic cannot move at depths less than 9 feet, there’s a chance that a low-water choke point will be created along a 180-mile section between Cairo and St. Louis — further stalling already restricted barge traffic, Bloomberg News reported.

Until rain fell last weekend in the Ohio River valley, as well as in Arkansas, low-water conditions prevailed on more southerly stretches of the river as well, forcing barge operators to lighten loads and reduce the number of barges in a tow.

Despite a drought that struck Arkansas and much of the nation’s Midwest, Arkansas’ 2012 corn crop — a record 122 million bushels — is expected to be the state’s largest on record, according to the National Agricultural Statistic Service’s Nov. 9 report. Soybean yields, at 129.1 million bushels, are estimated to be up 2 percent from 2011, making it the state’s second-largest soybean crop.

Scott Stiles, an extension economist for the University of Arkansas Division of Agriculture, said the ability to irrigate fields enabled Arkansas farmers to succeed in the drought where farmers in other states saw yields drop.

“We irrigate so much of our production here in Arkansas,” about 90 percent of corn acreage and more than two-thirds of soybean acreage, Stiles said. “Because of that we can withstand the hot and dry conditions that we endured. That’s the key difference between this region and the Midwest.

The Midwest remains the biggest corn and soybean production region and wields the most influence over the price of those commodities, Stiles said. While Arkansas had good yields, its farmers were able to get historically high prices because of the Midwest drought.

The higher prices are being maintained at a time of the year when crop prices normally fall as corn and soybeans move to market as the harvest draws to a close, he said.

For example, Stiles said soybean prices being paid at the end of November were as much as 55 cents higher per bushel than the price being paid on the Chicago Board of Trade’s futures market.

On Wednesday, soybean futures for January delivery closed at $14.73 a bushel on the Chicago Board of Trade. Also, corn futures for March delivery closed at $7.25 a bushel in Chicago.

David Choate, vice president of Bruce Oakley Grain, a subsidiary of North Little Rock-based Bruce Oakley Inc., which operates several grain elevators in Arkansas, said that while farmers are getting prices that exceed Board of Trade prices, the premium amount paid to farmers is slightly lower because of handling, transportation and other costs incurred by grain elevator operators.

“They [bidders] go out months in advance and sell this stuff,” Choate said. “They don’t anticipate this bottleneck of midwestern soybeans and corn so they have to scramble to draw those bushels from somewhere else so they keep raising their basis bids to try and shake some loose, so to speak.”

Goodson said that through last Friday, river levels in Helena-West Helena neared minus 2 feet at the Helena-West Helena gauge. He said the granaries believe they can keep loading and shipping barges until the gauge hits minus 8 or minus 9 feet.

Reducing the amount loaded onto barges increases transportation costs, which takes a bite out of the price paid to farmers. But even if barges are loaded at 70 percent of capacity, it’s still cheaper than shipping commodities to market by truck, Goodson said.

John Janoush of the tow-boat operator Jantran Inc., based in Rosedale, Miss., and a whollyowned subsidiary of Bruce Oakley Inc., said low-water conditions created a demand backlog for barge transport. With the weekend rains, Janoush expects the backlog to clear up.

“Right now, all drought restrictions have been lifted. We’re back to normal tow sizes,” Janoush said Wednesday.

Janoush said barges had moved much of the grain that was harvested over the past few months. However, he said the fact that freight rates haven’t declined indicates there’s still a lot to be moved.

High demand and the need to lightly-load barges because of shallow water can drive up transportation costs as much as 1,000 percent, he said.

While the higher prices are good news for Arkansas farmers, Stiles said most are doing what they can to preserve the windfall.

In the coming months, farmers are looking at higher costs and will need working capital to offset their expenses, Stiles said.

Farmers are facing the loss of direct payments for crops from the federal government under the current farm bill pending before Congress, he said. Also, overall operating costs are climbing, including fuel and fertilizer as well as rents for leased farmland and overall agricultural land prices, which are climbing as they become more valuable with the rise in commodity prices.

Business, Pages 25 on 12/13/2012

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