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Drought’s ripple effect on US corn market dynamics
USAgNet - 12/04/2023

The U.S. corn market faces unique challenges due to consecutive years of drought impacting Mississippi River transport, a key route for grain shipments. The Mississippi River, crucial for transporting U.S. grains, has experienced lower water levels, leading to weight restrictions on barges, slower traffic, and higher shipping costs. This situation has significant repercussions for the corn market, both domestically and internationally.

In 2022 and 2023, severe drought conditions led to a notable decrease in grain barge movements on the river. By mid-2022, over two-thirds of the U.S. faced drought, affecting river transport efficiency and capacity. These conditions persisted into 2023, particularly around the Mississippi River watershed, further disrupting grain transportation.

The impact on corn transport has been substantial. Corn barge movements were consistently below the 3-year average, with rates often less than half of typical levels. This reduction in transport efficiency results in higher shipping costs, affecting the price of corn at ports and diminishing its competitiveness on the world market.

Transportation costs play a crucial role in setting corn prices. The fall of 2022 saw peak barge spot rates more than double the rates of the previous two years, reflecting the strain on river transport. Though rates in fall 2023 were not as extreme, they remained significantly above average, particularly near the river’s mouth.

These transportation challenges have repercussions for U.S. corn competitiveness. As shipping costs rise and barge capacity diminishes, farmgate prices lower, and the cost for global buyers increases. This situation has led to U.S. corn being less competitive compared to other major producers like Brazil.

However, the recent equalization of port prices between the U.S. and Brazil suggests a positive shift in the export demand outlook for U.S. corn, a welcome development for American corn farmers amidst challenging conditions.

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