The U.S. grain transportation system, particularly the inland waterways, is considered a competitive edge for America’s farmers. But a century-old lock and dam system along the Mississippi River and a pending rail merger could present challenges in the future.

“Part of the success we’ve had in exports is because we have this really efficient intermodal system of river and rail and roads that all work together, and it’s important to keep those systems up, because when we’re talking about moving such the large volume that we produce here, being able to get that to an export destination efficiently is really important,” National Corn Growers Association Chief Economist Krista Swanson told FarmWeek.

Illinois is a bit different from other states with its vicinity to the Mississippi, Illinois and Ohio rivers, which allows for more “exposure to the international market than some other places,” said Collin Watters, IL Corn’s director of exports and logistics.

The Mississippi River system is one of the most critical logistics corridors for the U.S. corn export system, which makes advocating for federal investments to modernize the waterways a priority for IL Corn and the Illinois Farm Bureau.

During a recent Leaders to Washington trip, members advocated for legislator support to improve infrastructure along the Mississippi, particularly the aging lock and dam system.

Tom Heinold, chief of the operations division of the U.S. Army Corps of Engineers Rock Island District, said routine maintenance has pretty much stayed on schedule, but non-routine repairs have not been well-funded the past couple of years.

“I think 2022 was the last time we got a large infusion of infrastructure money for our locks and dams and so things are breaking faster than we can repair them right now,” Heinold told FarmWeek. “But I have to caveat that and say that during the 2000s, 2010s, and the first couple of years of the 2020s, we took very good care of the locks. ... My next big concern is the dams. Those dam gates out there, there are a few hundred of them across all of our dams between the St. Louis, Rock Island and St. Paul districts, and they have gone largely unmaintained ... and they’re starting to show signs of decay.”

According to the USDA, close to 60% of U.S. grain exports are shipped by barge and roughly 32 million tons of corn per year are barged down the Mississippi River system to Louisiana export terminals.

Barges dominate because Midwestern corn can be loaded on rivers and moved cheaply to Gulf export ports. Most corn used within the U.S. moves by truck or rail (to ethanol plants, feedlots or processors).

“Right now, we do have a competitive edge because we’ve invested in this (river) system, and it’s reliable and very, very efficient. If we fail to invest in this system (in the future), that price point could go the other way, and Brazil and other ag-producing nations in South America, for instance, could eat us alive,” Heinold warned.

Drought and consistent low water levels in the lower Mississippi also continue to be a concern, while the upper river is “looking pretty good,” Heinold said March 9.

“On the lower river, they have gone for about four years in a drought condition, and unfortunately, that condition, more or less, is persisting. We’ve got some recent rain, but it hasn’t been enough to cancel out the drought and put a great deal of water back into the river system down south. The system is all connected, so it might be worth watching the potential drought on the lower river.”

This could mean light-loading barges, which in turn affects prices.

“When you have to make more trips with a tow boat to get the same product to market, that gets passed on,” he said.

Pending rail merger

Farmers and ag groups also are watching the proposed $85 billion merger between Union Pacific and Norfolk Southern, which could significantly alter rail competition, shipping costs and service reliability for agricultural shippers if approved by federal regulators.

The railroads have informed the Surface Transportation Board they intend to file a revised merger application on April 30, following the STB’s rejection of the railroads’ initial merger application for being incomplete.

The deal would create the nation’s first coast-to-coast freight railroad. The board could make a decision by 2027.

In 2023 alone, U.S. railroads carried more than 80 million tons of corn, much of it originating in the Midwest and Northern Plains and moving toward coastal ports or major processing hubs.

Mexico is the top export market for U.S. corn. About two-thirds of the grain the US ships to Mexico moves by rail. Disruptions in rail transport to Mexico could erode the U.S.’s proximity advantage, cause storage backups and weaken basis.

“For agriculture and rural America, the central question is not whether railroads could operate a larger network, but how further concentration would affect pricing power, service reliability and accountability in markets where shippers already have limited alternatives,” American Farm Bureau Federation Economist Daniel Munch wrote in a recent Market Intel.

When rail rates rise, farmers have limited ability to offset the increase, Munch wrote. Commodity prices are set in global markets; input costs are largely fixed in the short run and production decisions cannot be easily adjusted after harvest. As a result, higher rail rates will be absorbed directly into farm margins.

“The risk of the UP-NS merger is clear. It would leave farmers more dependent on fewer railroads at a time when they already have almost no ability to walk away from higher costs or poor service,” Munch said.

• Rhiannon Branch contributed to this story. This story was distributed through a cooperative project between Illinois Farm Bureau and the Illinois Press Association. For more food and farming news, visit FarmWeekNow.com.