Agriculture as a Source of Barge Demand on the Upper Mississippi and Illinois Rivers: Background and Issues

Publication Date: May 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Agriculture, forestry and fishing; Transportation

Type:

Abstract:

Five of the nation's top agricultural production states--Iowa, Illinois, Minnesota, Missouri, and Wisconsin--have traditionally relied on the Upper Mississippi River-Illinois Waterway (UMR-IWW) navigation system as their principal conduit for export-bound agricultural products, mostly bulk corn and soybeans. The low-cost, high-volume capability of barge transportation has long provided an important competitive advantage for U.S. agricultural products in international markets. Agricultural barge freight on the UMR-IWW grew rapidly for several decades in the post-WWII era, but has leveled off since the early 1980s. There is disagreement over the cause for this lack of growth in barge demand.

Shipping and agricultural interests argue that stagnant UMR-IWW barge traffic is due to delays associated with aging infrastructure and limited lock capacity; that delays are increasingly forcing grain shippers to switch to alternate transportation modes to ensure timely arrival at down-river processing plants or Gulf ports; that the declining efficiency of the UMR-IWW is hurting both U.S. competitiveness in international markets and U.S. farm incomes at home; and that investment is needed to modernize and expand the capacity of the locks.

Other interest groups contend that growth in domestic demand, as well as international market conditions, have changed substantially since the period of rapid growth in barge demand experienced during the 1960s and 1970s. Changes in the shape and origin of international demand and supply, an increasing number of bilateral and multilateral trade agreements, and other factors have resulted in the emergence of new trade routes for agricultural commodities that have drawn exportable supplies of corn and soybeans away from the UMR-IWW system.

Recent trade patterns, coupled with USDA's long-run market outlook, suggest that U.S. corn and soybean exports may increasingly turn to overland trade routes to access growing Asian markets (via the Pacific Northwest), as well as to nearby markets in Mexico and Canada. In addition, expected strong competition from South American producers, particularly in global soybean and product markets, may lead to a refocusing of U.S. exports away from Atlantic-rim markets and toward Canadian, Mexican, and possibly Asian markets, where geography offers some competitive advantages. If these expectations are realized, then growth in future barge demand from the agricultural sector may be well below levels anticipated by proponents of large-scale investments in the UMR-IWW.

This report provides background on the linkage between U.S. agriculture and the UMR-IWW navigation system. In addition, it explores several of the key issues and uncertainties behind evolving trade patterns and projections for future agricultural freight traffic on the UMR-IWW navigation system. This report will be updated as events warrant.