AgDM newsletter article, July 2004
by Daryll E. Ray, Blasingame Chair, Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and Director, UT Agricultural Policy Analysis Center (APAC). (865)974-7407; dray@utk.edu; http://www.agpolicy.org
A recent Senate committee’s
approval of legislation that authorizes the upgrading of the Mississippi River
lock and dam system brought this issue back into the public spotlight. The
Mississippi River locks and dams are an essential part of the grain transportation
infrastructure of the central U.S., inexpensively delivering grain from the
nation’s breadbasket to Gulf ports for export shipment.
The system consists of a series of 27 locks and dams on the Mississippi River
above St. Louis, Missouri, ensuring a nine foot channel for barge traffic
as far upstream as St. Paul, Minnesota. The bulk of the system was built in
the 1930s. The question has been whether or not this system needs to be upgraded
to repair aging structures as well as to meet the current needs of shippers.
Agricultural producers and their organizations have been directly involved
in lobbying for the upgrade project. They contend that it is necessary to
help U.S. farmers remain competitive with producers elsewhere in the world
by providing an efficient, low-cost transportation system.
There are, no doubt, some very good reasons for upgrading the lock and dam
system including repairs of the effects of aging and the opportunity to take
advantage of advances that have been made in riverine transportation systems
since the system was originally built. On the other hand, it is important
not to overestimate the positive impact it might have on farmers and the price
they receive for their seeds and grains.
I say that because much of the original economic justification for the system
was based on ten-year-old grain export projections that have not materialized.
Those familiar with grain export numbers know that rather than the 2.65 billion
bushels that were projected for the 2003 crop year, the numbers have come
in at 2.05 billion bushels. In general, corn exports remain flat at 20 percent
below the 1979-1980 peak levels.
This does not mean that we will not have a spurt or even a long-term increase
in corn exports. However, betting on increased exports based on hopes such
that China will reverse a centuries-long self-sufficiency policy and become
a major long-term U.S. customer seems like a bet that is far from a sure thing.
None of this is to say that there won’t be benefits of the lock and dam upgrade.
There will. The question is who will benefit. It may or may not be the farmers
who are arguing in favor of the project. In fact, we can think of situations
in the future in which grain-belt farmers might even be disadvantaged. We
already see South American soybean meal being shipped into the Port of Wilmington
(NC); something that I would never have guessed in my wildest dreams a decade
ago.
Cargill is attempting to ship ethanol from Brazil to the U.S. Again, that
doesn’t mean that barges full of Brazilian or Argentinean soybean meal will
be making their way up the Mississippi River with a rebuilt system.
It also doesn’t mean that they won’t.