By Sarah Gonzalez, Director of Communications and Digital Media
The U.S. Department of Agriculture (USDA) on Aug. 28 released a significant new study that quantifies the cost savings and competitive advantages that would accrue from investing in long-delayed improvements to inland waterways locks and dams on the Upper Mississippi and Illinois River system.
Concluding that “higher and consistent inland waterway funding is needed to ensure the long-term prosperity of U.S. agriculture,” the study, Importance of Inland Waterways to U.S. Agriculture, found that the inland waterways system saves between $7 billion and $9 billion annually over the cost of shipping by other modes. “The infrastructure, however, is aging and needs major rehabilitation and construction to restore it to its full capability and forestall major disruptions, while providing opportunities for growth,” the study said.
Secretary of Agriculture Sonny Perdue, accompanied by Assistant Secretary of the Army for Civil Works R.D. James, unveiled the study at a town hall meeting conducted at Mel Price Locks and Dam in Alton, Ill. Representatives of NGFA at the event included: NGFA Second Vice Chairman JoAnn Brouillette, managing partner and president of Demeter LP, Fowler, Ind.; Executive Committee Member Chris Boerm, president of global transportation at Archer Daniels Midland Company, Decatur, Ill.; Waterborne Commerce Committee Chairman Scott Leininger, senior vice president at CGB Enterprises Inc., Covington, La.; and NGFA Director of Legislative Affairs and Public Policy Bobby Frederick.
Produced by Informa Economics for USDA’s Agricultural Marketing Service, the study analyzed the potential consequences of three different levels of infrastructure investment – status quo, reduced and increased. The status quo scenario envisions continued current spending trends in the president’s budget requests. The second scenario analyzed increased investment on the Inland Waterways System and the completion of all approved projects and rehabilitation projects required to increase reliability of the locks and dams. The last scenario examined the impact of reduced investment with no new construction or rehabilitation.
Compared to the status quo, the study found increasing investment in the inland waterways system by $6.3 billion over a 10-year period (through 2029) and $400 million per year thereafter through 2045 cumulatively would grow U.S. gross domestic product by 20 percent (to $64.6 billion) and create 472,000 jobs. The study says this option would more than offset the cost of completing all the proposed projects, and would increase the market value of U.S. corn and soybeans by $39 billion from what otherwise would be the case. Meanwhile, reduced investment would decrease the market value of those commodities by $58 billion, the study says.
“We aren’t status quo kinds of people. We came to make something happen,” Perdue said during the town hall event. He urged stakeholders at the meeting to use the findings of the study to amplify the importance of the inland waterways system with policymakers in Washington. “This infrastructure is critical for the competitiveness of the U.S. farmer…This is the story we need to be talking about here: Increased investment enhances our [U.S.] competitiveness by reducing those shipping costs,” he said.
During the event, NGFA and Waterways Council Inc. (WCI) issued a joint press release commending the administration for highlighting the critical connection between the inland waterways and the competitiveness of American agriculture in global markets. In its public statement, NGFA emphasized a point made within the study – that the United States is in direct competition with Brazil and infrastructure investment in both countries can have a tremendous impact on each nation’s agricultural economy.
“Foreign competition from countries like Brazil is only increasing given current trade disruptions, and China is investing aggressively in South America’s transportation infrastructure to the United States’ detriment,” said NGFA President and CEO Randy Gordon. “The United States simply can’t afford to lag behind any longer.”
The study found that the U.S. currently has an advantage of $5.35 per metric ton over Brazil when shipping soybeans from Davenport, Iowa, to Shanghai, China, via the inland waterways system. If the current navigation infrastructure spending trend is continued at status quo levels through 2045, the U.S. advantage declines to $3.03 per metric ton before any additional improvements in Brazil’s infrastructure are deployed. With increased infrastructure investment in the U.S. inland waterways system, the study projected that barge rates would decrease, and the landed cost of grain at destination markets would improve the U.S. competitive advantage to $22.55 per metric ton over Brazil with all other items unchanged. [Emphasis added].
The image from the study below illustrates that soybean transportation costs to China from Brazil are decreasing at a faster rate than those from the United States. “If U.S. transportation costs increase, the competitiveness of U.S. agriculture is in jeopardy,” the study stated.
Meanwhile, lock-and-dam performance is declining under current investment trends, the study found. Lagging infrastructure maintenance and improvement needs have resulted in more frequent delays in barge traffic, with the percentage of vessels delayed increasing from 35 percent in 2010 to 49 percent in 2017. Delays can cost up to $739 per hour for an average tow, or more than $44 million per year, the study said.
NGFA described the study as “a wake-up call” to the White House Office of Management and Budget and Congress to make funding for the Navigation and Ecosystem Sustainability Program (NESP) available this year, “and to ensure growing investments are continued and expedited in the tremendous natural resource that America’s inland waterways represent.”
Under NESP, seven locks (five on the Upper Mississippi River and two on the Illinois Waterway) would be expanded to 1,200 feet with dual chambers to accommodate larger barges, saving time and natural resources. However, the study noted: “Project engineering and design (PED) funding is urgently needed for NESP to start design on new locks, which are essential for the competitiveness of the heartland corridor.”
During the town hall event, NGFA’s Frederick emphasized the critical need for funding to perform preconstruction engineering and design work – a prerequisite before construction could begin on the NESP lock-and-dam projects and their difference-making additional capacity. Perdue urged the shipping community to utilize USDA’s new study, particularly the data demonstrating the return on investment, in stakeholders’ consistent calls on Congress to make inland waterways funding a priority.
In its conclusions, the study noted that in addition to being more environmentally friendly than other modes of transportation, waterways transportation has an economic advantage over rail and truck.
“Without adequate waterways capacity, congestion on roadways and the rail network will increase,” the study noted, adding that it would require 216 rail cars or 1,050 trucks to move the equivalent volume of a standard 15-barge tow.
“We appreciate the leadership of Secretary Perdue and USDA in once again spotlighting the importance of the U.S. inland waterways transportation system to U.S. agriculture’s global competitiveness and farmers’ bottom lines,” Gordon said in the NGFA-WCI press statement. “Very importantly, this study quantifies the significant cost of further delays in rebuilding America’s inland waterway infrastructure, and it’s not a pretty picture.”
Read the full 169-page report here.