Low Mississippi River Levels Expected to Amplify Weaker Basis at Harvest Time

⋅ BY MARY HIGHTOWER ⋅

In 2023, the Mississippi River at Memphis, Tennessee, receded to record low levels, affecting shipping. (U of A System Division of Agriculture file photo by Katrina Boyd).

If forecasts hold, the Mississippi River level at Memphis, Tennessee, will again fall below zero as harvest season takes hold, raising the specter of the last two seasons’ higher freight rates, piled up grain and weaker basis.

Now is the time for farmers to look closely at ways to protect themselves by managing basis risk, said Scott Stiles, Extension economics program associate for the University of Arkansas System Division of Agriculture.

The latest forecast from NOAA’s National Water Prediction Service shows the river gauge at Memphis falling to minus 3.2 feet by Aug. 27. In October 2023, the Mississippi fell to a record minus 11.5 feet, topping the record low set in October 2022 of minus 10.81 feet.

The Mississippi River is a vital artery for grain transportation. According to the U.S. Department of Agriculture’s Federal Grain Inspection Services, 57% of U.S. soybean exports and 47% of corn exports have been shipped out of New Orleans in the current marketing year.

The Mississippi River is also important for the movement of fertilizer. Industry sources estimate about 33% of urea and diammonium phosphate moves up the Mississippi River from the Gulf of Mexico.

Third Year Straight

“This is the third year in a row the river has gotten shallow at harvest time,” Stiles said, adding that “forecasts for river depth are subject to change, and the gauge at Memphis is still well above the record lows seen last fall; however, the outlook points to steady decline through much of August.”

“I’m not wanting to yell ‘fire’ in a crowded theater, but I do want to get this on people’s radar,” Stiles said Monday. “Given the combination of a rapidly falling river, the onset of harvest and increasing barge freight, basis has already started to soften over the past week.”

Basis is the difference between the cash price and the futures price for a commodity.

Basis Risk

Graph showing soybean basis at West Memphis, Arkansas, between August and October, 2023, during a time of record low river levels at Memphis, Tennessee. (U of A System Division of Agriculture image by Scott Stiles).

Stiles said that since Aug. 1, corn basis has fallen two to five cents and soybeans 10 to 15 cents at some Mississippi River terminals.

“The weaker basis is normal at harvest time but will be exaggerated if the river becomes difficult to navigate,” he said. “The risk associated with a collapse in basis can be severe, as we saw in 2023. By the end of September last year, the soybean basis at West Memphis fell to $1.20 under futures. With corn and soybean prices currently at the lowest levels since 2020, a repeat of historic weakness in basis would be devastating to growers.”

Stiles said there are two ways farmers can offset some of the effects.

“Basis risk can be managed by utilizing basis contracts that lock in the basis and protect against further declines,” he said. “Most elevators offer these.”

Stiles said another option is for growers to store grain until after the peak harvest window.

“Having enough grain storage might mean getting some more bin space rented from a neighbor or getting a grain bagging machine,” he said.

The wait was worth it last year.

“For example, basis improved dramatically by mid-October last year,” Stiles said. “We may see a repeat of that this year with harvest starting a little earlier. A lot depends on the ability of barge traffic to navigate normally this fall. Adding further pressure, the U.S. could potentially see record corn and soybean production this year according to USDA’s projections.”

NOAA hinted at the potential for low river levels in its spring outlook, noting historically low snow coverage in the upper Great Plains and western U.S.

Where’d the Water Go?

The lower Mississippi River is fed by two big sources, the upper Mississippi River and the Ohio River, which converge at Cairo, Illinois. Kai Roth, senior hydrologist at NOAA’s Lower Mississippi River Forecast Center in Slidell, Louisiana, said the key to the river’s current levels is the Ohio River because the Ohio River can carry a larger volume of water than the Upper Mississippi River can.

“Right now, the Ohio is very low. It’s very dry and there’s not a whole lot of flow coming out of the Ohio,” he said. “The only saving grace we have right now is actually those floods we had on the upper Mississippi earlier in the year. It’s causing the lower Mississippi River to be a little bit higher than it could be.

“We’re not near the levels like we saw at this time in ‘22 and ’23 — yet,” Roth said, adding that through October, weather in the Mississippi and Ohio basins tend to be dry.

“This time of year, we do not get the spring fronts coming through that produce a lot of rain on the basins,” he said. “I’m looking further out, and I’m really not seeing much in the way of relief — at least in the near term.”

The river levels at Cairo are the bellwether for the lower basin, Roth said. The rises and falls at Cairo translate all the way down to the lower part of the river.

“Cairo is our main modeling point. So, when Cairo drops a little bit more than we expected, everything downstream follows suit,” he said.

Find the gauges online:


Mary Hightower is chief communications officer for the University of Arkansas System Division of Agriculture and may be reached at mhightower@uada.edu.

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