This month, low water levels in the Mississippi River caused a break in navigation, leaving more than 2,300 vessels aground for a time. Although the channel has now been restored, there are still 4,000 vessels waiting to pass. According to the Memphis office of the US National Weather Service, the Mississippi River is expected to reach record low water levels on the 17th or 18th, which will directly affect the operation of the channel and result in barges being unable to load: according to the USDA's weekly shipping report, the average tonnage of southbound barges has recently been reduced by more than 20%.

The Mississippi River is an important waterway in the United States. According to the US Bureau of Transportation Statistics, approximately 5% of US cargo is transported by river barge, depending on the weight of the cargo and the distance travelled. This is particularly true for crop shipments, with the Mississippi River basin transporting 92% of all US agricultural exports. Approximately three-quarters of the world's feed grain and soybean exports, as well as some US domestically produced livestock, are transported via the Mississippi River.

However, with the Mississippi River at its lowest level in a decade due to drought conditions in the Midwest this year, disruptions to shipping routes have severely impacted the movement of US agricultural products and fertilizers and pushed up barge freight rates for agricultural shipments, putting upward pressure on food prices.

The USDA released a report in early October showing that barge freight rates from the Port of St. Lewis, Missouri to the Port of New Orleans had reached $90.45 per ton, the highest record since 2003, and had tripled in 1 year. The crop shipments (soybeans, wheat and corn) on the Mississippi River in the last week of September fell to about 170,000 tonnes, down 50% from the average of the last 3 years.

According to current forecasts, low water conditions on the Mississippi River will continue into early November. Given the conflict between Russia and Ukraine, the impact of rising US domestic freight rates is likely to have an impact on the global grain market this year as many agricultural consumer countries rely on US grain exports.

For example, one Japanese trading company said that barge freight costs have increased from around 10 per cent to almost 30 per cent of the total cost required to purchase grain, and that the price paid by Japan for grain imports includes futures prices on the Chicago Mercantile Exchange in the US, domestic freight costs in the US and freight costs to Japan.

As mentioned earlier, grain prices are also rising, and in its October bulletin on grain supply and demand, the Food and Agriculture Organization again revised its grain production forecast for 2022 downwards to 2.768 billion tonnes, a 1.7% year-on-year decline from 2021.

Specifically, world coarse grains production is forecast at 1,468 million tonnes in 2022, down 2.8% year-on-year, mainly due to poor crop conditions in the US. world cereal consumption is forecast at 2,784 million tonnes in 2022/23, down 0.5% from 2021/22, mainly due to lower feed use.

The latest forecast for world grain trade in 2022/23 is down 2.4% on the previous year, with trade in all major grains expected to contract, mainly as a result of a combination of the Russia-Ukraine conflict, the strong dollar and a range of other factors.