Low levels of the Mississippi River significantly impact Arkansas agriculture

The Mississippi River, a crucial conduit for transporting goods in and out of Arkansas, has drawn significant attention due to its record low levels for the second consecutive year. These low water levels have had a notable impact on the state’s agricultural sector, prompting experts and farmers to adapt and find ways to mitigate the challenges.

Navigating Agricultural Challenges

Ryan Loy, an Assistant Professor of Agriculture Economics and Extension Economist at the University of Arkansas, has been closely monitoring the situation. Loy notes that although there was a brief improvement in water levels coinciding with the harvest season, thanks to increased rainfall, the river’s level remains critically low. Currently, the water level is at -9, which is four feet below what is considered low.

This situation has ongoing repercussions for Arkansas’s agriculture, particularly for producers marketing their grain. They are facing what Loy refers to as “basis risk,” where the cash price for their products is lower than the futures price due to the negative impact of the river’s low level. This disparity is forcing producers to hold onto their grain longer, anticipating better cash prices in the future. This strategic adjustment is a direct response to simple supply-and-demand mechanics.

However, the reliance on the river for transportation has led to a shift in logistics. As Loy points out, many companies are considering alternative methods like rail or truck transport. This shift, while necessary, is not ideal due to higher carbon footprints and lower efficiency compared to barge transportation.

The uncertainty surrounding the river’s levels remains a significant concern. While recent rains might bring the river back to minimal operational levels, the long-term outlook remains unclear. Loy expresses concern about the recurring nature of the issue, pondering the situation farmers might face next year.

In response to these challenges, Loy and other experts are exploring strategies to assist Arkansas farmers in managing this risk more effectively. One approach is to focus on forward contracting and hedging in the futures market. These financial tools can provide some stability and predictability for farmers amidst the fluctuating conditions.

This situation on the Mississippi River underscores the interdependency between natural waterways and agricultural economies. As experts and farmers in Arkansas navigate these uncertain waters, their adaptability and strategic planning are crucial for minimizing the impact of these environmental challenges on their livelihoods and the broader agricultural sector.