Soybean Farmers Strategically Invest in Key Supply Chain Link
July 17, 2019 Ohio Soybean Association
As Ohio soybean farmers continue to tackle this year’s unprecedented challenges in growing and marketing a crop, it remains essential to maintain and improve the transportation system used to get their products to markets around the world. With that in mind, the United Soybean Board (USB) recently announced a $2 million allocation to help offset the planning, design, and research costs of deepening the lower Mississippi River from 45 ft. to 50 ft.
According to the Soy Transportation Coalition (STC), dredging this part of the river would allow for larger and/or more heavily loaded ships and decrease transportation costs of soybeans from Mississippi Gulf export terminals by 13 cents. This could mean an additional $34 million for Ohio soybean farmers annually as a result of improved basis levels.
The 256-mile stretch of the Mississippi River from Baton Rouge, Louisiana, to the Gulf of Mexico accounts for 60% of U.S. soybean exports, along with 59% of corn exports – by far the leading export region for both commodities.
“The Ohio Soybean Council and our national group, USB, are always working to find ways to improve the bottom line for soybean farmers,” said Steve Reinhard, OSC chairman, USB board member and Crawford County soybean farmer. “By strategically cutting transportation costs we can increase the value farmers receive for their crops, as well as make us more efficient in getting those products to our customers.”
The overall project is estimated to cost $245 million and would occur in three phases. Two of the phases will be cost-shared between the federal government (75%) and non-federal sources (25%). The State of Louisiana has been designated as the obligated non-federal entity.
USB is allocating the $2 million to help offset planning, design, and research costs, combined with approximately $21 million in federal funding and $7.5 million in funding from the State of Louisiana to initiate the first year’s work of the project (i.e. commencing the deepening of the river from Venice, Louisiana, to the Gulf of Mexico). While the State of Louisiana has provided its initial $7.5 million allocation of matching funds, the federal government has yet to approve its approximately $21 million in initial funding.
On the policy side, the Ohio Soybean Association (OSA) and its national affiliate the American Soybean Association (ASA) is advocating for the federal government to approve its matching funds so this project can move forward.
“This is a priority for OSA and our farmer leaders both here in the state and nationally,” said Scott Metzger, OSA president, ASA board member and soybean farmer from Ross County. “Critical infrastructure improvements are needed in many different sectors and this is one that would provide a direct benefit to farmers.”
Basis is the difference between the local price a farmer receives and the market value established by the Chicago Board of Trade. It is well established that farmers located in closer proximity to the nation’s inland waterways and barge transportation enjoy a positive or less negative basis vs. soybeans grown in areas further removed. As a rule, the less-costly and more efficient the supply chain, the higher value a farmer will receive for the bushels of soybeans produced.
“If I had to select a single infrastructure enhancement that would provide the most benefit to the greatest number of U.S. soybean farmers, deepening the lower Mississippi River would be my choice,” explains Mike Steenhoek, executive director of the Soy Transportation Coalition. “Soybean farmers are demonstrating a willingness to collaborate with federal and state government on an innovative public private partnership that will enhance the competitiveness of both agriculture and a host of other industries. The Soy Transportation Coalition, the American Soybean Association, state soybean associations, and other stakeholder groups look forward to working together to ensure this critical project becomes a reality.”