Red Wing Grain deals with low water levels and record barging rates
Red Wing Grain, which typically loads 400-600 barges in a year and handles about 25 million to 30 million bushels annually through its facility, is down 10% to 20% this fall, said Jim Larson, general manager
RED WING, Minn. — Low water levels and rising barge costs have had an impact on Red Wing Grain, one of five Mississippi River ports in Minnesota providing access to river ports to the south and the Gulf of Mexico via New Orleans
Jim Larson, general manager of Red Wing Grain, spent 12 years working for Cargill before coming to Red Wing Grain about 17 years ago. Red Wing Grain LLC is 50% owned by Cargill and 50% owned by Ag Partners in Goodhue, Minnesota.
“Cargill buys it right off our dock and takes it down south, and it goes to their export facility, and then they load it, and it goes out in big vessels,” said Larson on the morning of Oct. 28, as a barge was being loaded with soybeans behind him.
The port in Red Wing is a big part of the community and there is a public trail that runs directly through the facility.
“At one time they were the wheat capital of the world in 1874,” said Larson. “Now we have corn and soybeans, and they can see that agriculture is pretty important to this community.”
For the river-loading grain facility on the Mississippi River, Larson said the season starts around April and ends around Thanksgiving when the river starts to freeze.
Red Wing Grain buys corn and soybeans from farmers within about a 75-mile radius, and Larson said around 40% of the grain comes from Wisconsin while 60% is from Minnesota. The grain gets offloaded onto barges and it goes to the Gulf of Mexico for export.
“It will go to Korea, Japan, China, could go to South America, or could go to Africa,” said Larson.
From Red Wing, Larson said it can take up to three weeks to reach the Gulf where it’s unloaded.
According to Daniel Munch, economist with the American Farm Bureau Federation, railway and trucking have encountered an array of service issues often linked to labor and equipment capacity constraints due to the COVID-19 pandemic. But barges have remained “largely unaffected” until this year, said Munch, who added that barges can provide transportation at a “tenth of the cost of rail and a sixteenth of the cost of trucking when available.”
“The new limitations on this cost-effective and efficient transportation mode because of dangerously low water levels in the Mississippi River is especially problematic during the height of harvest season, when farmers are looking to move grain to storage facilities,” said Munch. “Without relief, many producers will scramble to find places to store their goods or face exorbitant wait times and costs to acquire transportation.”
Larson said a few things happened to make this barge season an “interesting” one.
“It started out very tight, and there weren't a lot of barges available,” he said. “Freight was two to three to four times the normal cost, which in turn affects the farmer, so he had to get less for his grain even though grain prices are really high right now.”
Larson said they were fortunate to have ample space at the Red Wing port to continue accepting grain from farmers even when they couldn’t get barges. One site at Red Wing Grain holds about 2.2 million bushels and another site about six miles away holds about 4 million bushels.
The Red Wing port built up its storage over the last decade, said Larson. In a typical year they would have all the soybeans loaded out by fall, before the corn harvest ends
“We’re sitting on a bunch of them still, and it's in corn space,” said Larson of stored soybeans. “Ideally, we'd like to move all those beans, and ideally, we'd like to move them on barges, but I don't know if we'll be able to get the barges.”
Larson said transportation costs of barging are still cheaper than truck or rail because barges can carry much larger loads.
“You can load 50 to 60,000 bushels on a barge versus 1,000 bushels on a semi, or 3 to 4,000 bushels on a railcar,” he said.
Red Wing Grain typically loads 400-600 barges in a year, said Larson, and handles about 25 million to 30 million bushels annually through its facility.
“This fall, we're probably down 10 to 20%,” he said.
He said that’s likely due to barge rates and availability, which could change before the season ends.
“We have that grain on hand still, and it’s just waiting to see if we can load that out,” he said.
Low water levels
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For all summer and into fall, water levels on the Mississippi have been low. But Larson said because of the lock and dam system in the upper Mississippi, they aren’t getting too low for business at the port.
“We definitely need rain to replenish not only the soil for the crops of farmers, but for the river,” said Larson. “And it'd be great to get some rain before we get a hard frost, or we get a big snowfall for next spring, because we're definitely at a deficit right now.”
The Red Wing Grain site is more used to flooding than it is low water levels, said Larson.
“The river goes up and the river goes down, but for the most part, it is concerning a little bit because the last three years have been dry just for our farmers in general,” said Larson. “We've had decent crops around here, and are very fortunate that the hybrids are bred genetically to withstand dry conditions, but sooner or later, we're going to need some more moisture in the soil for crops.”
That’s the more important piece to the port in Red Wing, said Larson.
“That’s No. 1 — our business depends on the crops,” he said.