The Importance Of Efficient Funding Of River Infrastructure
Among the graphics shown by Warren Preston, deputy chief economist of USDA, at a recent conference at the University of Missouri-St. Louis focusing on agricultural market and supply chains, was a bar graph from the recently published USDA report on the importance of waterways to agriculture. The bar graph breaks down four contributing factors to the landed cost of a ton of soybeans moving from Davenport, Iowa; Sioux Falls, S.D.; or Mato Grosso, Brazil, to Shanghai, China.
The production cost of the American ton of soybeans was slightly higher, but the transportation component is the eye-opener. In Brazil transportation costs (mostly trucking) capture 27.15 percent of the total cost for that ton of soybeans, versus 24.40 percent for Sioux Falls and 21.1 percent for Davenport. that difference is due to the availability of cheaper, cleaner barge traffic in the U.S. While Brazil is making some waterways improvements, it’s not going to close that gap soon—unless we fail to maintain what we’ve got.
The competitiveness of U.S. corn and soybeans depends on several things, including currency fluctuations, but clearly the transportation advantage is vital. Farmers are keenly aware of that, which is why that same graphic was included in an August 5 letter from the American Soybean Association (ASA) to members of the Transportation and Infrastructure subcommittee and Water Resources and Environment subcommittee of the House of Representatives.
Farmers and ag groups have lined up behind the barge industry’s push for a change in the cost-share for waterway infrastructure projects. Currently, except for special exceptions, the Inland Waterways Trust Fund (IWTF) provides 50 percent of the cost inland waterways infrastructure, with the general treasury providing the other 50 percent.
To expedite final construction of Olmsted Locks and Dam, that ratio was changed to 85-15 for that project only. That change sped up construction and lowered the cost estimated at completion by $258 million. Those savings freed up a large chunk of money for other needed lock and dam projects.
In its August 5, letter, the ASA noted, “Significant progress has been made compared to the stagnation, dysfunction and lack of progress that existed for many years prior. The policy changes made in the 2014 WRDA, the increase in the barge fuel fee, and the subsequent annual appropriations levels have helped move up the timeframe for completion of authorized IWTF projects.”
The letter notes that the combined cost of already-authorized IWTF projects is less than $9 billion—“relatively modest costs compared to other infrastructure and other government spending.” If they are constrained to a 50-50 cost share, many of these projects will not even begin construction in the next 20 years. shifting the cost share to 75-25 would enable them all to be completed within a 10- to 20-year time window.
Farmers can’t control currency fluctuations or trade policy, but they recognize that keeping the transportation advantage is vital to their continued success in the global marketplace.
