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Midwest Drought Having Long-Lasting Effect on Mississippi

Just a couple hundred miles from the headwaters of the Mississippi River the dam in downtown Minneapolis is looking painfully dry. The warm weather of this fall has left the river more exposed than usual this time of year but the lack of traffic in the shallow waters hasn't been alarming for those of us who regularly cross the bridge.

In St. Louis, 500 miles farther south, the low water is far more alarming and has businesses around the region wondering if the drought of 2012 will be impacting operations long after most crops have been pulled from the ground. The Mississippi is the path to the Gulf of Mexico and both import and export markets that keep the farmland of the Midwest thriving.

Running the river dry
Flow is low on the Mississippi, but the problem is being exacerbated by the U.S. Army Corps of Engineers decision to slow the flow of water from the Missouri River into the Mississippi over the past few weeks. Three weeks ago there were 37,000 cubic feet per second flowing from the Missouri into the Mississippi, but by Dec. 11 the Corps is planning to reduce that flow to 12,000 cubic feet per second. This could leave boulders not seen in decades exposed near St. Louis where barges had expected another month or two of solid work.  

The American Waterways Operators has said that $2.3 billion of agricultural products, $1.8 billion in chemicals, and $1.3 billion of petroleum products would normally travel up and down the Mississippi over the next two months. But a reduced flow could devastate this commerce. Companies like Agrium (NYSE: AGU  ) , PotashCorp (NYSE: POT  ) , and Mosaic (NYSE: MOS  ) , who rely on the trade of agriculture goods and fertilizers, are already worried about the impact.

A balancing act
Mother Nature hasn't made the decisions for the Army Corps of Engineers easy this year. The Corps balances eight river uses when determining how much flow to allow into the Mississippi, including navigation. But if it runs the Missouri dry to allow for trade to take place it would impact the amount of water available for irrigation during next year's planting season.

Snowfall usually fills the Mississippi's tributaries leading up to where the Missouri and Mississippi meet but snowfall was almost nonexistent last year and this year doesn't look any better. The Corps has to balance the needs of today with the needs of next year and companies may have to deal with a closed Mississippi for a period of time this year. This could cause some havoc, but we're not talking about the end of the world here.

Alternate routes
If transporting goods via waterways weren't the least expensive path it wouldn't be the predominant transportation for these goods coming out of the Midwest. But it also doesn't mean there aren't alternatives, even if they're more expensive.

Rail lines from Union Pacific (NYSE: UNP  ) , Norfolk Southern (NYSE: NSC  ) , BNSF, and CSX (NYSE: CSX  ) all have lines that can pick up the slack that a low Mississippi may leave. Then there's standard trucking transportation as well. These methods may not be as convenient and they may not have been the plan, but if grain needs to be delivered and fertilizer needs to get to farmers there are ways it will happen.

Business won't grind to a halt if the Mississippi continues to be extremely low, it just may make business more expensive.

Foolish bottom line
If the companies you own rely on the Mississippi as a way to transport material the low water levels on the Mississippi may have an impact on costs for the fourth quarter and into 2013. On the flip side, rail lines may see a boost in traffic as companies look for alternatives.

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