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The Mississippi River is facing low water levels. It could make inflation worse

AYESHA RASCOE, HOST:

If you think inflation is driving the cost of goods up, hold on to your debit cards because it could get worse thanks to the Mississippi River. The river acts as a highway for critical goods, moving roughly 500 million tons' worth of products. But low rainfall means low water levels and a slower movement of shipments. We're joined now by Alan Barrett, director of consulting and research at Higby Barrett.

Welcome to the show.

ALAN BARRETT: It's nice to be here.

RASCOE: OK. So how bad is it right now in this river?

BARRETT: Well, it's gotten to a level in Memphis, Tenn., that's below the level in 1988, which was the last time we got to this level. What it does is it increases the price of freight rates. There's fixed costs on a barge. So when you lower the number of bushels you can put on a barge, your per bushel barge cost increases. And so you have the same cost, but you have that many less bushels. In addition, you have how many barges you can put in a tow configuration. Normally, it's around 40. Right now it's down to 25 because you have less room to make the turns in the river. So that increases costs.

RASCOE: And that being the case, then, would trucks or rail be an alternative to barges? Because it seemed like it would take a lot more trucks and maybe a lot more rail.

BARRETT: Right. Rail could do it if it had enough time. But nobody in the rail industry is going to build a long-term solution to a short-term problem. On the truck side, it'd just be physically impossible to move that many trucks.

RASCOE: Eventually, that's going to hit the consumer.

BARRETT: It'll take some time before they feel the pinch. And in some areas, they might actually get a price break because in the case of soybeans, for example, if they aren't able to export the soybeans, they're just going to have to store the beans. And it's going to cause less demand, less consumption, and it's going to lower the price. But you're right. In the long haul, somebody has to pay all that transportation costs, and it'll eventually work its way up through to the end user. You have to remember most of the goods that move on the waterway system are primary goods. They're used as feedstocks for industries. So it does take a little while before the cost factors all the way up to the end consumer.

RASCOE: So these are the goods that make the other goods, right?

BARRETT: Yeah, that's right.

RASCOE: Like, so that's why it takes - so it takes a little while to get there.

BARRETT: Well, like, for example, on the Ohio River, where we have extremely low water as well - and that's causing a lot of the low water on the lower Mississippi - that's where the coal industry is, for the most part, especially for coal utilities. So if that cost increases, it won't dramatically increase costs immediately. But at some point, that extra cost for the feedstock will be translated into energy costs that everybody has to pay.

RASCOE: You mentioned soybeans. The U.S. is, like, the huge supplier. There's already a war in Ukraine hitting the global grain supply. Could this make things even worse?

BARRETT: Well, it does make the world balance sheets a little tighter if you're trying to buy grain. I would say about 60% of the exports out of the U.S. go out through the center Gulf, from Ohio all the way to Iowa and all the way up to Wisconsin and Minnesota. And then it goes all the way down to New Orleans. And the worst part about the low water is it's happening right as harvest begins. This is the time of year where we're providing the crops to the world.

RASCOE: Alan Barrett, director of consulting and research at Higby Barrett, thanks so much for speaking with us today.

BARRETT: Thank you.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

Ayesha Rascoe is a White House correspondent for NPR. She is currently covering her third presidential administration. Rascoe's White House coverage has included a number of high profile foreign trips, including President Trump's 2019 summit with North Korean leader Kim Jong Un in Hanoi, Vietnam, and President Obama's final NATO summit in Warsaw, Poland in 2016. As a part of the White House team, she's also a regular on the NPR Politics Podcast.