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Agricultural 

Marketing 

Service

December 2016

What is the Issue?

The Upper Mississippi River-Illinois River (UMR-IR) is a primary corridor for U.S. grain and oilseeds to Gulf of Mexico 

export ports. The U.S. Army Corps of Engineers (USACE or Corps) maintains a 9-foot-deep navigation channel for barge 

transportation on a total of 36 locks and dams, including 28 on the UMR and 8 on the IR. Built in the 1930s, most of 

these locks have surpassed their designed lifespan. However, maintenance and rehabilitative efforts by the Corps 

have extended the life cycle of many of the projects. Nevertheless, the U.S. grain and oilseed industry has frequently 

raised concerns about the navigational efficiency of these aging and constrained waterways. Congress authorized 

the Navigation and Ecosystem Sustainability Program (NESP) in 2007 to address the capacity constraints on the most 

congested segments of the UMR-IR. However, the implementation of NESP has been delayed due to a lack of preconstruction and construction appropriations from Congress. 

This study examines the potential economic impacts of UWR-IR navigability on U.S. corn and soybean stakeholders 

and certain sectors of the transportation industry if long-duration disruptions were to occur because of significant lock 

closures for major unanticipated repairs. Specifically, the study estimates the net changes in economic surplus of the 

corn and soybean sectors, along with shifts in transport mode for grain flows before and after assumed disruptions of 

the lock system in the next decade. Increased transportation costs caused by the disruptions resulted in changes in the 

economic surplus of the corn and soybean sectors due to a loss in profits by producers and increased purchase costs for 

consumers.

This is a summary of Staff Report #AE16-08, “Economic Impacts Analysis of Inland Waterways Disruption on 

the Transport of Corn and Soybeans” by T.E. Yu, B.C. English, and R.J. Menard, Department of Agricultural 

and Resource Economics, University of Tennessee. This paper was developed with funding from USDA’s 

Agricultural Marketing Service (AMS) through cooperative agreement number 15-TMXXX-TN-0004. The 

opinions and conclusions expressed are the authors and do not necessarily represent the views of the 

USDA or AMS. The full report is available at https://ag.tennessee.edu/arec/Documents/publications/

EconomicImpactsInlandWaterwaysDisruptions092016.pdf.

Economic Impacts Analysis of Inland Waterways 

Disruption on the Transport of Corn and Soybeans 

(Summary) Nick Marathon
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How Was the Study Conducted?

The hypothetical disruptions used for the study are lock closures at Mississippi River Lock 25 and Illinois River La Grange 

Lock, since these two locks are the only two included in both modernization and small-scale navigation improvement 

under NESP (see figure 1). These locks were also selected because they have a smaller capacity chamber of only 600 feet; 

and because they are older than the remaining two southernmost locks on the Mississippi River in the St. Louis area. 

For the analysis, two lock closure time horizons are considered for each of the locks. The study independently analyzes 

the Lock 25 and La Grange closures. The closure times assumed in the study were: (1) the fall quarter (September 

through November in 2024/25), and (2) the entire marketing year in 2024/25 (September through August). In addition, 

three potential changes in rail rates are incorporated in the lock disruptions scenarios: (1) no change, (2) an increase of 5 

percent, and (3) an increase of 15 percent. The report looked at how traffic is diverted by a lock closure and the revenue 

shifts between the modes as a result of reduced navigation. Overall economic impacts are measured by combining the 

transportation sector impacts with the impacts on the corn and soybean sectors.

Figure 1. Location of Two Locks in Study
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An econometric model of the international corn and soybean sectors was applied to USDA’s Agricultural Baseline 

Projections1 for corn and soybean supply and demand in 2024/25 and was initially used to determine corn and soybean 

flows. The study used the econometric model to determine producer and consumer surplus of the U.S. corn and soybean 

sectors before lock disruptions on the UMR-IR by inputting the baseline values into a spatial model for the disruptions 

at selected locks and dams on the UMR-IR. The model also estimates the flows and usage of transportation across 

mode, after the lock disruptions. Aggregate economic impacts of the before and after disruptions were then obtained 

from an input-output model, IMPLAN (IMpact analysis for PLANning Version 3.0). The estimated prices, producer and 

consumer surplus, and economic metrics (employment, labor income, total value added, and total industry output) were 

contrasted to isolate the impacts of lock disruptions on the UMR-IR. 

What Did the Study Find?

The key findings of the economic impacts from lock disruptions are summarized as follows:

• The closure of Lock 25 during harvest season from September to November—with rail rates remaining 

unchanged—resulted in corn and soybean prices in Illinois, Iowa, and Minnesota (adjacent to the UMR) 

decreasing up to $4.89/ metric ton (mt) ($0.13/bushel (bu)) and $8.25/mt ($0.22/bu), respectively. 

• When the horizon of the lock closure extends to 1 year, corn prices in the regions next to the river decrease 

$6.61/mt ($0.17/bu) and the soybean prices decline up to $10.81/mt ($0.29/bu) if rail rates remain steady. 

• The producer prices of corn and soybeans drop further when rail rates increase and Lock 25 is inaccessible for a 

year, with prices reducing up to $8.15/mt ($0.21/bu) for corn and $16.33/mt ($0.44/bu) for soybeans. 

• The reduction in producer prices varies across region subject to the availability of alternative routes and modes 

to markets. 

• The analysis shows a similar pattern when La Grange Lock is closed. A reduction of 5 million tons, or a 9-percent 

decrease, of corn and soybean exports at Gulf ports occurs with a closure of Lock 25 for the fall quarter. 

• Extending the closing horizon through the entire marketing year results in a reduction of exports of nearly 8 

million tons, or 13 percent. 

• Disruptions at La Grange Lock lower corn and soybean exports at Gulf ports by 5 percent.

• Pacific Northwest ports are the major alternative routes to the international markets when Lock 25 or La Grange 

is closed if rail rates do not increase. Exports from Atlantic Coast emerge as an important substitute port area if 

rail rates elevate after lock closure.

• When one or the other of the two locks is not accessible, it results in a considerable reduction in the number of 

ton-miles of corn and soybeans hauled by barge. Rail ton-miles for corn and soybeans, unsurprisingly, escalate. 

However, increases in rail rates divert some volume to truck and barge transportation.

• Aggregate economic activity related to grain barge transportation is reduced by $933 million (40-percent 

decrease) if Lock 25 is closed from September to November. The reduction reaches nearly $2 billion if the lock is 

unavailable for the entire marketing year.

• If rail rates increase due to the lock closure, economic activity associated with rail transportation increases 

from corn and soybean shipments diverted from barge to rail. The positive economic impacts for the rail sector 

surpass the loss of economic activity of barge and truck transportation when rail rates increase.

1 The agricultural baseline database provides long run, 10-year projections from USDA’s annual long-term projections report, which 

is published in February each year. http://www.ers.usda.gov/data-products/agricultural-baseline-database.aspx.
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• Economic surplus of the corn and soybean sector declines between $171 million for a fall closure and $747 

million annually when Lock 25 is inaccessible. Closing La Grange Lock also leads to a loss of $549 million per year 

in economic surplus of the corn and soybean sectors.

• Corn and soybean producers in the Corn Belt region suffer the most loss in economic surplus, followed by the 

Lake State region and Northern Plains region.

• The estimated decline in economic surplus in the corn and soybean sectors due to a closure of Lock 25 could 

cause a decrease of more than 7,000 jobs, a $1.3 billion loss of labor income, and a reduction of about $2.4 

billion of economic activity (total industry output) annually. 

• Similarly, closing La Grange Lock for the entire marketing year could result in a reduction of 5,500 jobs, a loss of 

$900 million in labor income, and a reduction of $1.8 billion of economic activity annually.

• Closing Lock 25 or La Grange Lock creates net negative impacts on jobs, labor income, total value added, and 

total industry output in the U.S. economy.

Preferred citation:

Yu, T.E, B.C. English and R.J. Menard. Economic Impacts Analysis of Inland Waterways Disruption on the Transport of Corn 

and Soybeans. Staff Report #AE16-08. Department of Agricultural and Resource Economics, University of Tennessee. 

September 2016.

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December 2016

Photo credit: USDA