Floods to disrupt barges for weeks, rail months

CHICAGO (Reuters) - Flooding in the U.S. Midwest is taking a toll on freight carriers, costing barge lines about $1 million per day and likely disrupting railroads for months to come, said traders and industry executives on Monday.

The worst flooding in the Midwest in 15 years has closed 300 miles of the Mississippi River to commercial traffic. Several bridges and unknown miles of railroad track have been damaged or washed away.

Barge rates already have risen 15 percent and the flooding could have an even bigger impact on railroads.

"It may turn out that the biggest disruptions come from rail rather than the barge side," said Diana Klemme, vice president of Grain Services Corp, an agricultural brokerage and risk management firm. "We don't know what conditions the bridges and tracks are in. You just don't replace that overnight."

Barge traffic is expected to resume in two to three weeks as water levels drop and the U.S. Army Corps of Engineers reinstalls electrical equipment that had been moved.

The Mississippi River is the main channel for grain flowing from Midwest farms to the export terminals at the Gulf of Mexico. The river transported 68 million tonnes of farm goods in 2006, according to the U.S. Army Corps of Engineers.

The Mississippi also moved 48 million tonnes of petroleum products and 5 million tonnes of coal.

Dry weather has been forecast, which should allow water levels to recede and barge traffic to resume faster than in 1993, when constant rain and flooding shut the Mississippi River for about two months.

"In 1993, there were months of delays," said Larry Daily, president of Alter Barge Line Inc in Bettendorf, Iowa. "This time, it's going to be shut down two weeks if we don't get any more rain, longer if it rains again."

Even a delay of a few weeks, comes with a hefty price tag.

Alter has 100 barges trapped on the upper Mississippi River, which is costing the company $25,000 to $30,000 a day.

"We figure that's $750,000 to $1 million per day for the industry," Daily said.

Barge freight rates have climbed 15 percent since the flooding started. And they could go even higher once the river re-opens due to pent-up demand and continued problems with rail lines, grain traders said.

"There will be certain end-user markets that will have to pay more," Klemme said.

RAIL LINES UNDER WATER

Major rail lines have been rerouting shipments. The flooding prompted Union Pacific Corp, the No. 1 U.S. railroad, to enact force majeure provisions of contracts which allow shippers to extend deadlines for cargo delivery due to events beyond their control such as natural disasters.

Several major rail lines are out of service at No. 2 U.S. railroad Burlington Northern Santa Fe Corp, spokesman Steve Forsberg said.

The railroad's east-west line across southern Iowa and north-south through St. Louis are out of service. About 50 to 60 trains a day are affected.

Forsberg said the railroad did not have an estimate yet for how long the lines will be out of service because in places the rivers have yet to crest.

"Their equipment is completely under water," said a grain trader at an elevator that ships corn and soybeans by rail. "They have no idea if it will work -- or even if it's still there. Some of these bridges may not be structurally sound anymore. It's going to be a mess for months."

The Mississippi River at St. Louis is forecast to crest on the evening of June 21 at 39 feet, making it the 10th or 11th worst flood at that location, said Army Corps spokesman Alan Dooley. The worst flood occurred in 1993 when the river crested at nearly 50 feet.

"We are re-routing as much traffic as we can," Forsberg said. "But there are areas here we simply can't get through to customers on those lines."

(Additional reporting by Nick Carey; Editing by David Gregorio)