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The Next Short Term Worry for Food Prices? River Avulsion

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It involves the Mississippi River, and if it happens next week, there will be dangerous geopolitical, economic and financial implications for the world. Here's why.

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There are an awful lot of big problems to worry about these days. The economy, the debt limit, the deficit, Social Security, Medicare, the Middle East -- the list is almost endless. But, for the next couple of weeks you can forget about those problems and focus on a new one that hopefully goes away in a couple of weeks. The new problem is something called "river avulsion," and if it happens next week it is going to be a big problem for the world with geopolitical, economic and financial implications that are likely to be extremely confusing and dangerous in many respects.

As you might have guessed, it involves the Mississippi River, and of course, Louisiana. River avulsion is the process of a river in a delta switching its main channel to a new one. All rivers with a delta undergo this process with varying times between the switches. The Mississippi River's switching time is believed to be 1,000-1,500 years, and it is overdue. A river without levees in a delta actually starts to build its own because of the way sediment drops out. Eventually the river bed gets high enough above the surrounding land and a steeper, shorter route to the ocean breaks though, and it quickly becomes the new main channel.

Enter humans. Once shovels were invented, it didn't take long to figure out that building levees, even little ones, might be a good way to avoid putting your foot down in water after you got out of bed in the morning, thus making life more pleasant. Not much changed for a few thousand years until the steam engine was invented. Steamboats were quickly invented and suddenly, the Mississippi became a two-lane highway with a few problems, namely submerged trees called snags that could sink a steamboat. Clearing snags was important. One particular bad turn of the river was near the southwest corner of the state of Mississippi and Louisiana. Believe it or not, in the 1840s a loop of the river was shorted out by cutting across it, but more importantly the Red River (best known as the border of Texas and Oklahoma) originally joining the Mississippi at that point was diverted into the Atchafalaya River at the same time.

The Atchafalaya River Basin is important for several reasons. First, it is the largest swamp in the US, home to countless water fowl, and all sorts of nasty reptiles who only ask to be left alone, but are more than willing to bite first, ask questions later. Secondly, it just happens to be the path of the Mississippi River a few thousand years ago. All delta sediments compact over time if it is not refreshed by new silt, so now it is the easy downhill route to the Gulf of Mexico.

The dredging events back in the 1840s started to make it easier for the Mississippi to flow into the Atchafalaya. Here and here are links to the history.

The bottom line is that by the 1950s it was apparent that the Mississippi wanted to flow through the Atchafalaya and action had to be taken. Congress charged the US Army Corps of Engineers to stop the Mississippi from switching its main channel. They accomplished this by building the Old River Control Structure (ORCS). You would think that this could be accomplished by building a huge levee and walking away, but there were complicating issues. At that point the Atchafalaya was already receiving significant water flow, so a decision was made to let 30% of the Mississippi water flow down the Atchafalaya and 70% down the main channel. So now we have manmade gates and channels controlling flow instead of one humongous levee. The risk with this design is the force of the water scours out the dirt (there are no rocks there) and undermines the gate. The following diagram is from the first link and describes what happened in 1973.



The ORCS actually has a small hydroelectric plant running in one of the three channels. Stop and think about that for a second. That means that the Mississippi normally is high enough above the channels to the Atchafalaya to use the height differential to generate electricity. The differential is normally about 15 feet. If one of these gates collapsed the flow the Mississippi would take immediate advantage and a raging torrent would immediately start to erode a wider opening. Remember it's just dirt.

So if the Old River Control Structure is the biggest risk, won't opening the spillways relieve the pressure? Not really, because the ORCS is upstream from both spillways! The full force of the Mississippi runs directly at the ORCS which was significantly damaged in the 1973 flood, the last time the Morganza spillway was opened.

Let's assume the worst and the ORCS is completely compromised and the Mississippi starts to create a new main channel down the Atchafalaya. Since the Morganza spillway is already flooding the Atchafalaya Floodway, most of the people living there have already left. The only real question is whether or not the levees at Morgan City are high enough to withstand the addition flow above the 600,000 cubic feet per second that the Morganza spillway can deliver. I don't have an answer for that question. Nevertheless, the people problem here shouldn't be that horrendous.

Moving onto horrendous, the real problem will be when the Mississippi flow drops back to normal levels. The big question will be: Is there enough water to keep all of the shipping ports from New Orleans to Baton Rouge open? The risk here is enormous. It's estimated that 60% of the grain exports from the US travel out the Mississippi. If the Mississippi is closed, the effect on food prices will be staggering in both directions. Outside of North America, the price of food will skyrocket, and we have already seen food riots, not to mention good old-fashioned political riots. In North America some very strange things will happen. Many farmers will be unable to find buyers. From the mid-West, the best way out is through the Great Lakes and the St Lawrence Seaway, but the Great Lake ports don't have the capacity to store and load anything close to the Louisiana ports. For example, corn in Iowa will be practically worthless. Corn in Savanna, Georgia will be worth the price of gold (OK, maybe a slight exaggeration). Location, location, location. Speaking of location, what would the price be in the trading pits in Chicago? Depending on the terms of the contracts, it could collapse.

Next, oil and refined products. There are huge refineries along the Mississippi. In Baton Rouge, Exxon runs the second biggest refinery in the country. Their capacity is 500,000 barrels a day, most of which seems to come from pipelines because they stated production could be reduced to 400,000 barrels a day because tankers cannot dock. On the other hand do some of these pipelines cross the Atchafalaya Basin which could be scoured out by massive water flow? Either way refined products couldn't be barged up the Mississippi in the worst case. I think the safest investment thought is that the price of refined oil products will jump. How you want to play that is your call.

I think I have built an obvious case that we cannot let the Mississippi create a new channel. So now the question is how long will it take to seal off the new channel? Remember the helicopters dropping sandbags on the broken levee in New Orleans? Forget that solution. It will take boulders, tens of thousands of huge truck loads to work across the breach, and of course the delta has no rock quarries. The rock will have to be trucked in from a distance. It can be done, it will be done, but will it be done before creating a global food crisis? That I do not know.

I am not predicting a failure of the Old River Control Structure, but the surge coming next week will test it, as strongly as 1973, if not worse. Can levees in critical spots fail? Katrina proved that. I doubt the ORCS will fail next week, but the chances are above zero. Minyanville prides itself on being early. My advice is to pay attention, but be careful not to overreact. The worst case can be fixed, but the press and the markets will go nuts in the mean time. The first time you hear the words "Old River Control Structure" on CNBC it will time to start paying close attention.
No positions in stocks mentioned.

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