Dry Trade – Effect of Climate on Commerce
Climate change continues to pose a threat to human activity every day, with many states across the United States reporting record levels of heat. Unfortunately, this is straining already depleted water resources across the country with a water crisis in the Southwest unfolding as we speak, but it looks like the largest river in the US may be next.
The Mississippi River is vital to the US economy due to the benefits it provides for commerce, with the Port of New Orleans estimating that more than 500 million tons of goods flow through the river every single year. However, high temperatures in the region have led to lower water levels in these summer months, which is set to disrupt commerce in the coming weeks.
Critical crops, including soybeans and corn, are shipped downstream on the Mississippi River from states like Iowa and Illinois, which could create significant volatility in the prices of these items. AccuWeather estimates that last year, low water levels resulted in $20 billion in losses, and it’s fair to estimate that figure landing higher this year due to historically low levels around cities like Saint Louis and Memphis.
This is only going to get worse as time passes, leaving groups like the Army Corps of Engineers working to find solutions to the problem. Given that the region just faced heavy flooding earlier this year due to climate change, it is vital for the US to address this issue to protect the economy from receiving any shock when inflation is still rampant.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.