The U.S. Army Corp of Engineers, in its largest such undertaking in at least 25 years, on Tuesday began clearing a shallow stretch of the drought-hit Mississippi River of rocks impeding the flow of billions of dollars' worth of goods to the Gulf Coast.

A shipping superhighway that links much of the central United States to the Gulf of Mexico, the Mississippi is near record-low levels due to the worst U.S. drought since 1956.

Using a fleet of excavators and barges with extensions that allow the vessels to 'stand' on the river bed, the Corps began its task to remove 900 cubic yards of limestone stretching over six miles near Thebes, Illinois.

The work, which could take a month to 45 days to complete, is expected to hamper the movement of barges carrying grain from production centers to export terminals at the U.S. Gulf as well as upriver shipments of fertilizer, coal and road salt.

"Right now they're removing rocks through mechanical means using spud barges and excavators," said Army Corps spokesman Mike Petersen, referring to barges with 'legs.'

"They also have a piece of equipment called a hydrohammer, basically a huge aquatic jackhammer, to break up bigger chunks of rock for excavation."

"The water is so low right now that an excavator can reach down to the very bottom and knock these rock pinnacles down. They've had a lot of success with that and it also reduces the timeline and the cost," he told Reuters by telephone.

The next phase of the excavation would involve the use of explosives to break up the rocks at that stretch.

The low water level on the Mississippi River after the worst drought in half a century this year was exacerbated by the Corps' decision to reduce the amount of water that flows into the waterway from the Missouri River - an annual event.

The move raised protests from Midwestern governors and senators who urged President Barack Obama to rescind the decision for fear that badly needed income would be lost through the disruption of commerce that flows through the river.

The Army Corps on Monday projected "no significant interruption in navigation" in a briefing to members of the agriculture industry and elected officials, including U.S. Senator Dick Durbin of Illinois, the chamber's No. 2 ranking democrat.

The excavation work that began on Tuesday would close the Mississippi River near Thebes for 16 hours a day to barges heading south to the U.S. Gulf and northwards after emptying their cargoes at export terminals.

River traffic will be allowed to transit the six-mile work zone each night, but a backlog of barges was beginning to form.

QUEUE FORMING

A queue of 12 southbound and three northbound tow boats, each of which typically ferries 20 to 25 barges each with 1,500-ton capacity, were waiting on Tuesday to transit the area, a U.S. Coast Guard spokesman said. He said 13 northbound vessels moved through the stretch on Monday night.

The stretch near Thebes was known historically as Little Chain of Rocks, a smaller version of a treacherous area of the river north of St. Louis known as Chain of Rocks which vessels now bypass via a canal constructed in the 1940s and 1950s.

The rock-removal project was prioritized this year as the Mississippi River approached record-low levels and threatened to halt river navigation, especially along a 200-mile stretch between St Louis and Cairo, Illinois.

Exporters stepped up shipments of grain and soybeans to the Gulf Coast before water levels fell to critically low levels, forcing barges to take on lighter loads. They also resorted to loading more of their goods on railcars.

The disruption of river traffic due to low water has rallied export prices for grains, especially soybeans that are in strong demand from buyers like China. The United States remains the primary global supplier of soybeans until the harvest in South American powerhouses Brazil and Argentina early next year.

GROWMARK, an agricultural cooperative, is evaluating daily its costs to use the river to ship grains to the U.S. Gulf and fertilizer north to the Midwest farm belt.

There is an "economic threshold" at which low water levels would raise costs for river shipping so high that it would be less expensive to transport products by truck or rail, said Chuck Spencer, GROWMARK's director of government affairs.

"We know that if we're going to have any water-borne commerce that, in the short term, we're going to have to put up with this construction time frame" at Thebes, Spencer said.

Storms moving through the U.S. Plains and Midwest are poised to add a few inches of water to the river, according to river forecasts by the National Weather Service, possibly delaying what many believed would be an effective end to navigation in late December.

The Mississippi River at St. Louis on Monday was forecast to recede by nearly two feet by the end of the month, but as of Tuesday morning the forecast showed a 1.5-foot drop.

The Waterways Council, a river shipping industry group, initially expected the river would be effectively closed by Dec. 10 due to low water.

But recent rains as well as steps by the Army Corps to release water from Carlyle Lake, a southern Illinois reservoir, have pushed back the forecast to about Jan. 10, said Debra Colbert, senior vice president of the Waterways Council.

"At least we'll be able to get some barges past but it's still a significant disruption." (Additional reporting by Thomas Polansek in Chicago; Editing by K.T. Arasu and James Dalgleish)