By Karl Plume

(Reuters) - The drought-drained Mississippi River will rise slightly later this week between St. Louis and Cairo, Illinois, but later continue its decline toward historic lows, according to a National Weather Service forecast.

Low water, due to the worst U.S. drought since 1956, has already impeded the flow of billions of dollars worth of grain, coal, fertilizer and other commodities between the central United States and shipping terminals at the Gulf of Mexico.

A further drop in river levels could halt commercial shipping traffic entirely by this weekend, the American Waterways Operators and the Waterways Council Inc said in a statement on Wednesday.

Last week, the council said the river along the Cairo-St. Louis stretch would be too low for navigation by January 7 but on Wednesday it said shipping may come to a halt between January 5 and 15.

A shutdown could affect more than 8,000 jobs, cost $54 million in wages and benefits, and halt the movement of 7.2 million tons of commodities valued at $2.8 billion, the two industry groups said.

The Army Corps of Engineers, which is spearheading a project to remove river-bottom rock that could impede shipping if the river becomes too shallow, remains optimistic that the nine-foot-deep channel, which most commercial vessels need, can be maintained.

Forecasts for warmer weather, which would limit river-choking ice from forming, and the potential for rain next week bolstered that outlook.

The Corps is removing the most threatening rock pinnacles near the Illinois towns of Grand Tower and Thebes first, hoping to deepen the shipping channel by about two feet by mid-January, just before the river was forecast to hit critically low levels.

"The Corps rock removal contractors are making excellent progress in removing the rock obstructions from the primary area of concern," said Major General John Peabody, the Corps' Mississippi Valley Division Commander.

"We believe we will deepen the channel ahead of the worst-case river stage scenario, and I remain confident that navigation will continue," he said. Continued...