New Panama Canal offers new opportunities for U.S. agriculture

Almost one-third of U.S. corn, wheat and soybeans now transit the Panama Canal to reach Asian markets. Now, with the new $6 billion Panama Canal expansion completed, cargo capacity will double and could shorten travel distance from the U.S. Gulf Coast to Asia by some 5,000 nautical miles and seven to nine days.

“The original canal, which was complete 102 years ago, has been well maintained but the size of the locks no longer met the needs of global commerce, especially the size of ships,” said Mike Steenhoek, Executive Director of the Soy Transportation Coalition, who was in Panama for the Grand Opening of the expansion at the end of June. “For the Panama Canal to remain relevant in the 21st Century this new canal and the new larger locks were necessary.”

The larger ships, now able to use the Panamanian shortcut, will add additional revenue producing freight which will ultimately reduce the cost, per bushel, to American agriculture’s eventual customer.

“The new canal really has the potential to enhance the economics of a host of industries and we feel that agriculture is one of them,” Steenhoek said.

Economically speaking, the day of the ground breaking for the new canal expansion 10 years ago and the day that it opened for business are much different. This is a concern for canal investors.

“Even after the retraction of the global economy in 2008, we’re still trying to dig ourselves out of it,” Steenhoek said. “The Panama Canal also has competition to keep in mind and currently they do not have an elevated negotiating position with their customers, so they’ll have to really work to remain competitive which is also good for agriculture in the U.S.”

With the expansion of the Panama Canal, American commodities like corn and soybeans will be loaded from the key export region of the Mississippi Gulf at almost double the rate, almost 2 million bushels more per vessel, then ships that traveled the original canal.

“When you’re operating in a commodity industry like agriculture there’s not a lot of product differentiation between what we produce in the U.S. and what is produced in South America,” Steenhoek said. “Success is largely a function of being able to get products to our customers at the lowered cost and the most reliable fashion. The Panama Canal expansion will help preserve our competitive advantage.”

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