The Panama Canal expansion will have far-reaching effects on the global trade, but it is U.S. grain exports that could benefit the most from the eight-year, $6 billion project.
While speaking at the Ag Transportation Summit at the Westin Hotel in Rosemont, Ill., on Aug. 4, Javier Ho — a Panama Canal Authority official — stated the lengthy venture that will double the Canal’s capacity was more than 90 percent complete and it is on track to open during the spring of 2016.
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In addition to significantly widening the Canal to allow for larger ships and adding new channels, the project is also constructing a set of new locks that will permit heavier, longer and wider ships to pass through. This is positive news for the United States, as it could not only dramatically increase the volume that is being traded, but it could also result in an increase in grain transport from the Midwest to Asian Markets.
“Grain exported from the U.S. Midwest, and new opportunities for exports, such as coal, oil, and petroleum products, and liquefied natural gas (LNG), may be able to capitalize on expanded Panama Canal capacity,” the authors of a 2013 U.S. Maritime Administration study wrote. “Impacts are likely to be significantly different by geographic region and by the type of product transported.”
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Currently, vessels carrying up to 5,000, twenty-foot equivalent units (TEUs) can pass through the canal, but once the expansion is complete, that number will more than double to 13,000 TEUs. This provides extra incentive for states in the Midwest to rethink their shipping routes. While Pacific Northwest ports have been on the rise recently, it could become more fiscally responsible for farmers to ship their goods down the Mississippi River and to a Gulf port.
“The expansion is also positive for U.S. Gulf ports,” according to Will Sawyer, an analyst with Rabobank’s Food & Agribusiness Research and Advisory group, “as the doubling of the draw area in Minnesota, Iowa and Missouri will allow U.S. Gulf ports to take back much of the export share lost to the Pacific Northwest over the past 15 years. Most of this shift will be driven by increased corn exports through the U.S. Gulf, reversing the recent trend.”
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