Opening of Expanded Panama Canal Also Opens New Era for U.S. Commodities
Panamanian President Juan Carlos Varela and Panama Canal Administrator and CEO Jorge L. Quijano oversaw the official inauguration ceremony marking the opening of the expanded Panama Canal on June 26.
The $5.4 billion project is the largest expansion to the canal since its construction in 1914. After ten years, the project was completed two years behind schedule due to multiple challenges including labor disputes, a lawsuit filed by a group of European contractors against the Panama Canal Authority over cost overruns, and issues with materials and faulty engineering.
Now completed, the project includes new locks that are 70 feet wider and 18 feet deeper on both the Pacific and Atlantic oceans. The dredging of 150 cubic meters of material helped create a second lane along the canal, effectively doubling seaway capacity.
The expanded capacity that the project will provide is expected to translate to an increase in U.S. soybean transport capacity from 76,000 tons to 100,000 tons adding up to $8 million in value to each vessel according to the U.S. Soy Transportation Coalition, while the cost of shipping grain from the U.S. Corn Belt to Asia is expected to be reduced by 12%.
The U.S. is the world’s second largest shipper of soybeans to China, accounting for 30% of the 81.5 million tons China imported last year according to Chinese customs data. Six hundred million bushels of U.S. soybeans, or 44% of U.S. soy exports are shipped through the canal per year, making soybeans the top U.S. agricultural commodity to use the canal according to the United Soybean Board.
While an increase to tonnage is always beneficial, according to a soy checkoff-funded study conducted by HighQuest Partners, overseas soy buyers are equally concerned about delivery timelines as they are about soybean prices. The Panama Canal Authority estimates that the expansion will reduce transport times between ports on the Atlantic Ocean and Asia by up to 16 days, and foresees tonnage volumes to increase by an average 3% per year – up from 341 million tons in 2015, reports Reuters.
"A customer of U.S. soybeans in Asia could save 35 cents per bushel simply due to greater transportation efficiency," said Mike Steenhoek, the Coalition executive director.
While good news for U.S. grain farmers and traders who will be able to capitalize on a more efficient global transportation system, it will also benefit their counterparts in Brazil and Argentine – the U.S’s top two rivals in the global market. To maintain a competitive advantage on the global stage, Mark Seib, a leader for both the United Soybean Board and the Soy Transportation Coalition is calling for greater investment into the U.S.’s domestic transportation infrastructure.
“We need to focus on improving our infrastructure, especially the locks and dams on our inland waterways,” says Seib in a United Soybean Board statement. “Panama has done an excellent job of maintaining and improving its infrastructure for over 100 years, and it’s time to step up the work on ours.”