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New Panama Canal expansion sees grain

transportation costs tumble

he long-awaited Panama Canal

expansion opened earlier this Summer
with a ceremonial ship passing through
the waterway. Based on extensive
research including more than 100
studies on the economic feasibility,
market demand, environmental impact
and other technical engineering aspects,
the Panama Canal expansion involved
the construction of a Third Set of Locks that will now allow
larger ships to pass through the famous canal.
The project, costing more than US$5 billion and lasting nine
years, boasts a wealth of new features including improved water
supply, updated navigational channels and new Pacific and
Atlantic lock complexes with eight rolling gates on each side.
The new set up is expected to be particularly beneficial to the
ships that were previously not able to traverse the Panama Canal,
as the container capacity per vessel has now expanded from
4,400 to 12,000 containers per vessel; with this almost threefold
increase with some sources predicting that fuel costs could be
reduced by as much as 16 percent.
The Canal is a vital trade route for all grains and other
agricultural commodities that are shipped from the U.S. Corn
Belt to Asia, said USGC Chairman and Nebraska farmer Alan
Tiemann, who attended the canals opening ceremony. In fact,
with the completion of this project, it is estimated that the cost to
transport grain between those two points will drop significantly.

The largest expansion for the Canal in nearly a century

From its inception, the intention of the multibillion-dollar

plan included the construction of a new set of locks to allow the
passage of wider, longer and much heavier cargo ships.
60 | November 2016 - Milling and Grain

by Andrew Wilkinson,
Milling and Grain

The Panama Canals expansion and resulting decreases in

shipping costs and time will improve competitiveness of U.S.
grains in growing markets, stated Tiemann, adding that, This
will help U.S. farmers gain access to new markets and continue
to expand sales with buyers in our established markets who want
more efficient shipments of grain.
While the exact impact of the Canals expansion on the global
grain trade still remains uncertain to a certain extent, the Canals
ability to handle Capesize vessels will certainly create greater
opportunities for the export of grains and other commodities.
That should raise basis bids on number of users alone, as there
will be more competition for the grain.

Third highest ever annual tonnage

So how has the Panama Canal faired in its first months

following the expansion project? Well according to its most
recent annual report, the waterway has recorded the third-highest
annual tonnage in its 102-year history in 2016, and as the new
section of the canal only opened in June, these figures only look
set to rise in the coming years.
During the 2016 fiscal year, which went from Oct. 1, 2015
to Sept. 30, 2016, the Panama Canal Authority recorded 330.7
million Panama Canal tons (PC/UMS). During the year a
total of 13,114 vessels sailed through the canal, including 238
Neopanamax vessels taking advantage of the newly opened
Expansion project. In fact, Neopanamax vessels accounted for
approximately 18.2 million PC/UMS.
Despite the international shipping downturn this past year,
we recorded one of the highest annual tonnage figures since
the opening of the original Canal 102 years ago, stated Jorge
L. Quijano, Panama Canal Administrator, who qualified his
statement by adding that, This latest success reinforces the




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"It has been widely reported that the wider

canal will cut the cost
of shipping grain.
From the United States
Midwest to Asia, for
example, this cost has
enjoyed a reduction of
as much as 12 percent, which will help
them stay competitive
with South America, a
Rabobank report said
continued strategic importance of the route and the growing value
that recent investments in the Canal will bring to the maritime
However, although the nexpanede Panama canal appears to
already of benefit to shipping industry, the grain price gains
are predicted to be very limited at best. This is the case as,
according to Jay ONeil, agricultural economist at Kansas State

Universitys international grains program,

not many foreign grain buyers can handle
the bigger ships or the larger cargoes. How
many of our customers want an 85,000-ton
cargo? Not that many, he imparted in a recent
interview with Farm Futures. But will the
project have any bearing on the overall cost of

Lower shipping costs

It has been widely reported that the wider

canal will cut the cost of shipping grain.
From the United States Midwest to Asia, for
example, this cost has enjoyed a reduction of as
much as 12 percent, which will help them stay
competitive with South America, a Rabobank
report said recently.
But, South American soybeans going to Asia
will also still have a cost advantage, it said.
The Canal expansion and resulting decreases
in shipment cost and time will greatly improve
the cost position of the U.S. versus Brazil,
Argentina and other grain exporting countries
in Eastern Europe, Rabobank analyst Will
Sawyer said in the report.
The effect on overall U.S. export growth will be harder to
quantify, due to variability in supply and demand factors.
We see the US Department of Agricultures baseline
projections of under one percent export growth for soybeans and
five percent for corn over the next decade as best case scenarios,
the report said.


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62 | November

2016 - Milling and Grain

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Brandon Norwood, Vice President; Tel: +1 785 822 4109

10/02/2015 17:30