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T
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 Pacic and Atlantic lock complexes with eight rolling gates on each side. The new set up is expected to be particularly benecial 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 canal’s 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 signicantly.”
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.“The Panama Canal’s 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 efcient shipments of grain.”
While the exact impact of the Canal’s expansion on the global grain trade still remains uncertain to a certain extent, the Canal’s 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 rst 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 gures only look
set to rise in the coming years.
During the 2016 scal 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 gures since the opening of the original Canal 102 years ago,” stated Jorge L. Quijano, Panama Canal Administrator, who qualied his
statement by adding that, “This latest success reinforces the
New Panama Canal expansion sees graintransportation costs tumble
by Andrew Wilkinson, Milling and Grain
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November 2016 - Milling and Grain
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continued strategic importance of the route and the growing value that recent investments in the Canal will bring to the maritime
industry.”
However, although the nexpanede Panama canal appears to
already of benet to shipping industry, the grain price gains
are predicted to be very limited at best. This is the case as, according to Jay O’Neil, agricultural economist at Kansas State University’s 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 shipping?
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 Agriculture’s baseline projections of under one percent export growth for soybeans and
ve percent for corn over the next decade as best case scenarios,”
the report said.
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"It has been widely re-ported 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 per-cent, which will help them stay competitive with South America, a Rabobank report said recently"
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November 2016 - Milling and Grain
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