Panama Canal Expansion Holds Questions for Soybean Industry

U.S. soybean farmers depend on U.S. ports to export their harvested beans around the world. That’s why the pending expansion of the Panama Canal could hold implications for U.S. soybean farmers.

In late July, Jimmy Sneed, United Soybean Board (USB) communications program vice-chair, Global Opportunities Committee member and Mississippi soybean farmer, attended a tour of the Port of New Orleans organized by the Soy Transportation Coalition (STC) to see if the U.S. soy gateway to the world will be ready for larger ships that use the wider and bigger shortcut between the Atlantic and Pacific oceans.

“With increased size comes economies of scale, so the United States should be able to deliver soybeans and products to our customers at a more competitive price,” says Sneed. “We should be able to capture more value for everyone from U.S. farmers to processors.”

Louisiana State Senator A.G. Crowe addressed the group, noting the expansion could result in a deepwater facility where larger containerized grain cargo vessels can transverse and be off-loaded. If actually realized, the multibillion dollar project will take advantage of the widening of the Panama Canal, due to be completed in 2014. Southern Louisiana ports serve as the last stop for about 60 percent of U.S. soy headed for the international market.

Sneed noted that a number of challenges must be addressed before southern Louisiana ports are able to accommodate the larger ships utilizing the expanded Panama Canal. Some areas of concern include:

1. Water depth at the ports and throughout the lower Mississippi River
2. Width of the river, as the longer vessels require a larger turning radius
3. Road and rail infrastructure that feed into and out of the ports
4. Adequate clearance of bridges crossing the river

“Developing the infrastructure to accommodate these vessels represents the current challenge,” says Sneed. “A relatively small number of facilities can take advantage of these opportunities today, particularly on the Mississippi River. To take full advantage of these vessels, the infrastructure from farm gate to export facility will be important so the larger amount of soybeans will be able to be delivered to the export elevator in a timely way so that loading can be done within the allowed time to prevent demerge charges.”

In May, STC, funded in part by the soybean checkoff, and the Panama Canal Authority (ACP), which manages a $5.25 billion expansion of the canal that could likely send record-size ships to U.S. ports starting in 2014, signed a Memorandum of Understanding (MOU). The MOU calls for the STC and ACP to share information, promotion efforts and educational events as the Panama Canal expansion program continues.

The soybean checkoff funded research to measure the impact the expansion will have on the U.S. soybean industry. USB expects to release the results by the end of 2011.

STC partners with other organizations with common interest, and works to build coordination with the entire U.S. soy value chain to identify and develop strategies and solutions to these challenges.

“Transportation costs represent a significant expenditure associated with the farm gate value of the soybean,” says Sneed. “It also plays a major part in the margins for processors and end users.”