C Magazine
YOUR CHS CONNECTION
July/August 2011
Feature
Carving a Bigger Canal
Expansion of the Panama Canal will add to Gulf of Mexico competitiveness, but probably won't affect global trade patterns for the foreseeable future.
Completion of the Panama Canal expansion in 2014 is expected to loosen a bottleneck in the flow of U.S. crop exports, but any major shift in global grain trade appears to be more remote.
Albert Leman Zubieta, administrator of the Panama Canal, has been spreading the word that U.S. ports, particularly on the East Coast and Gulf of Mexico, need to prepare for the larger ships that will be entering their ports. He spoke at a May gathering in Washington, D.C., sponsored by the Soy Transportation Coalition and urged U.S. agricultural interests to ensure they are prepared for the more efficient mega-ships that will be heading that way in a few short years.
The $5.2 billion canal expansion will enable the waterway, which dates to 1914, to handle ships with almost triple the capacity of Panamax ships, sized for current canal capacity. Shorter waiting times and reduced shipping costs are expected for shipments of grain from the Gulf bound for expanding markets in Asia.
The broader impact of the wider and deeper third channel when it opens in three years remains to be seen for the U.S. shipping system, including East and West Coast ports and those on the Gulf of Mexico. Increased container shipments could be among the first benefits for East Coast ports, provided they are dredged deeply enough to handle the larger vessels that will eventually follow.
Soybean transportation and other commodity groups are trying to assess the impact on agriculture, particularly on its primary grain export channels to Asia down the Mississippi River through Gulf of Mexico ports and the Panama Canal, or through Pacific Northwest ports via rail from the Midwest.
CHS Has Options
Grain exporters also have a vested interest in these new capabilities. That group includes CHS, with a ship-loading elevator on the Center Gulf and two terminals in the Pacific Northwest (PNW) that could all feel the impact of increased Gulf competition. This multiple export-channel capability, which also includes St. Lawrence Seaway access from its Superior, Wis., terminal, continues to give CHS the flexibility to ship through the channel that gives the company and its grain shippers the best freight breaks and end-customer access.
CHS grain merchandisers say the improvements should help Gulf export facilities like the one it operates at Myrtle Grove, La., remain competitive. That terminal could handle larger cargo ships with relatively minor improvements.
For the foreseeable future, though, soybean trader Chris Pothen and corn trader Jason Marthaler say Panamax ships will continue to be used because the new channel will be deeper as well as wider. That means the same vessels will be able to handle more grain because of gains in draft.
Pothen says the additional capacity could close some of the Gulf of Mexico competitive gap over PNW ports by $2 to $3 per ton. It also will increase the U.S. advantage over South American grain exporters.
Read more at http://c.chsinc.com
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