Abstract
Traditionally for the Panama Canal Authority, grain flows are the number two commodity transiting the waterway, ranging between 33.4 and 53.1 million metric tons in the last five fiscal years and representing a significant 20% of total cargo tonnage on average[1]. At the same time, about 81% of the total grain trade through the Panama Canal originates in ports located along the U.S. Gulf, including export terminals in Corpus Christi, Houston/Galveston and several terminals along the Mississippi River, perhaps the most important transportation mode for crops shipped out of U.S. Midwest.
In 2016, about 31% of total U.S. grains exports, that is, 44.1 million metric tons out of a total of 141.4 million metric tons transited through the Panama Canal. The main destination of the U.S. Gulf grain trade is East Asia, mainly China, Japan, South Korea and Taiwan, although there are significant flows to ports located at both the West Coast of Central and South America. The U.S. Gulf trade, however, competes with grains originating in the U.S. Pacific Northwest (PNW) and from alternative grains sources such as Brazil, Argentina, Eastern Europe, Russia and Australia. In order for the grain originating in the U.S. Midwest and transiting through the Panama Canal to remain relevant compared to the PNW and alternative sources in other countries, it is very important that the grain trade from this region has reliable and economical means of transportation to remain competitive. This fact highlights the importance of a safe and reliable transportation system, including inland navigation waterways, railroads and port terminals.
This presentation will begin assessing the importance of the different means of transportation utilized in the movements of U.S. grain exports to the world market. These transportation modes include trucks, railroads and barges. It will discuss the U.S. Gulf versus PNW “competition” in attracting grains for exports, especially the relevant East Asian market. Most of the grains exported through the PNW involve railroads while grains exported through the U.S. Gulf involve railroad and/or barges. Depending on the location of an American grain producer, he may decide to sell his grains to either a grain elevator with access to a railroad yard that can reach either/both the Gulf ports or PNW, or may decide to sell his grains to an elevator that may reach barge terminals connecting to export terminals located on the Mississippi River. To keep it simple, this interaction is dictated by the relative prices that a grain producer may receive for his product and by the cost of transportation from origin to destination. We will attempt to highlight the importance of the U.S. grain transportation system to the Panama Canal with the following analysis:
- Approximate the geographical area in the U.S. hinterland where railroads may deliver grains for exports either to the Gulf versus PNW. This approximation will be based on transportation cost and representative grain originating points for shuttle and unit trains.
- Approximate and measure the geographical areas where the Mississippi river and the export terminals along this river can be reached through the barge system. This will include the transportation costs of grains delivered using this transportation mode.
- Once the geographical area in the interior of the U.S. where railroads may deliver grains to export terminal is determined, and the geographical scope of the barge system is determined, we will attempt to forecast weekly grain transit through the Panama Canal using weekly grain transportation data (barges passing Lock 27 in the Mississippi River, rail deliveries to ports, grains inspections, grain barges unloaded in the New Orleans region and vessel loading activity in port). This attempt will be discussed during the final oral presentation.
- The importance of infrastructure developments in the U.S., especially the one related to the grain trade, will be highlighted. Special emphasis will be given to the Mississippi River Locks System and the need for upgrades. Locks failures and unexpected closures are negative events that impact the flow of grains through the system.
- The main grain export terminals along the Gulf Coast will be highlighted.
This presentation will be of interest and benefit to conference attendees because it will explain and highlight the importance of the inland transportation system for the U.S. grain trades. According to some sources, around 60 percent of all American corn, soybean and wheat exports exit the country via the Gulf Coast. According to “A Reliable Waterway System Is Important to Agriculture” developed by the U.S. Department of Agriculture, “Agriculture will provide a $21.5 billion trade surplus to the American economy” and “Exports are responsible for 20 percent of U.S. farm income, also driving rural economic activity and supporting more than one million American jobs on and off the farm”.[2] Therefore, a reliable and competitive grain transportation system is beneficial for both American farmers and for Panama Canal grain trade.
[1] Based upon Panama Canal Authority Datawarehouse, comparing with USDA data.
[2] USDA, February 17, 2017.