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Super-Sizing Panama | As Panama Canal Capacity Expands, Bottlenecks in Domestic Infrastructure Hamper U.S. Export Efficiency

 The Big Ditch is getting bigger.

“It’s a very impressive project,” says Dean Campbell, the Coulterville, IL, farmer who chairs the Soy Transportation Coalition, of the Panama Canal capacity-doubling project. “What I’m seeing is a big ‘plus’ for American freight, especially Gulf freight when the Panama Canal expansion is done.”

Campbell saw Panama’s expansion firsthand last March. The Panamanians manage it very well, he reports.

In 2006 Panamanian voters approved a $5.25 billion plan to double its capacity and modernize the canal. When completed in 2015, it will add two new three-step locks (one on the Pacific side and one on the Atlantic), two navigational channels connecting the new locks to the existing system and deeper, wider shipping lanes.

It will also feature an improved lock-gate design that will shorten lock closures for maintenance and a system of water recapture to reduce fresh-water losses.

The expansion comes just in time. The current canal, completed in 1914, not only limits ship size, but is also nearing its limit for the number of ships it can handle. During peak shipping season, 40 or more ships can be backed up each day waiting to transit the canal.

The expansion is good news for U.S. corn and soybean farmers, since 57% of U.S. grain leaving Gulf ports uses the canal. The expansion removes one bottleneck restricting the flow of grain.

It will lessen the canal transport time, and should lessen the ocean-freight cost, says Campbell.

That will be important not only for bulk grain but for containerized soybean meal and distillers dried grains bound for Asia.

Panama is not, however, a complete solution to grain-shippers’ woes. “Everything is connected – the rivers, the railroads, Panama,” says Kendell Keith, president of the National Grain and Feed Association. “We’re concerned about the logistics up and down the [Mississippi] river and our ability to feed the canal.”

Until we figure out how to build new Mississippi locks and dams, “it won’t matter how big the ditch down in Panama is,” Keith says.

Locks and dams on the Mississippi aren’t the only challenge. It will take improvements in U.S. ports for shippers to take advantage of the canal’s improvements. The new canal improvements will allow it to handle 50-ft. draft boats instead of the current 39½ ft. – but at low water, the Port of New Orleans can only handle drafts up to 35 ft.

“If we don’t improve our domestic system, “we could see freight go up to a dollar a bushel,” says Keith. “So we’ve got to start investing in infrastructure here in the U.S.”

December 2010

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