It’s not quite hitting the Canadian grain shipping corridors yet, but global issues with two canals and one border could have large impacts on world grain and product supplies.
Let’s start in the Suez Canal. While not the highest ranking for grain movement, any disruption to a major shipping route has trickle-down effects on others. About 12 per cent of global trade moves through the Suez, according to Reuters, and current safety concerns has some shippers choosing the much longer route south around the Horn of Africa. Consumer goods are likely to be the most impacted, as both Target and Walmart products are usually moved through the Suez.
Moving south, the U.S. government’s plan to crack down on illegal migrant movement at the U.S./Mexico border involved the closure of two bridges used by BNSF Railway and Union Pacific Railroad.
Mike Steenhoek, executive director of the Soy Transportation Coalition, sent a brief earlier this week on the huge impact these freight route closures would have on commodity movement.
Steenhoek says that the soybean meal, oil, and grain market accounts for US$4.62 billion worth of trade with Mexico, ranking as the number two market for beans and meal and number four for oil, globally. “The vast majority of those shipments occur via rail,” he writes.
The government reversed its decision on these freight route closures on December 22. The National Grain and Feed Association (NGFA) and the North America Export Grain Association (NAEGA) released a statement that reads, in part: “We call on the governments of the United States and Mexico to continue to dialogue and to put in place measures on both sides of the border to ensure this does not happen again. The free flow of trade across the border is critical to food security for our countries and the region at large. A plan must be in place to keep the border open to commerce between our nations.”
A not-so-easily solved issue is that of the Panama Canal and the U.S. river system. Persistent drought and dry weather for a huge part of the U.S. has led to lower river levels, including the Mississippi River. That’s led to some slow downs and concerns about commodity movement in the U.S. and on to global markets not just now, but over the last two years. South America is experiencing a similar issue with the Panama Canal shipping route.
Steenhoek recently returned from a tour of the region and received an update from the Panama Canal Authority on the impact of the drought conditions on navigation. The Authority says that it anticipates increasing daily moves to 24 from 22, but that’s still far below the normal of 36 to 40.
He adds that the Panama Canal Authority suggests their water saving measures have been successful. “Unfortunately for dry bulk ocean vessels that transport soybeans, grain, and other commodities, the Panama Canal will remain a severely limited option,” Steenhoek says, as cruise ships, container vessels, LNG vessels, automobile carriers, and others pay considerably higher tolls to transit the canal and are able to provide more precise arrival times than agricultural shipments. “As a result, agricultural shipments via the Panama Canal will remain significantly limited for the foreseeable future,” he says.
The full Canadian impact of each of these issues has yet to play out, as the main impact is largely on the U.S. at this time, however, any issues that disrupt global trade flows impact Canada and Canadian exports, eventually.
This story has been updated since it was published, as the two bridges in to Mexico were re-opened mid-day, December 22, 2023.
