by Professor Ross Kingwell, AEGIC Chief Economist
In 2024, delays and increased costs of shipping grain through the Panama Canal is making Australian grain more attractive to Asian buyers.
It’s May, 2024 and central America needs rain, lots of it, to replenish Lake Gatun (Figure 1), the main source of water that supports the lock systems of the Panama Canal.
Figure 1: Lake Gatun in central America
Persistent lack of rain throughout 2023 and into 2024 have greatly lowered water levels in Lake Gatun (Figure 2). The ramifications are that fewer ships can transverse the Panama Canal. The delays also increase the cost of shipping through the canal.
Figure 2: Water levels in Lake Gatun: Jan 2021 to May 2024
Figure 3 shows the marked decline in ship movements and trade volumes passing through the canal. The delays have increased the costs of transit through the canal by over 5 per cent. There are delays and increased costs of exporting corn, soybean and wheat through the canal from the Americas into Asian markets like China.
Figure 3: Changes in the Panama Canal’s throughput
In some cases exporters may consider alternate sea routes but these are also expensive options, incurring several more sailing days (Figure 4).
The upshot of the delays and higher costs of shipping through the Panama Canal is that grain sourced from Australia is made relatively more attractive and is quicker to access.
AEGIC is an initiative of the Western Australian State Government and Grains Australia.
Figure 4: Sea route options from grain-exporting regions of the Americas to East Asia
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Horizons: the AEGIC Economics and Market Insights blog
Expert grains industry analysis and commentary from AEGIC’s Economics and Market Insight Team on a range of big-picture topics that affect Australia’s export grains sector.
AEGIC is an initiative of the Western Australian State Government and Grains Australia.
