Challengers to US Grain Exports
Old Man River washed his angry personality over many Cornbelt lives, homes, towns, and businesses in the past couple weeks and will continue as the flood surge slowly moves south to the Gulf of Mexico. While not discounting the personal devastation, the periodic flood and low water events of the Mississippi demonstrate the need for improvements in flood control, locks and dams, and overall river transportation.
The abundance of grain produced in the Cornbelt not only feeds and fuels the US, but 60% of US grain exports are carried on barges down the Mississippi to export terminals at the Gulf. During the past week, river traffic was halted in several places due to flooding and rolling closures will follow the southbound surge of floodwater.
For many years the Mississippi has been the backbone of agricultural transportation, providing a route to the world for Cornbelt farm products and a route to the interior for needed inputs such as fertilizer and fuel. Over time, the Congress has slowly made some minor investments to maintain the river infrastructure, but they have been relatively few and far between.
Now, the advantage that farmers and US grain exporters have enjoyed from the natural river transportation may be in jeopardy. No longer is that relatively inexpensive method of shipping grain keeping US farmers ahead of the competition.
In South America, the Brazilian Ports of Santos and Paranagua, will soon be hosting hundreds of ocean-going bulk freighters hauling corn and soybeans to global buyers. But because it is a long distance to those southern ports, Brazil has spent billions of dollars improving the grain loading infrastructure at Santarem on the Amazon River and Itaqui on Brazil’s northeastern Atlantic coast.
Those so-called Northern Arc ports will be shipping out more than one billion bushels of corn and soybeans annually produced in the interior of Brazil. The price charged to global grain buyers will not only be cheap due to the inflated Brazilian real, but because many days are cut from the shipping schedule, the transportation cost is lessened as well. In the global grain trade when buyers purchase millions of tons of grain, a $10 discount to US Gulf bids will seal the deal.
While US farmers consider it a slap in the face, it is frequently cheaper for poultry and swine producers in the southeastern US to import corn and soybean meal from Brazil via those ports than to ship it by rail freight from the Midwest.
But the Northern Arc is not the only competitor with its sights set on raising the level of competition with US grain suppliers. An alliance between Canada and Russia to utilize the Arctic Bridge can put Canadian grain from Manitoba into northern Europe in just eight days. That is the shipping time from the Port of Churchill on the western short of Hudson Bay to Murmansk in northern Russia. The Arctic Bridge would skirt the southern point of Greenland and the northern shore of Scandinavia in less than half of the time it would take a freighter to move through the Great Lakes and out the St. Lawrence Seaway to Rotterdam.
The attraction of the Arctic Bridge, which is currently open only 4 months of the year, is enhanced by the prospects of global warming which would keep sea ice open for a longer shipping season. And Russia has been investing heavily in a new fleet of icebreakers.
The issue for the US grain industry to evaluate is whether the Northern Arc and the Arctic Bridge are allowing competing grain suppliers to just catch up with the US transportation advantage, or accelerate past and leave US farmers in their wake.
The floor is open for discussion.
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