Experts Remain Optimistic Despite Hurdles Overseas

National Corn Growers Association Lead Economist Krista Swanson remains optimistic despite overseas obstacles for United States corn exports.

Drought in Central America and turmoil in the Middle East have added time to trade routes and raised prices for ocean freight shipments.

“The Panama Canal is really important when it comes to exporting corn and soybeans to some of the Asian countries in particular,” Swanson said.

The Associated Press reports port authorities decreased crossings through the Panama Canal by 36% due to record drought. In 2022, the U.S. exported 17% of corn through the channel.

On January 16, authorities announced an increase from 22-24 daily transits. However, the number paled to the canal’s typical 36-40 daily movements.

A typical shipment through the Panama Canal takes U.S. grain approximately 32 days to reach Japan. Swanson said with the backups the Suez Canal is the next best pathway but takes shipments nearly 50 days.

However, major shipping organizations are bypassing the Suez Canal and vying for alternative, longer routes after Houthi attacks in the Red Sea. The detours around the tip of Africa are expected to take 54 days or more.

“Now we're looking at close to doubling the number of days at sea,” Swanson said. “Which really makes it more expensive to get grain to the destination.”

IL Corn Director of Exports and Logistics Collin Watters said longer export routes drive up transit costs on U.S. grain shipments. Grain freight costs from the U.S. to Japan via the Panama Canal increased in August through December by more than 22% compared to early 2023—a 62% rise from pre-coronavirus rates.

No Bull Ag Economist Susan Stroud reported the Red Sea detours alone have increased shipping transit fees by 5-15%.

“There’s a finite number of boats and crews. So, if those boats are now on the water, sailing for a longer period then they aren’t available for other shipments,” Watters said. “Everything is interconnected. It adds a lot of inefficiency to the entire system causing freight costs to go up.”

Watters and Swanson said Brazil, a top competitor for U.S. grain, is less effected by the backups. Grain exports from Brazil can travel around the Cape of Good Hope in Africa in 40 days—14 days shorter than the U.S.

“The bigger concern is that competitors', mainly South American, freight operations haven't changed all that much,” Watters said. “They’re still able to make those movements from Brazil and Argentina to Asia the same way they normally would. Ultimately, their costs haven’t been as impacted as ours.”

Swanson remains optimistic despite congestion at sea. She said nearly 50% of U.S. corn exports traveled to Mexico in the 2023-24 marketing year. “Certainly, ocean freight rates, distance and travel are not issues when we’re talking about Mexico,” Swanson said. “They’re a super important trading partner to the United States and corn grown in Illinois as well.”

Swanson said ethanol production and corn feed demand also increased this year placing farmers in a good position despite shipment implications.

After underwhelming grain exports last marketing year, Watters said he remains cautiously optimistic.

“United States’ grain right now is very competitive in the world market,” Watters said. “Hopefully demand picks up and I'm sure that the American farmer will be able to satisfy that demand in the coming year.”

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