PANAMA CANAL — The world’s two largest shipping canals are facing delays and problems, threatening to snarl commodities shipping and push prices higher. This is bad news for Midwest grain farmers.

The Suez Canal is becoming difficult to access. Major shipping companies have said in recent days that they will reroute from the Suez Canal to travel around Africa to avoid passing through the Bab el Mandeb Strait because of missiles fired at ships by Iranian-backed Houthi militants in Yemen.

Of more concern to Midwest farmers is the Panama Canal where drought has sent the canal’s water levels to record lows and long delays in ships crossing. Drought conditions have resulted in Gatun Lake being seven feet lower than normal, causing delays between three and eight days. Gatun Lake, which connects the Atlantic and Pacific oceans, typically sits around 87 feet above sea level. Right now, it’s around 81 feet, causing the Panama Canal Authority to limit the number of transits through the canal each day. To make matters worse, Panama just entered its dry season that runs from now through mid-April.

This prompted Mike Steenhoek, Executive Director of the Soy Transportation Coalition, to pay a visit to the Panama Canal in mid-December and see first-hand the bottleneck and drought issues at the canal. Steenhoek has the task of tackling transportation infrastructure problems in the U.S. and abroad head on, and he was at the canal to ensure farmers’ grain reaches those export markets.

 “Normally, you would expect about 38 to 40 vessel transits per day through the Panama Canal,” Steenhoek said. “Right now, they’ve instituted restrictions, so we’re down to about 22 now. That number can get down to 18 when it comes to February. “

Steenhoek added that vessels carrying soybeans and other grains aren’t at the front of the line to get through.

“They’re basing that restriction largely on who has the ability to pay the most,” he said. “And I understand that, but those tend to be the large container vessels, and the liquid natural gas and petroleum gas kind of vessels. It’s not actually the dry bulk vessels.”

Steenhoek says that a confluence of events is hindering grain movements to overseas markets, including drought conditions on the Mississippi River. All of these events are costing U.S. producers money, and that’s money that they cannot afford to just absorb.

“If we try to pass those costs on to our customers, customers will respond by saying, well, maybe it’s a good day to buy more from Brazil,” Steenhoek said. “That is our reality. So a lot of those costs are ultimately absorbed by the farmer.”

Steenhoek says those in the U.S. benefit from having a strong rail system to move goods to the West Coast to ship out from there, but that comes at an increased cost as well.

 Accompanying Steenhoek on this trip were Larry Rusch of Vincennes, Ind., and Jim Douglas of Flat Rock, Ind. Rusch is an Indiana Soybean Alliance board member. Douglas is one of nine directors to the United Soybean Board. Rusch and Douglas are among 11 farmers who made the trip to the Panama Canal, looking for solutions to the shipping dilemma.

“From my hotel room I could see ships lined up out in the ocean, waiting their turn to enter the Panama Canal,” Rusch said. “There’s always 30 ships out there. With the limited number of ships allowed to enter the canal there will be an increase in the freight rate. We already have a high freight rate in the U.S. due to the drought that we now have in the Midwest. There’s less grain moving down the Mississippi River and rates are being raised there. All this cuts into the price that they’re willing to pay our farmers.”

“We in Indiana have exports of corn and soybeans which make their way down the Mississippi and eventually to counties like Japan, China and others,” Douglas said. “In the U.S., the Mississippi and Missouri Rivers are low and affecting shipping as well.

Right now we’re studying ways to make sure the corn and soybeans get to the customers who purchased them.”

The Panama Canal is an artificial, 51-mile waterway in Panama that connects the Atlantic Ocean with the Pacific Ocean. Canal locks at each end lift ships up the Gatun Lake and then lower they ships at the other end. Fifty-two million gallons of water are eventually released into the oceans. However, due to drought conditions some ships are unable to traverse the canal.

 “The low water in (Gatun) lake was caused by the drought they have down here and it’s very abnormal for them,” Douglas said. “Their rainy season down here doesn’t begin until March so this situation will continue for a few more months. The oil and gas industry, cruise industry and container industry books time slots to enter the canal in advance but the grain industry does not. That’s the pecking order.”