What is in this article?:
- More Grain Heads West | Will New U.S. Export Elevator Shift Corn Belt Westward?
- Not limited to foreign sales
Not limited to foreign sales
The new terminal’s effects aren’t limited to foreign sales, according to several analysts.
“This is a big, powerful facility, the first new U.S. export elevator in decades,” says Jay O’Neil, senior agricultural economist at Kansas State’s International Grains program. “It’s the biggest and fastest in the PNW, so it adds considerable capacity.
“It has motivated other export houses to modernize and expand capacity to be competitive. That’s meant improved storage capacity, faster elevator legs and faster unloading for rail coming in.”
Examples include United Grain’s Vancouver Improvement project, scheduled to add 66,000 metric tons of storage capacity this year and to expand rail yards by 2014, and Ag Processing’s multi-million-dollar expansion at the Port of Grays Harbor, which will add on-site storage and expand unloading capacity for unit trains. At Port of Kalama, the Temco terminal plans to invest $50 million, adding 12 storage silos, new rail lines and new conveyors.
Even so, O’Neil doesn’t expect a sea change to shift the bulk of the grain trade from the Gulf to the PNW.
“I would say PNW exports to South Asia will increase, but I don’t think all the grain business will shift. The Panama Canal expansion means deeper draft ships can load out of the Gulf to Asia, and it will reduce the wait time to transit the canal. That could knock two to three days off transit times during peak season.”
All the port developments as good news for soybean growers, says Soy Transportation Coalition’s Executive Director Mike Steenhoek. “For states with little processing and little local markets for beans, this facilitates soybean growth. North Dakota, for example, is very export-oriented.
“We’re going to see more areas where people can look at rail or barge to move their commodities, and there is an option should have a depressive effect on barge rates. It puts a lid on. That could be a great benefit to grain shipping.”
There’s agreement that draw areas – the areas that normally feed commodities south to the Gulf or west to the PNW – will be affected, possibly in a number of ways.
A Soy Transportation Coalition study suggests that a combination of Panama Canal improvements and river dredging at New Orleans could expand the main draw area for the Mississippi to 150 miles on either side of the river.
Exports from South Dakota, much of Nebraska and western Minnesota already flow to the PNW. Now the demand to feed Longview could expand the PNW’s draw farther east into Iowa.
Chad Hart, Extension economist and grain markets specialist for Iowa State University, sees another likelihood: expanded corn and soybean acres in the western Corn Belt.
Acres are moving toward this area, he says. “More draw means more incentives for growers in the Dakotas and Minnesota, and that should mean improved basis.
“In Iowa, the traditional pattern is for basis to be stronger in the southeast, where people can sell to the river. Now we could see a similar pattern for Dakota and Minnesota farmers who can sell to the PNW.”
The new PNW capacity will take grain away from other markets, which will then go elsewhere to source their supplies, O’Neil says.
“So you will have a transportation battle. All the facilities out there [on the Pacific] are going to be hungry, but it’s still very cost-effective to load grain down the river to New Orleans.
“Will the river fight back, and does that mean barge rates will have to adjust, and then ocean freight rates out of the Gulf will have to adjust?
“The grain business always has multiple dynamics, and when you get more at play, it gets harder to predict,” O’Neil. “We’ll have to see how hungry the river to New Orleans is compared to the PNW to see how much more grain the PNW will draw.”