Shipping Vessel Being Loaded with Grain

Grain Movement Through the Panama Canal

The Panama Canal is of great strategic importance, not only to the United States but to every country that operates an ocean water navy and to every company that needs to have goods shipped through that area of the world- which makes it vitally important to many companies, farmers and food producers.

The Panama Canal is considered a modern engineering world wonder; humanity cut a line through an entire continent. Men and machine dug several miles of land up and managed to allow massive ships to pass through this canal. The canal is more important than just showing off what excruciating, hard labor, vision and perseverance can achieve. The French started construction in the 1800s to facilitate trade and increase commerce revenue but eventually their project went bankrupt. Then the United States got involved. Teddy Roosevelt knew that the U.S. Navy needed a way to connect its Pacific fleet and its Atlantic fleet; otherwise it would take weeks for the ships to make the hazardous trip around the Southern tip of South America and travel all the way up to North America again. Now they would have a way to cut weeks off of the travel time for ships getting from the Pacific Ocean to the Atlantic Ocean and vice versa. There are several uses for the canal, both militarily and economically.

Shockingly, the canal was a cheaper easier alternative to shipping then using the routes above Canada and through the Northern Hemisphere, known as the Northwest Passage. Above Canada there are several archipelago islands which, combined with massive ice fields, make navigation difficult through that area. Due to the modern advent reduction of the ice sheets, the waterways are becoming a more viable option, though when the Panama Canal was constructed, there was no consistent Northwest Passage. During the warmer months, explorers would occasionally find a route large enough for container ships but it was inconsistent and costly to search every summer for a shipping lane for a couple months a year of use.

The Canal was a struggle for the French with their efforts bankrupted economically. They cancelled the project and it lay dormant for some time. The United States still had desires to adopt and build the Canal. Under Theodore Roosevelt, construction of the Canal continued and was completed in 1914. For more information on the canal read our earlier article here.

Grain Trade

Regarding grain trade; the canal is less important than it is for other goods concerning grain movement for North America. Grain commodities, such as corn, are mostly produced and grown in the mid-west, making it more efficient for grains to be shipped- via train, truck or barge- to the most convenient U.S. ports. If commodities such as wheat are destined for Asia, then they go to the West coast. If they are destined for Europe, they then go to the East coast.

What the canal is important for is goods coming from South America. Due to the mountainous terrain of central South America, it can be faster and cheaper to transport the produced products and goods via container ship through the canal to other parts of the world.

Economics

The economic repercussions of the canal are more apparent than ever. With the Panamax ships bringing thousands of tonnes of goods through that canal, shipping companies can save hundreds of thousands of dollars every time one of their ships pass through, versus the cost of going around the South American Continent.

Map Route

The green line (see map) is the route that ships use from West to East (or vice versa) if they travel through the Panama Canal. The blue line is one that would be used without the creation of the Panama Canal. As you can see, even with how slow ships travel through the Canal, it is still a lot faster than taking the long route. It is also safer. The route around the tip of South America is notoriously dangerous and hazardous to the ships, resulting in slower travel times making shipping costs rise slightly. Any change in shipping routes of this scale will be immediately felt in the prices of goods that rely on this route.

Shipping goods is a dangerous low margin endeavor that relies on the economies of scale to make a profit. That is why shipping container vessels are so large because they need to accommodate more containers in order to maximize their profit. Cutting weeks off of travel time allows for less delays and fewer costs for the company and consumer.

The Canal allows 35–40 ships to pass through each day, and while not all of those are Panamax vessels, we can use the tonnage of the average Panamax vessel to showcase how much average weight passes through daily. Each Panamax ship can carry 52,500 tonnes during transit of the canal due to draft limitations. 35x52,500= 1,837,500. Approximately 1,837,500 tonnes of goods travel through the Canal daily meaning approximately 670,687,500 tonnes of goods travel through the Canal annually. That was before the new locks were installed opening up another lane and allowing even bigger ships.

Militarily

The original reason that the canal was constructed was to ensure that the 2 U.S. Navy fleets could support each other and to help project the United States power. The need to marry the 2 fleets was made aware to Teddy Roosevelt when he fought in the Spanish-American war and couldn’t get enough Naval support because the Pacific fleet couldn’t get around South America in time to support the Atlantic fleet.

Theodore's experiences as a Rough Rider influenced his drive to finish the canal to enable the navy to become a more global force and reduce the number of fleets needed to globally project power. During this time, the United States was exiting its isolationist stage and starting to project its global abilities and influence; the first example being the Canal itself. Initially the territory was part of Colombia but America helped annex the territory to create Panama and allow the construction to continue.

Coincidentally, the construction of the Canal finished the same month that the fighting in Europe erupted, and while it would be years before United States got militarily involved, the canal helped deliver goods to Britain and support the United States allies.

During the 2nd world war the Canal was of paramount importance and the United States and Axis powers knew this. There was a plan to dive bomb the canal using two Stukas launched from an unknown Colombian island, but that plan was cancelled for unknown reasons; and it likely would have failed. The United States established military bases in Panama in exchange for completing major public works for the country; those bases were maintained until the 90s when control of the Canal was transferred to Panama.

The Panama Canal is incredibly important to commercial shipping, The United States and to Panama’s economy. In fact, it is important to just about every economy in the world as we all rely on imports and exports to sustain GDP and growth. Nowadays, the Canal is the largest source of income for the Panamanian government and is in constant use. It is so important that there was a new addition that opened up in 2016 allowing for the larger Panamax vessels to travel through the new locks. Panama is now considering an even larger expansion on the lake itself as well as yet another additional set of locks.

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1- “Building the Panama Canal.” U.S. Department of State. U.S. Department of State, n.d. Web. 20 Feb. 2017.

2- Potter, Jase. “Modern World Wonders-Panama Canal.” Modern World Wonders-Panama Canal. N.p., n.d. Web. 20 Feb. 2017.

3- “Theodore Roosevelt.” Theodore Roosevelt — The World of 1898: The Spanish-American War (Hispanic Division, Library of Congress). N.p., n.d. Web. 20 Feb. 2017.

4- YouTube. YouTube, 12 Aug. 2015. Web. 17 Feb. 2017. https://www.youtube.com/watch?v=vt430_qRqHk