UC Davis Agricultural and Resource Economics

Heidi Schweizer, University of California, Davis

Response of North Dakota Soybean Flows to the Panama Canal Expansion: A Positive Mathematical Programming Model

Date and Location

Thursday, November 2, 2017, 4:10 PM - 5:30 PM
ARE Library, 4101 Social Sciences and Humanities

Abstract

The expansion of the Panama Canal, completed in 2016, approximately doubled its capacity. The expansion should have direct and indirect effects on United States soybean transportation, because grain and oilseed exports dominate the East to West dry bulk traffic through the canal. In this paper, I examine how the Panama Canal expansion might change soybean flows from North Dakota. North Dakota is situated on the “economic divide” between shipments west to Portland and shipments south down the Mississippi River. I specify a spatial-temporal partial equilibrium model of soybean flows from North Dakota producing regions and calibrate this model to 2010-2016 data using positive mathematical programming. With Monte Carlo methods, I simulate prices and transportation costs to conduct sensitivity analysis of the calibrated model. I solve for soybean shipments from North Dakota regions before and after benefits of the Panama Canal expansion are realized. Results show that after the Panama Canal expansion more than two million bushels (1.5 percent) fewer North Dakota soybeans will be exported through Portland, Oregon. These soybeans will travel South instead, and are sourced from North Dakota regions close to Minneapolis, Minnesota. We can expect approximately five to six more unit-train shipments to Minneapolis during the first three months of the soybean marketing year.

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