Many Irons in the Fire: 2011 STC Projects

For farming to remain profitable, it is not enough to increase supply and demand. We must also increase connectivity between the two. That connectivity is our nation’s transportation infrastructure.

There is a growing realization among farmers of the importance of a well-financed and maintained infrastructure. Our nation’s transportation system is largely the source of U.S. agriculture’s competitive advantage on the global marketplace. It also has a significant impact on the actual price farmers receive at the original point of delivery.

At its annual meeting in December, the board of directors of the Soy Transportation Coalition established an aggressive work plan for 2011 to address many of the glaring deficiencies within the nation’s transportation system. The following is a list of some of the leading initiatives of the STC for the current year.

Highways and Bridges

The STC is analyzing the current system for financing the nation’s surface transportation system and the reasons why the current system is unsustainable. Attention is also being devoted to the leading proposals being considered by Congress for financing the next surface transportation bill. Finally, the STC is examining the impact of the leading proposals on the soybean industry, in particular, and agriculture, in general.

Every six years, the U.S. Congress reauthorizes legislation that determines the volume of spending, the recipients of that spending, and the revenue sources of that spending for the nation’s surface transportation system. The current surface transportation plan, the “Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users” (SAFETEA-LU), had an expiration date of September 30, 2009. Since Congress was unable to reach consensus on a new six-year authorization, the current legislation has been extended.

The infrastructure projects and overall plan stipulated by SAFETEA-LU are primarily financed by an 18.4 cent tax per gallon of gasoline purchased and a 24.4 cent tax per gallon of diesel fuel. This arrangement has proven to be unsustainable in adequately funding our nation’s surface transportation needs. As a result, new funding mechanisms for the next surface transportation bill are being explored and debated. This issue poses a significant impact on the transportation of soybeans and other agricultural products. It is therefore advisable for the soybean producer community to develop an understanding of these issues and their potential impact on industry profitability.

Locks and Dams

The STC is conducting a study, “America’s Locks and Dams: ‘A Ticking Time Bomb for Agriculture?”, that will highlight and investigate: 1.) The current and future role of our nation’s lock and dam inventory in facilitating the movement of agricultural freight; 2.) The current condition of our nation’s lock inventory – particularly which locks are most likely to experience a catastrophic failure; and 3.) The economic impact on agriculture if such a failure occurs.

The project aims to increase the intensity of support for lock and dam modernization and repair by highlighting the tangible consequences potentially experienced on a local level if a significant failure occurs. Communicating the local impact often resonates more than communicating the macro impact.

Specifically, the analysis will examine the impact on basis for agricultural commodities, agricultural inputs, and energy prices in a particular congressional district or region. The analysis will also profile a potential farmer, grain elevator, and soybean processor potentially affected by the lock failure in the congressional district or region.

Panama Canal Expansion

The STC is conducting a project that will accomplish two objectives: 1.) Develop an understanding of the impact of the Panama Canal expansion’s impact on U.S. agriculture, in general, and the soybean industry, in particular; and 2.) Develop a list of recommended action steps to ensure U.S. agriculture is able to fully benefit from the Panama Canal’s expansion.

While much investment over the years has been allocated for the Panama Canal’s operations and maintenance, the number and size of the lock chambers has remained the same since the canal’s opening in 1914. Currently many of the largest ocean vessels exceed the size of the canal locks. To maintain its role as a key artery for global commerce in the future, the Panama Canal Authority determined that expansion of the canal

was necessary.

The Panama Canal is being expanded by constructing an additional third channel with a new set of locks – doubling the size of ships able to transit the canal. The project is scheduled to be completed in 2014 at a cost of $5.2 billion.

There is a lack of understanding of how the completion of the Panama Canal expansion will impact the flow of agricultural products in the United States. If U.S. agriculture is facing a significant change to how grain flows in this country, it is important to understand it more thoroughly than we currently do. This change in flow will certainly impact our current infrastructure. Some corridors may be further exhausted. The bottleneck that often occurs at the Panama Canal may simply shift, once the expansion is completed, to U.S. ports or our interior waterways.

Comprehensive Farm to Market Transportation Study

The transportation system that serves U.S. agriculture can be described as “trying to attach a garden hose to a fire hydrant.” Our transportation system cannot completely handle what farmers produce. The STC will therefore conduct a study that will highlight: 1.) What and how much U.S. farmers produce – both current and future; 2.) Where this production occurs and will occur in the future; 3.) Where this current and future production will be consumed; and 4.) The transportation system that is charged with distributing the current and future production. The study will highlight to what extent is our transportation capable of accommodating our current and future production. Is it likely that the problem will get worse? In the future, will we be trying to attach a drinking straw to a fire hydrant?

To access any of the above studies as they are completed, go to www.soytransportation.org.