ESTIMATING A PRELIMINARY DEMAND MODEL FOR CORN MOVEMENTS FROM THE U.S. EAST COAST AND GULF TO EAST ASIA, FUTURE CORN TRAFFIC, AND DECARBONIZATION PROCESS

Abstract

Corn is the second most important component of the grain segment after soybeans, averaging close to 35.7% of total grain traffic through the Panama Canal. The objective of this paper is to attempt to fit a preliminary general demand model for corn traffic through the Panama Canal using Ordinary Least Square (OLS). The corn traffic estimated is the U.S. Gulf and East Coast to East Asia, particularly China, Japan, South Korea, and Taiwan, and the research hypothesized the possible variables that may explain the downward trend in
the movements of corn in this route between October 2004 to September 2022. Canal costs, U.S. Gulf freight rates, U.S. Gulf and Pacific Northwest grains inspections and the energy index were the most important explanatory variables in the study. This research also discusses the future of corn traffic through the waterway in terms of alternative sources, routes, and possible demand for corn, and explores the decarbonization process impacting the Panama Canal and the U.S. corn supply chain. For the literature review, the research is leveraging on previous estimation of demand functions for grains and the decarbonization studies related to the maritime industry, and examine papers related to Panama Canal shipping demand, thus closing the gap on the literature about transportation demand through the waterway.