The volume of agricultural exports, especially those that move in containers, will be higher in the coming year than they were following the drought of 2012, according to agri-business shippers who addressed the South Carolina International Trade Conference this week.
“Agricultural exports as a whole may go up, though the commodities will change,” said Doug Grennen, senior manager of the BCO group at the Scoular Co.
For example, some cotton farmers this year shifted a portion of their acreage to higher-demand crops, and therefore cotton exports will likely be down about 8 percent, said Michael Symonanis, regional head of execution, North America, at Louis Dreyfus Corp.
Crop substitution makes sense because China the past two years stockpiled cotton, and therefore there will be less of the commodity moving to this important market. And the U.S. has relatively little inventory following last year’s drought.
Because the U.S. is the high-cost producer of cotton, importing nations will source more of their product from lower-cost countries. The bottom line this year is that there is “nothing pulling our commodity through the value chain,” Symonanis said.
The opposite scenario is developing with soybeans. The U.S. is a primary supplier of soybeans, a commodity that is in great demand overseas, especially in Asia, and soybean production should be strong this year.
The U.S. Department of Agriculture projects soybean exports to China — the largest buyer of U.S. soybeans — in the coming year will be 17 percent higher than they were this past year.
Although 93 percent of U.S. grain exports move in bulk vessels, the share of containerized grain is edging up, because some buyers value the financial flexibility and infrastructure advantages inherent in shipping 25 metric tons of grain in a container compared with 55,000 tons in a bulk vessel, Grennen said.
However, documentation requirements for smaller shipments are 10 to 20 times higher than for bulk shipments, and the freight cost per ton is higher. That is why shippers of containerized grain must differentiate themselves through their logistics advantages, he said.
Distillers’ dried grains, which are a byproduct of ethanol production, are a booming export commodity. DDGs are a popular feed commodity for cattle, pigs and chickens. “Pigs love DDGs,” Grennen said.
China has 600 million pigs, or 10 times the number in the U.S. DDG exports to China could total 4 million metric tons this year, up from 1 million tons just three years ago.
A problem shared by many shippers of containerized agricultural products is that crops are grown in rural areas, but the empty containers that are needed to carry the grain are located in cities. Repositioning of empties from urban areas to grain silos and transload facilities in the interior can be costly.
However, as ocean carriers continue to introduce bigger container ships into the U.S. trades, they will actively seek grain exports for the back haul to Asia, Grennen said. He indicated carriers could make money on containerized grain exports. “It’s far from the best rate, but it’s not the worst rate,” he said.
Chilled and frozen meat products command a higher freight rate than dry commodities, and they have a bright future in Asia, where the burgeoning middle class seeks high-quality protein products.
Chicken exports are leading the way, said Diogo Lobo, president of Lineage Logistics, but exports of beef and pork are also steady, he said. The U.S. and Brazil are positioned the best to satisfy the growing demand for protein products in the export markets, Lobo said.