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The Truth about Trade

RSS By: Dean Kleckner, AgWeb.com

Dean is Chairman Emeritus of 'Truth About Trade & Technology, a nonprofit advocacy group led by a volunteer board of American farmers.

Containing Cost

Jul 03, 2008
Barges get a bum rap. They aren’t flashy like NASCAR vehicles. They aren’t popular with kids like bulldozers and fire trucks. They certainly don’t go on interplanetary voyages like NASA probes.
 
The word is actually a bit of an insult. When we talk about people who “barge” right into the middle of something, we mean that they’ve moved clumsily and perhaps even ungraciously.
 
With $140 per barrel crude oil (today), when it comes to transporting material from point to point, nothing beats a barge loaded with containers.
 
Consider a few figures. A semi-trailer truck can move a ton of freight about 59 miles on a gallon of diesel. Railroads are a popular alternative because they’re much more efficient: With a single gallon of fuel, they can carry a ton of freight 386 miles.
 
Yet neither one can approach the incredible fuel efficiency of barges. By burning a gallon of fuel, they can ship a ton of freight 522 miles. That’s roughly the distance from Des Moines to Detroit.
 
The problem with barges is that they aren’t flexible. Trucks can drive on highways and make deliveries right to your doorstep. Trains glide along railroads that crisscross the country. Barges must keep to rivers and canals.
 
When heavy rainfall causes the Mississippi River and its tributaries to flood, the result can be a mess of frustrating bottlenecks. An executive at one company that depends on barges to move goods down the river recently told the Wall Street Journal that the current delays are costing him $1 million per day.
 
For farmers in the Midwest, barges are a primary means of shipping what we grow to consumers in the United States as well as around the world. In time, the floodwaters will recede and the holdups will disappear.
 
An even greater problem involves the scarcity of containers. Two or three years ago, we had a surplus of containers--so many that people were scratching their heads and trying to figure out what to do with all of the empty ones.
 
The latest figures from the Federal Maritime Administration bear out what a lot of us have been concerned about more recently: The number of empty containers available for cargoes such as corn, wheat, soybeans and DDG’s (distiller dry grains; a co-product of ethanol production) shrank dramatically last year. The problem has only gotten worse this year, as Americans export more and more goods abroad.
 
According to some reports, exporters can wait three to six weeks for containers to become available. In the meantime, they have to pay storage costs, which only add to the price of transportation--especially when a popular export item, such as meat, requires cold-storage facilities.
 
The Agricultural Transportation Coalition estimates that if more containers had been available, farm exports might have been 20 to 30 percent higher over the last six months. The international food crisis would have been slightly milder as well.
 
When the demand for containers was low, shipping costs were low. Now that the demand is high again, shipping costs have gone up and containers are harder to source. Eventually, the market will address the container shortage and we’ll get the supplies when and where we need them.
 
But it will take time. A public-policy solution may help the problem, especially in the future: Some exporters believe Congress should repeal shipping laws that give antitrust immunity to ocean carriers. Currently, these carriers can fix transportation rates--a practice that insulates them to market signals that might otherwise inspire a quicker response to shortages.
 
In addition, we need to update our transportation infrastructure system. It’s the backbone of a vibrant U.S. economic system and the ‘road’ that connects us to the rest of the world. Locks and dams, railroads, roads and ports are all outdated and in need of renovation and expansion. This is going to require some serious and strategic investment.
 
What amazes me is that, through all of this, when left alone, trade, trade agreements  and the laws of economics work. And when they do, we all benefit.
 
Tim Burrack raises corn and soybeans in partnership with his brother on their NE Iowa family farm. Tim is a Board Member of Truth About Trade and Technology. (www.truthabouttrade.org)
 
 
 
 
 
 
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