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Shippers Feel Pressure

December 4, 2008
By: Charles Johnson, Farm Journal Editor
 
 


The economic downturn pressures shippers just as it does other business sectors. That will have trickle-down effects, both positive and negative, on agriculture.

"It could have an impact on our ability to ship grain," says Scott Fritz, chairman of the U.S. Soybean Export Council, who farms at Winamac, Ind. "Construction of new vessels as well as improvements to infrastructure have slowed. So ag may be constrained due to capacity."

On the other hand, declining international trade means steamship bulk freight rates have crashed, dropping as much as 95% from their peak at midyear. Bulk rates from Pacific Northwest ports that topped $140/metric ton now are under $20/ton. That makes exporting ag products much less expensive.

"There were vessels trading in July at $100,000 to $140,000 a day, or $200,000 a day on larger vessels, that now are at $6,000 a day. It's a very, very challenging scenario," says Jay O'Neil, senior economist with Kansas State University's International Grains Program. "We want to be very careful that cargo makes it to port and does not get seized in a bankruptcy proceeding."

Big boxes. About 5% of U.S. grain now moves overseas via containers. "Containers bring the ability to segregate grain, something we lusted after for many years," says Lynn Clarkson, president of Clarkson Grain in Cerro Gordo, Ill. "This started with food-grade soybeans. Then along came GMOs and segregation became critical."

In addition, he says, "The container democratizes trade. You don't have to find a buyer willing to buy 20,000 tons of grain at a time. A farmer can develop his own trade, if he wants."

Container demand eased off this summer, and in the short term, "U.S. imports of manufactured goods will be growing more slowly. So outbound container freight may not be as cheap as it has been the past couple of years," says Marc Levinson, an economist and author of The Box, a book about the container industry. "But I don't expect a decline in container imports once we get through this recession."

Joe Jordan, general manager of Soyatech, adds: "Farmers have had a hard time getting the containers they need at rates they can pay. They need storage and transportation costs they can afford or it negates the premium they get for specialty crops. I expect containers to be more available and not have the critical shortage of six months ago."

To contact Charles Johnson, e-mail CJohnson@farmjournal.com.



Top Producer, December 2008

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FEATURED IN: Top Producer - DECEMBER 2008
RELATED TOPICS: Marketing

 
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