Cost-share split sought for inland waterways work

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By Chris Gillis for American Shipper

Inland waterways users want Capitol Hill lawmakers to modify the cost-share structure to finance infrastructure projects on the commercial river system to reflect the approach that now is used for deepening the nation’s harbors from 45 to 50 feet.

Currently, the cost-share structure for inland waterways infrastructure projects is 50% nonfederal funds and 50% federal funds. The 2016 Water Resources Development Act (WRDA) established a cost-share split of 25% nonfederal funds and 75% federal funds to support harbor deepening.

In the case of the inland waterways industry, the 25% nonfederal funds would be derived from the Inland Waterways Trust Fund (IWTF) for inland navigation projects. The IWTF is funded through the collection of a 29 cents-per-gallon diesel gas tax already paid by the inland waterways users.

The inland waterways industry wants Congress to make this change as it prepares the language in the 2020 Energy and Water Development and Related Agencies Appropriations Act.

“The inland waterways system has a portfolio of more than 15 high-priority inland navigation projects either under construction or awaiting construction. At the current rate, many of these projects will not even begin construction in the next 20 years,” testified Rob Innis, plant manager for LafargeHolcim (OTC: HCMLF) at Sparrows Point, Md., as a representative of the Waterways Council Inc. (WCI) before the House Water Resources and Environment Subcommittee on Wednesday.

According to Innis, LafargeHolcim, a global supplier of concrete and aggregates, relies on the U.S. inland waterways system to support 30 facilities. In 2018, the company transported 9.2 million tons material over the nation’s rivers.

“By conforming the cost share with the Inland Waterways Trust Fund to the same formula that was approved for deep-draft ports in WRDA 2016, this committee’s action would allow for the inland navigation capital program to remain operating at or above a $400 million level achieved since the cost-share change at Olmsted and accelerate project delivery on that portfolio of critical inland waterways projects,” said Innis, who also serves as a member of the Inland Waterways Users Board. A special provision in the 2014 Water Resources Reform and Development Act (WRRDA) allowed for a one-off cost share of a 25% IWTF-75% federal funding split over the last six years to speed up the Olmsted Locks and Dam revitalization program. The Inland Waterways Users Board noted to Congress in May that this allowed for an estimated $600 million in economic benefit to be already achieved for the nation.

“With this cost-sharing change, there will be sufficient funds in the IWTF to continue full and efficient funding for the ongoing inland waterways projects already under construction and to allow consideration of additional important and time-sensitive projects,” the Inland Waterways User Board wrote in a letter to the leadership of both the House and Senate on May 10.

SSGA represented at Ag Transportation Coalition Annual Meeting

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By Bruce Abbe

Ag shippers currently face a myriad of issues and challenges in intermodal container transportation, from trucking costs, port congestion, coming cost increases from the pending low sulfur fuel mandate, demurrage and detention penalties, and more. Those attending last week’s national Agriculture Transportation Coalition (AgTC) Annual Meeting in Tacoma, Wash., heard a very sobering take on the “elephant in the room” for exporters – the unknowns and dim prospects surrounding the future of trade between the U.S. and its largest ag export customer: China.

AgTC’s annual meeting drew a record crowd of nearly 500 ag export shippers, forwarders and logistics officials. Among them were 18 member companies of the Specialty Soya and Grains Alliance, including SSGA board members Bob Sinner of SB&B Foods, Darwin Rader of Zeeland Farm Services, and Bruce Abbe, past president of Midwest Shippers Association (MSA). Among other current SSGA or past MSA members with multiple staff in attendance were: MacMillan-Piper, Inc., Northwest Seaport Alliance, Professional Export Services, GlobeRunners, Inc., Fr. Meyer’s Sohn NA, LLC – FMS Logistics, Scoular, Laufer Group international, Tacoma Transload, Inc., US Nisshin Shokai, Ltd., Norseman, Toyota Tsusho America, Inc., International Feed, Double River Forwarding LLC, Bluegrass Farms of Ohio, Inc., Ray-Mont Logistics America and Fornazor International.

Erin Ennis, senior vice president of the US-China Business Council (USCBC), told attendees she wished she could bring a more positive message about the prospects for improved trade with China, but international trade industry observers remain very much in the dark about where talks stand. Current posturing of the Trump Administration and its China counterparts does not bode well heading into the next scheduled meeting at the G20 summit in Tokyo at the end of this month.

USCBC works on trade policy on both ends, seeking improved trade flows and fair business operating environment by both the U.S. and China’s government.

Ennis, a ten-year veteran at USCBC and previous staff member at the U.S. International Trade Commission and on Capital Hill, made several observations.

“China has yet to feel the pain of the U.S. tariffs,” she said.

Currency valuation changes have helped minimize the cost impact of the tariffs in place since 2018 so far. But the threatened, pending increases will have an impact if they go through.

“China is preparing for a no deal scenario,” Ennis said.

President Trump has likewise indicated no rush to compromise on the remaining issues under negotiation – some, notably intellectual property and technology rights, that are serious, thorny matters to agree on.

Due for a reset?

Ennis believes that regardless of who won the last election, the U.S. and China would still be in a trade dispute. The relationship between China and the U.S. “was due for a reset,” and there is wide spread views among trade observers from both political perspectives that China is a bad actor. She believes “there has been uniform support for the Administration’s tactics.”

Currently, roughly $267 billion in Chinese goods exported to the U.S. are subject to 25 percent tariffs from the first three lists of products that have been posted since last fall. In addition, some $17 billion in steel and aluminum imports are subject to tariffs. Negotiations are to begin again and if there is no agreement, the Trump administration said it will go forward with tariffs on the remining $300 billion in imported products from China.

Retaliation

If that happens, China will unquestionably retaliate. Ennis estimated that China has retaliated from past Trump tariffs at about 85 percent of reciprocal tariffs at the 25 percent tariff level. Although some ag exports got hit twice so in reality it’s a 50 percent tariff, she indicated. China has also intimated it could take “qualitative,” in addition to “quantitative retaliatory moves.”  Qualitative generally means unspecified challenges on issues like delays and product inspection hold-ups at the ports.

It is unclear how far apart the negotiators are over the intellectual property rights issue, she said.

“Economists say this uncertainty and threats of higher tariffs on trade between the U.S. and China is accelerating the chance for a global recession,” Ennis said.

While some economic forecasters have projected 2020 for a recession, without an agreement and with big increased tariffs on the remaining trade between the two countries, a recession could start in the third or fourth quarter of this year.

In response to a question, Ennis said over the past 16 months China has reduced tariffs on products imported from other countries than the U.S. – consumer products mostly.

“Until there is an agreement, U.S. products will be at a disadvantage,” she said.

Ennis also said we’re not yet at a point of no return, no progress … but as long as the U.S. tariffs are in place, China will have to retaliate.

What does this mean for U.S. agriculture? The hard facts are that as long as the tariffs are in place, you will be priced out of the China market.

For more coverage of the AgTC meeting and the China trade presentation, visit here.

Shipping and trucking industries gearing up for new 2020 ocean vessel fuel mandate

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Six months before ocean vessels will be required to burn low-sulfur fuel, such as diesel used in trucks, a U.S. Department of Commerce advisory committee disclosed recommendations to mitigate potential fuel shortages and price spikes.

The International Maritime Organization will mandate that the cargo shipping and cruise line industries shift from marine diesel (so-called bunker fuel) to ultra-low-sulfur diesel starting Jan. 1.

Most ships are expected to use new blends of fuel oil, which will be produced to meet the 0.5 percent limit from 3.5 percent on sulfur oxide (SOx).

Heavy fuel has been used by the maritime industry for years despite criticism of pollutants, partly because of its lower cost.

Limiting SOx emissions from ships will improve air quality and protect the environment.

The main type of bunker oil is derived as a residue from crude oil distillation. Crude oil contains sulfur which, after combustion in the engine, ends up in ship emissions. In the atmosphere, SOx can lead to acid rain, which can harm crops, forests and aquatic species, and contribute to the acidification of the oceans, according to IMO.

The Advisory Committee on Supply Chain Competitiveness said the cost and operational impact of the rule remains uncertain while cargo owners, carriers and fuel users need as much transparency as possible regarding fuel availability and price increases. Further, it suggests that the affected industries and the public be kept aware of the low-sulfur regulation and that the U.S. Energy Information Administration immediately create a web page with regular updates on prices and availability.

Port and trucking officials told Transport Topics they are cautiously optimistic about getting through the transition.

“My concern is if there is a huge jump in demand for low-sulfur diesel for shipping vessels we have an adequate supply,” said Armand Patella, a vice chairman of the Maryland Motor Truck Association.

Patella said the petroleum industry, along with the shipping and trucking industries, have been working to develop a strategy.

An alternative to using low-sulfur diesel, approved by IMO, involves installing scrubber technology on ships to remove pollutants and get SOx emissions to required levels.

“There are at least four suppliers of low-sulfur fuel out there, so it seems like most have a plan around phasing ships into scrubbers and using this type of fuel,” said Bayard Hogans, vice president of Ports America Chesapeake, which operates Seagirt Marine Terminal at the Port of Baltimore via a public-private partnership with the Maryland Port Administration.

The panel also advised the Commerce and Energy departments:

Make available information about IMO-compliant fuels, including low-sulfur diesel, truck and rail diesel, liquefied natural gas and other alternatives.

Increase federal support for alternative fuel research, including engine and fuel production technology.
Determine whether the nation has sufficient low-sulfur crude reserves and refined products to avoid potential supply disruptions for the nation’s transportation system and heating supply.

Determine whether the nation’s heavy crude oil and fuel transportation network has sufficient flexibility and capacity.
In a letter to President Donald Trump, 10 Republican senators, some from energy-producing states, expressed support for the mandate. They said the nation’s growing energy dominance puts the country at “a distinct advantage” to global competitors.

“Any attempt by the United States to reverse course on IMO 2020 could create market uncertainty, cause harm to the U.S. energy industry and backfire on consumers,” according to the letter dated April 29.

Strike halts grain exports in Argentina

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BUENOS AIRES, ARGENTINA — A nationwide strike in Argentina protesting austerity measures under President Mauricio Macri brought the country’s airports to a standstill and halted work at key grains ports on May 29, according to a Reuters report.

The strike, called by the country’s main unions, comes as center-right leader Macri tumbles in the polls ahead of presidential elections in October, his popularity with voters hurt by high inflation, job losses and a weak peso.

According to Reuters, Argentina’s airports were shut down as a result of the strike, while grain exports stopped at the ports in Rosario, one of the most important agro-industrial regions in the world.

In February 2018, trucker owners went on strike briefly to attempt to force the adoption of minimum grain hauling rates, halting exports at the Port of Rosario.

That strike also affected the operation of grain mills in the Santa Fe province, where 80% of the country’s agricultural exports are processed, transported and loaded onto ships.

With 6.8 million tonnes of soybean exports in 2018-19, Argentina ranks third in that category behind Brazil and the United States, according to the U.S. Department of Agriculture.

Ag container shippers figure prominently in latest Top 100 U.S. exporter rankings; focus shifting to SE Asia development

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By Bruce Abbe

Familiar names of U.S. container ag export shippers popped up once again in the latest annual Top 100 U.S. Importer and Exporter rankings published in last week’s print issue of the leading transportation industry publication, the Journal of Commerce (JOC). SSGA provided insights to a second accompanying JOC feature story in that key annual issue on how U.S. ag exporters are accelerating their focus on developing Southeast Asian markets.

The rankings were based on data from Port Import/Export Reporting Service (PIERS), a sister company of JOC, which are based on bill of lading reports provided to U.S. customs regulators.

Note: One key factor worth noting, however, is that PIERS data only comes from reports provided to the U.S. government on shipments leaving from U.S. ports. Numbers from ag and other U.S. exporters that use Canadian railroads to ship from Canadian ports are not included in the JOC Top 100 statistics, so the actual container exports from the U.S. shippers are often larger.

The JOC/PIERS data is reported in twenty-foot equivalent units (TEUs), the standard method for measuring container volumes. Since 40 foot containers are the larger, more commonly shipped size of containers on ocean vessels, compared to 20 foot containers, the number of actual ocean-going containers is less than the TEU totals.

Among the Top 100 U.S. container ag grain and oilseed exporters in 2018 by ranking were:

  1. The DeLong Company, number four overall, with 144,461 TEU’s in 2018 shipped from U.S. ports. Animal feed/food grain & soy.
  2. Louis Dreyfus Company, 85,166. Predominantly cotton.
  3. Lansing Trade Group, 65,181. Animal feed & grain.
  4. Cargill, 61,869. Conglomerate (variety of export products).
  5. Scoular, 57,570. Agricultural goods.
  6. Gavilon, 55,344. Animal feed and grain.
  7. Archer Daniels Midland, 43,132. Agricultural goods.
  8. CHS, 41,408. Agriculture, energy, food products.
  9. Al Dahra ACX Global, 38,171. Animal feed & grain.
  10. Perdue Agribusiness, 32,170. Food and feed products.
  11. Green Plains Trading, 31,911. Animal feed and grain, primarily DDGS.
  12. Fornazor International, 25,044. Animal feed and grain.
  13. Prairie Creek Grain, 24,339. Animal feed and grain.
  14. Toyota Tsusho America, 16,671. Conglomerate (variety of export products including grain & feed).
  15. Poet Nutrition, 12,942. Animal feed and grain, primarily DDGS.
  16. Stone Arch Commodities, 12,200. Animal feed and grain.

It’s worth noting that all but two of the above-mentioned ag shippers are recent members of the Specialty Soya and Grains Alliance (SSGA), or have been sponsors or exhibitors at SSGA’s annual international soy and specialty grains conference.

Other prominent U.S. ag companies on the list include meat exporters JBS USA, Tyson Foods and Smithfield foods; chemical and other products exporter Dupont; and John Deere equipment manufacturer.

The top three exporters were conglomerate Koch Industries, International Paper, and American Chung Nam, a leading paper and plastics recycling company.

The leading U.S. importers, in order, included Walmart, 940,410 TEU; Target, 631,621; and Home Depot, 417,000.

Go here to view JOC’s Top 100 Importers and Exporters coverage in detail.

Growing SE Asia Market

The total number of U.S. ag exports in 2018 of container shipped grains, cotton, fruits, nuts, vegetables, oilseeds such as soybeans, and related food & feed products totaled 1,465,462 TEUs, JOC reported. That was relatively flat, down just 0.1 percent from 2017.

However, that doesn’t reflect the shift in export markets and destinations that has been going on in a big way over 2018.

SSGA factored in a separate analysis feature story reported by JOC.

“Agricultural products are susceptible to global events beyond the control of growers, including weather, currency fluctuations, tariffs, and environmental and quality restrictions,” said Bruce Abbe, past president of the Midwest Shippers Association (MSA) and strategic adviser for SSGA. “The slight dip in exports in 2018 reflected tariff issues in China and India.”

Among North Asia Markets, U.S. ag exports to China in 2018 dropped 24.5 percent from 2017; and slid 6.5 percent to Japan, and 10.4 percent to South Korea. However, exports to Taiwan bumped up by 16.4 percent.

The Southeast Asian market, however, “has been fertile ground for U.S. ag exports over the past five years,” JOC reported. U.S. container ag exports were up – 9.9 percent to Indonesia, 38.1 percent to Vietnam, 21 percent up to Thailand, and up 44.2 percent to the Philippines in 2018 compared to 2014.

Container ag exports from the U.S. continue to be largely based on being the “backhaul” in the Trans Pacific lanes for getting containers back to manufacturers in Asia for the more lucrative “head haul.” While the West Coast ports remain the leading outbound gateways, JOC noted that East and Gulf coast ports “are more diversified, exporting sizable volumes to Latin America and Europe, as well.”

Abbe added that the exporters of specialty products, such as peas, lentils and pulses say markets throughout Southeast Asia and the Indian subcontinent will continue to grow in the coming years as manufacturing jobs expand and the middle-class populations in those regions increase. Carriers welcome this development because it generates a two-way haul, with imports of consumer merchandise into the U.S. and growing agricultural exports for the backhaul.

Go here for the full, more detailed story.