By Bruce Abbe

In 2018, a slowing global economy helped put the brakes on growth rates for container shipping, the predominant method of international shipping used by most soya and grain exporter members of the Specialty Soya & Grains Alliance (SSGA). However, data from a leading shipping analytical firm points to a rebound of container shipping growth over the next two years. Shipping-schedule reliability, while improving, seems to have a long way to go over recent month’s performance, according to recent analytics.

Overall, global container shipping exhibits growth year-to-year, but rates of growth vary significantly based on a range of factors, from the health of the international economy, to trade relations, labor relations, politics and more influences.

According to IHS Markit, a leading international shipping information media company, global container volume increased 4 percent to 146.4 million Twenty-Foot Equivalent Units (TEU) in 2018, but that was down from 7.6 percent growth the year before.

However, in its report, “Trends in the World Economy and Trade,” IHS projected a turn-around in 2019, thanks to increasing demand from the five biggest container exporting countries – China, the U.S., South Korea, Japan and Thailand – all major markets for SSGA shippers. IHS forecasted a growth rate for those countries at roughly 4.8 percent through 2025.

Go here for more in-depth coverage from the Journal of Commerce (JOC).

Schedule reliability coming up “from the depths”

JOC also reported late last week that container shipping “schedule reliability,” as tracked on the various trade lanes, has been improving month-to-month as of late – but it is coming up from “record depths” for global carrier performance due to the volatility of trade over the past year.

Carrier reliability from Asia improved 12.9 percentage points overall during March over the month before, with considerably more improvement in schedule reliability to the West Coast compared to the East Coast.

The U.S.-China trade war, driven by President Trump’s threat to increase tariffs by 25 percent on Chinese sourced goods by an early March deadline and later delayed pending promise of trade talks, caused importers to rapidly ramp up container goods imports for several months late last year. The results caused huge logjams at key ports and in rail service to inland destinations that lasted for months and is now recovering.

Imports first climbed in July and August in response to the first imposition of a 10-percent tariff on Chinese goods. Then in November and December, in response to the threat of an additional 25 percent tariff on a wider range of goods, ocean carriers added 34 extra-loader vessels to support the increased import volumes. Los Angeles/Long Beach received the brunt of the increases. Then in the first months of 2019, carriers cancelled a number of vessel sailings in response to softening demand.

It should be noted that nearly all of these ocean carrier decisions are made in response to higher value import demand projections – the “head haul” in steamship line parlance – and rarely in response to exports from the U.S. – the “back haul.”

It remains to be seen if President Trump’s fresh threat this weekend to again institute a 25 percent tariff on a wider range of Chinese imports will cause a return to volatile shipping patterns that cause logjams at the port terminals and inland supply chains. But as of last week, JOC, reporting information from CargoSmart and SeaIntelligence data firms, pointed to continued improvement in shipping schedule reliability from Asia to the U.S.

Click here for more in-depth coverage.

Look for more firsthand analysis of global container shipping trends at the upcoming U.S. Soy Global Trade Exchange and Midwest Specialty Grains Conference and Tradeshow, hosted by SSGA and the U.S. Soybean Export Council in Chicago August 20-22. A panel of senior ocean carrier representatives is planned for a key session in Chicago, the largest inland hub for intermodal shipping in the U.S. Follow conference developments at www.grainconference.org.

Bruce Abbe is senior director of specialty grains, products and transportation for SSGA. Reach Bruce at 952-253-6231 or drop him a line here.

A bipartisan bill has been introduced in the U.S. House of Representatives calling for full use of import shipping assessment funds collected for their targeted purpose – maintaining U.S. harbors and waterways.

H.R. 2396, the Full Utilization of the Harbor Maintenance Trust Fund Act, was introduced last week by five leading committee representatives, including House Transportation and Infrastructure Committee Chair Peter DeFazio (D-Ore.), Ranking Member Sam Graves (R-Mo.), Water Resources and Environment Subcommittee Chair Grace Napolitano (D-Calif.), Ranking Subcommittee Member Bruce Westermann (R-Ark) and Rep. Mike Kelly (R-Penn.).

The bill would make it easier for Congress to appropriate funds collected in the Trust Fund for authorized harbor maintenance. That would include access to an existing balance of $9.3 billion in funds not being used, and would enable $34 billion more in expenditures over the coming decade. It reportedly would enable the U.S. Army Corps of Engineers to dredge all federal harbors to their constructed widths and depths.

Go here for more in-depth coverage.

By Bruce Abbe

Several SSGA container grain exporters, bulk transloaders and other logistics provider members are closely watching the China-U.S. trade talks for possible news that could trigger a resurgence of a leading U.S. export commodity – dried distillers grains with solubles (DDGS) – and with it a major shift in loaded global container shipping flows.

Background rumors emerged from trade circles earlier this month that China was “mulling” an end to its anti-dumping investigation tariffs on U.S. DDGS. Then U.S. Grains Council President & CEO Thomas Sleight confirmed to the news media that, indeed, USGC had asked the Chinese Ministry of Commerce (MOFCOM) to review the existing tariffs on DDGS. A Reuters news story noted a statement from China’s Commerce ministry saying it was investigating the request, and if it met legal requirements, they would decide whether to review the case.

However, a USGC spokesperson noted the request to China came from USGC, not from the U.S. Trade Representative (USTR).

While all those news rumors seem to make the matter pretty speculative at this point, that is the way things are in trade discussions and negotiations. Yet, if China’s DDGS trade tariffs are ended, there likely would be significant change in trade flows for DDGS and similar feed commodities like soybean meal.

MAJOR CONTAINER GRAIN EXPORT COMMODITY

At one point in time, DDGS accounted for just over half of all U.S. shipments of grain commodities in containers. DDGS made for a perfect “back haul” for ocean containers going back to China, in particular, where the lions share of import containers to the U.S. originated bringing in higher value consumer goods manufactured in China – i.e. the “head haul.”

According to USGC statistics, nearly 12.7 million metric tons (MMT) of DDGS were exported from the U.S. in 2015. Over 6.4 MMT went to China.

Then in 2016, China launched anti-dumping and countervailing duty investigations on imports of U.S. DDGS that carried an 80 percent tariff. China’s imports that year plummeted to just over 2.34 MMT. In 2017, China’s DDGS imports dropped to just 371,667 MT. Some slight progress was made that year when China agreed to eliminate its 11 percent value-added tax on DDGS, but kept the steep tariff penalty in place.

In the meantime, U.S. DDGS exporters worked hard – and with some success – to diversify their markets.

Vietnam, Thailand, Mexico and Turkey, in particular, became growth markets for DDGS.  Year-end totals for DDGS exports in 2016 came in at just over 11.3 MMT – below 2015’s total, but not a radical drop.   Prices received for U.S. DDGS exports, however, took a hit.

During this time, China also largely shut down imports of waste paper and scrap metal from the U.S. for recycling, which also were major container cargo freight. The natural container ‘back haul’ to China for ocean container steamship lines took a double hit. Transportation modes also evolved, as Mexico is largely a railcar served market, and Turkey is more of a barge-to-bulk ship served market. The Asian markets tend to be supported by container shipping.

Meanwhile, the U.S./China trade war’s biggest casualty – soybeans – have also been undergoing a strong effort by U.S. exporters to diversify its market. Southeast Asian countries, notably Indonesia and Vietnam, have been growth markets for container shipped whole soybeans and soy meal. Yet, like past experience with DDGS, prices have taken a hit.

‘BACK HAUL’ CHANGES AND CHALLENGES

The Journal of Commerce (JOC) reported (March 5) exports of waste paper to China plunged over 43 percent in 2018, and scrap metal dropped over 83 percent. DDGS container exports plummeted over 61 percent to China, although DDGS container exports to the world that year increased 20 percent, JOC reported, citing its sister agency PIERS data.

SSGA (and its predecessor, the Midwest Shippers Association) grew concerned last year and early this year over reports from shipping industry sources that the steamship lines, even at inland locations, were starting to turn their import containers around immediately and send them back by rail to the ports empty – rather than taking an available load of grain or soy products – because they needed to get the container back to China for the ‘head haul.’

SSGA over the last several months has sought to deliver the message to the ocean container shipping industry that there is strong market growth underway for shipping grain and oilseed food and feed products to Southeast Asia and the Asian Subcontinent markets in particular. More direct container service is needed to serve these markets efficiently with less vessel-to-vessel “transshipments” overseas.

Yet the supply chain challenges are still there.

A Hyundai Merchant Marine (HMM) senior executive told JOC, “(C)arriers are careful about where they ship low-margin commodities because then when the containers are emptied, they must be repositioned, at a cost, to China where most of the exports from the region to the U.S. originate.”

If China – under pressure to increase its imports from the U.S. in the trade negotiations – decides to remove its steep anti-dumping tariff on DDGS, the trade flow picture could take another dramatic shift.

Most U.S. soybeans shipped to China in the past have been whole beans, which were processed into soymeal for livestock and poultry, and soy oil. Yet, DDGS proved to be a strong option as well for feed use.

If China removes the tariff on U.S. DDGS, the shipping and exporting industry will likely see a retooling of that natural back haul for container shipping.

The U.S.-China trade talks, alternately said to be nearly completed and then pushed back until the next negotiators’ meeting, will determine much of the fate for U.S. soybean exports. Regardless, soybeans and soymeal exports will likely continue their growth trend in the new markets. However, China’s decisions hold the key for prospects for recovery in prices for U.S. exports for DDGS, soy and other commodities.

Bruce Abbe is senior director of specialty grains, products and transportation for SSGA. Reach Bruce at 952-253-6231 or drop him a line here.

Wet conditions continue to put a hold on the planting of identity-preserved (IP) soybeans, which are mostly grown across states in the Upper Midwest. Like commodity soybeans, IP soybeans are typically planted within a two to three week window in early May, depending on location, soil temperature, soil moisture and weed control options.

Soybean farmers constantly balance environmental conditions at planting with planting windows. To produce the best yield, farmers will wait to plant when soil moisture conditions are good and soil temperature is at 50 degrees Fahrenheit and increasing in the short (10 day) term. Wet soil limits soybean access to oxygen, inhibiting plant growth and increasing plant susceptibility to a variety of seedling diseases. Traffic on wet soils increases soil compaction, which reduces yield over the long term.

For IP soybean buyers, it’s important to be able to estimate supply of the product at harvest. David Kee, director of research for the Minnesota Soybean Research & Promotion Council, suggests researching crop progress and weather forecasts of your growers.

“Knowing your growers and having access to reliable weather data will greatly improve your ability to estimate supply,” Kee says. “Subscribing to the USDA’s NASS [National Agricultural Statistics Service] Crop Progress and Condition Reports for your region provides a great source of information about the cropping situation and can help aid in your supply predictions.”