The hangover from last year’s hurricane season, which saw import and export cargoes transferred away from the Mississippi River System because of the devastation wrought on ports and shipping in the Gulf region, appears to have had remarkably few long-term repercussions for grain exporters.<\/p>\n
Ports in the Great Lakes, the US Pacific North-West (PNW) and the US East Coast received diverted grain as well as other cargo in the aftermath of the hurricanes that hit the US in August and September last year, but most of this was short-term business, petering out in early 2006 as operations on the Mississippi River returned to normal.<\/p>\n
“There was a diversion of grain away from the Gulf toward the PNW, Texas Gulf and the Great Lakes for export, ” says Ken Eriksen, vice president of transportation services at Informa Economics. “The diversions were mainly from September through February. But once operations and logistics began to find some level of consistent performance, flows returned back to the Gulf. Of course, it helped that the Gulf gained a considerable advantage over the PNW to land corn into Asia as panamax ocean freight rates weakened faster out of the Gulf relative to the PNW.”<\/p>\n
For US grain exports, the decisive factor in cargo routing continues to be cost – specifically the relative freight rates incurred for using river 45barges, ocean shipping and the US railroads. Japan remains the largest buyer of US grains, followed by Mexico, China, Taiwan, Egypt, the EU and South Korea, with a number of other Asian buyers also to the fore.<\/p>\n
The importance of the Asian market to exporters cannot be underestimated and, given that the Midwest is the main producing region for US exports of soybeans, maize and wheat, the PNW ports of Tacoma, Seattle, Kalama and Vancouver and Portland constitute the second most important US gateway region after the Gulf.<\/p>\n
According to Mr Eriksen however, the Mississippi River System, which links 30 US states to international shipping options available at ports in the Gulf of Mexico and will see over 600m short tons of cargo shipped on its waterways this year, retains its advantage for grain supply chain managers despite barge freight rates hovering at stubbornly high levels.<\/p>\n
“Even though barge freight rates are high, the Gulf still has a considerable advantage for exports to Asia, ” insists Mr Eriksen.<\/p>\n
“The advantage comes in the form of a narrow ocean freight spread between the Gulf and PNW that has been below $10 per metric tonne since November 2005.<\/p>\n
“One year ago, the spread exceeded $20. Here, in the last two weeks of July, the spread surpassed the $10 mark, which as a rule of thumb usually means the PNW becomes more competitive. But, the cost of grain in the PNW has jumped to a high price relative to the Gulf, as logistics to the PNW have been a concern, as has this year’s crop development for this fall’s harvest in the western Corn Belt where much of the grain destined for export through the PNW originates from.<\/p>\n
“The Mississippi River will benefit from better crops along the upper Mississippi River in Illinois, Iowa, Indiana and Ohio this year compared to what the western Corn Belt states will be able to provide.”<\/p>\n
There are 16 grain export facilities on the Mississippi River, five of which are floating or mid-stream operations. The largest of these come under the jurisdiction of the port of South Louisiana, which models itself as ‘America’s Largest Tonnage Port’ and handles “approximately 60% of all US grain shipments” each year, according to spokesman, Patrick DuFresne.<\/p>\n
While maize volumes increased 36% in the first quarter of 2006 to 14.3m short tons year-on-year, and steel products throughput jumped 48% to 2.1m tons, soybean throughput fell 11% to 9.7m tons in the period. “The soybean volumes are down slightly due to dry spring weather conditions in the Midwest section of the US, ” he says.<\/p>\n
Although the damage incurred to grain elevators, storage facilities and other port superstructure during the storms of last year has now been largely made good, the human disruption which saw millions flee Louisiana and other coastal areas has had the knock-on effect of leaving some port and barge companies short of crew.<\/p>\n
This has come to light primarily because demand for stevedoring and barge services is so high in the Mississippi Gulf at present, not least because US steel imports have increased by more than 30% this year and grain exports have also been strong.<\/p>\n
Corn and grain products account for nearly half of all cargo volumes moved by covered barges and nearly 60% of all tonne-miles. For grain buyers and sellers, freight rates for the covered barges used to ship most agricultural exports on the Mississippi are critical to the landed cost of their products and, thus, their competitiveness in international markets.<\/p>\n
In 2006, demand for the vessels across all cargoes will increase 14% to 177m short tons, says Mr Eriksen. Of this total, farm product volumes moving by covered barge through the system are forecast to reach 79.4m tons, a projected year-on-year rise of 24%.<\/p>\n
With demand for steel products carriage also at historically high levels and this cargo, like grains, tending to be shipped more than 1,000 miles on average, tonne-mile demand can reliably be expected to remain high through to the end of the year.<\/p>\n
Given that the vessel supply picture offers little in the way of encouragement to charterers, rates are unlikely to show much inclination to return to earth, says Mr Eriksen, although they may fluctuate sharply as farmers hold back grains in an effort to achieve better spreads.<\/p>\n
The covered barge fleet has been contracting for the past seven years, dropping from a high of 12,706 in 1998 to 11,271 at the end of last year. Figures supplied by Informa forecast 500 fleet additions this year and 500 removals. In 2007, 700 additions are expected and 438 retirements.<\/p>\n
Although some of the retirements may be delayed, with more than 50% of the fleet older than 24 years and over 10% over 30 years old, in the next five years covered barge capacity could reach crunch levels.<\/p>\n
“Barge rates will maintain high levels, ” says Mr Eriksen. “This year’s rates are high on a tight supply of barges and strong demand.<\/p>\n
“Operations have been mostly good throughout the year with no flooding, no significant icing concerns early in the year and only areas of low water. But if normal icing and flooding return next year then rates have far more upward potential.”<\/p>\n","protected":false},"excerpt":{"rendered":"
Hurricanes Katrina and Rita caused unprecedented human and financial damage along the Gulf coast of the US last year. As this years season gets underway, Michael King examines how the grain ports are gearing up for this seasons onslaught<\/p>\n","protected":false},"author":8,"featured_media":6669,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[58],"tags":[],"sponsor":[],"class_list":["post-6668","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-container-cargo-handling"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/posts\/6668","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/comments?post=6668"}],"version-history":[{"count":1,"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/posts\/6668\/revisions"}],"predecessor-version":[{"id":6670,"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/posts\/6668\/revisions\/6670"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/media\/6669"}],"wp:attachment":[{"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/media?parent=6668"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/categories?post=6668"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/tags?post=6668"},{"taxonomy":"sponsor","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport\/wp-json\/wp\/v2\/sponsor?post=6668"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}