November 10, 2008
Containerized shipping for US grain to increase
Containerized shipping, which was not even designed with grain transport in mind, could eventually account for as much as 20 percent of US grain export shipments, according to a president of an Illinois grain company.
Lynn Clarkson, president of Clarkson Grain Company, said one of the strengths of containerized shipping is the ability for shippers to segregate grain.
The industry could soon get a boost, Clarkson said in an interview at the Global Soybean and Grain Transport Conference, with the possible construction of a container shipping port facility in the New Orleans called Sea Point.
"We have one of the world's great waterway systems, connecting everywhere up to Minneapolis/St. Paul, Tulsa, Okla., Cincinnati, Pittsburgh ... and we currently don't use it for containers," Clarkson said. "Why not?"
The facility would help solve that issue, he said. Although it has not been finalized, Clarkson hopes it is up and running by 2010. Clarkson said Sea Point has a memorandum of understanding with a European investor, that if executed, would activate US$300 million in bonds from the state of Louisiana for the project, he said.
It would make container transportation within the US easier and add competition, he said.
"For better or worse, these freight companies want more leverage to use against the railroads, they want more competition," Clarkson said. "And the waterway system provides it."
Containerized shipping has proven increasingly popular for exporters who need to segregate their grain, which is especially important in light of genetically modified crops, he said. Shipping different varieties requires a lot more effort in both loading and unloading when using bulk freight, he said. And for countries such as Japan, which are still not accepting genetically modified crops, the containers provide more security.
"The containers take it right from door to door," Clarkson said. "There's no risk of contamination, there's no risk of blending."
The industry has grown during the last five years as bulk freight shipping rates climbed. But those rates have tumbled in the past couple of months, and the container shipping industry must respond if it wants to continue to compete, he said.
"If bulk freight rates are so low to be almost at cost, or sub-cost, and if the container guys do not wish to compete, then we will use a lot fewer containers," Clarkson said. "But if the container guys want to price themselves close to -- it doesn't have to be the same as -- bulk freight, I think they'll get an increasing amount of business."
Clarkson's forecast for the grain markets in general is less clear. If the markets were trading supply and demand, he said, the market would have already bottomed. Corn usually hits a seasonal bottom in mid-October, and many analysts were expected October lows would hold. But prices have fallen in recent days back toward that bottom.
"It had looked to me, if you looked at charts and other things, just the psychological actions of buyers, it looked like we had hit bottoms," Clarkson said.
Clarkson said the market's volatility this year is due in large part to a major change in US policy: the embrace of ethanol, which tied corn prices to energy prices.
Because that mandate is unlikely to go away with President-Elect Barack Obama, grains will likely rebound long-term, Clarkson said.
The winner of the "battle for acres" between corn and soy next year is still up in the air, he said. A couple of weeks ago, he though corn would be at a disadvantage because of high production costs. But fertilizer costs are now dropping rapidly, he said, making corn production more competitive. Soybean production does not rely on fertilizer.