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Can containers move the needle on trade?

Can containers move the needle on trade?

Farmers who want to ‘de-commoditize’ and diversify may make more money from container shipping

Demand for soybeans shipped to Asia via containers has jumped 40% since 2014, a fact that is not lost on farm groups anxious to find new export demand in the wake of the ongoing trade war with China. Another 18% growth is expected this year.

Commodity farmers may think the only way to export corn and soybeans is by bulk on big, ocean-going Panamax vessels. The folks at the Illinois Soybean Association would like to change that mindset with 20-foot and 40-foot rectangular steel boxes ubiquitously known as ‘containers.’

“It’s not just for higher value stuff,” says Scott Sigman, ISA transportation and export infrastructure lead. “I’ve seen coal shipped by container.”

Lopsided trade

Unfortunately, container shipping tends to be lopsided. Too often containers, which can carry about 28 metric tons, get shipped into the U.S., then just clog up ship yards, or get sent back to other countries empty. Repositioning containers costs the shipping industry $20 billion annually.

Putting ag products into Asia-Pacific-bound containers could solve shipping logistics as well as boost market demand. But there’s a lot more benefits, especially with consumers anxious to know where their food comes from.

“We can raise quality with these units; grain is not blended as it would be at a river terminal,” says Sigman, who formerly worked for container leasing and shipping companies. “Some foreign buyers tell us they would like to buy more directly. We’ve had buyers say, ‘I want to buy that field.’”

Better tracking

Unlike bulk commodities, stuff shipped in containers can be tracked with “Distributed Ledger Technologies.” This tracking can start with the seed stock, include planting and harvest data, and continue with quality data even as the product is being shipped in the container to final destination. The DLT is like a mini ecosystem that links seed companies, farmers, importers, exporters and equipment makers together.

“You’ll increasingly have visibility as to where the product came from and its quality characteristics,” says Sigman. “As farmers generate that data, they will be able to command a premium that you wouldn’t get in bulk commodities.”

Needed next steps

Logistically some things will need to change for the container strategy to work. Shipping lines that utilize containers need to have locations closer to farms or even on the farms, with access to USDA inspectors that must inspect each unit once loaded. Shipping more directly to customers overseas will improve basis and give farmers more incentives to grow niche crops.  That could include non-GM, organic, high protein, high oleic, white corn, food grade, and other specialties.

“There are buyers interested in those characteristics,” says Sigman. “Specialty crops will become more farmer friendly. You won’t have to go scrambling for contracts each winter.”

The goal is to establish weekly export flows to a broad number of buyers, many of whom want small but steady supplies in places like Taiwan, Indonesia, Vietnam, Japan or Korea.

“We could envision 10, 25 or 100 container units being shipped out every week,” Sigman says. “That way you’re helping your customer with cash flow. You can meter out that commodity. As they get weekly shipments that achieves benefits in inventory, and your customers don’t need as much storage at their facilities.”

TAGS: Exports Trade
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