U.S. agricultural exports should remain strong for many years because of the growing demand for food in developing nations, but infrastructure and logistical hurdles are restricting the ability of the farm industry to satisfy global demand.
North Dakota State University agricultural economist William Wilson told a Webcast Wednesday sponsored by The Journal of Commerce that he is bullish on the agricultural trade, certainly for the coming decade, because worldwide demand for grain for human and animal consumption is exceeding global supply.
China is and will continue to be a huge market for U.S. agricultural exports, with soybeans and corn in strong demand. Improved rail service to West Coast ports will help those natural gateways in the trans-Pacific trade to increase their share of exports to China, Wilson said.
Exports this year will suffer somewhat because of the drought that has gripped U.S. producing regions. Nevertheless, Bruce Abbe, executive director of the Midwest Shippers Association, said a recent U.S. Department of Agriculture report projected record agricultural exports this year in dollar terms, although volumes will be less than last year.
U.S. farmers could significantly increase their exports if the nation addresses its infrastructure needs. Barge operators with services to New Orleans are running light this year because of the drought, Abbe said. This development also highlights the lack of investment in dredging, locks and dams on the inland waterways, he said.
In contrast, Wilson noted that railroads have been investing billions of dollars to expand their networks and to improve service. These investments have helped to make the Pacific Northwest a growing gateway for agricultural exports to Asia, he said.
The Upper Midwest is missing out on export opportunities because of the high cost of repositioning empty containers to the region. The region is also disadvantaged by less-than-favorable intermodal rail rates to the West Coast and ocean freight rates from West Coast ports to Asia, Abbe said.
Shipping grain from Minnesota to Asia can cost $500 to $900 more per container than shipping the same product from Chicago, he said.
The North American market in general presents transportation challenges because farm products are sourced in rural areas that are distant from population centers where the empty containers are, said Ed Zaninelli, vice president of trans-Pacific westbound at OOCL.
This problem could be mitigated to a degree if the industry would invest in grain trans-loading facilities in Southern California, Zaninelli said. Grain could be shipped to Los Angeles-Long Beach in hopper cars, and transloaded there into marine containers. The port complex always has a surplus of empty containers, he said.