The public investment flowing into East Coast terminal expansion and harbor deepening ahead of the Panama Canal expansion may be getting all the ink, but private companies see another huge opportunity. Unlike the import-driven canal projects, however, the private investors are looking at the huge potential in the other direction: food exports through the Suez Canal to emerging markets in the Middle East, India and Africa.
In Baltimore, Ports America Chesapeake opened a small grain transloading facility last year at its Seagirt Marine Terminal to see if it would boost containerized grain exports, even if the port isn’t yet a big outlet for food. “It’s worked well, so we’re studying whether to build a bigger facility to go after more freight like this,” said Jim White, executive director of the Maryland Port Administration.
Other East Coast ports already sport an array of food-handling facilities. Savannah has seven transload facilities, Virginia has a half dozen, Charleston, five, and New York-New Jersey has three.
The Florida East Coast Railway operates a number of grain transload facilities around the Port of Miami that blow grain into empty local import containers for export to Latin American and Caribbean markets and on the backhaul to Asia through the Panama Canal.
Even Boston is exploring the possibility of bringing bulk grain shipments in hopper cars from Ontario by rail to Worcester, Mass., to transload into containers for export through the port.
Cold storage companies, likewise seeing the potential, are building more refrigerated warehouses at ports up and down the East Coast to transload frozen meat and fish into reefer boxes for export.
“The future is now. We don’t have to wait for the Panama Canal,” said Russell Held, deputy executive director of development at the Virginia Port Authority. Big post-Panamax container ships already call at the port’s Norfolk International Terminal to load heavy containers stuffed with grain exports and reefer boxes full of frozen meat.
“They can load heavier on the way out because the food weighs more,” Held said. “They can load heavy and take advantage of the deep water we have.”
Despite the drought in the Midwest that cut this year’s estimated corn and soybean harvest by more than a third, containerized grain exports are increasing at many East Coast ports this year, various port authorities say. Local sourcing in the Southeast is replacing some of the corn and soybean deficit.
“We are seeing a lot of local exports that come in by trucks,” Held said. “This year we expect the highest soybean and corn production in Virginia history, which has not been affected by the drought, so we won’t be hurt dramatically by it.”
The shortage of containers at Midwest grain harvest locations are a perennial challenge for grain exporters, but new rail services — especially Norfolk Southern Railway’s Heartland Corridor and CSX Transportation’s National Gateway — and the growth of transloading facilities that can blow grain into containers are drawing more shipments to East Coast ports.
“Many of the agricultural export shippers from the Chicago area and east are able to use the new rail corridors out of Ohio,” said Bruce Abbe, executive director of the Midwest Shippers Association in Minneapolis. “Those are the areas that are going to benefit the most from the new rail services.”
Most of the association’s members ship identity-preserved grain in containers from the Midwest to East and West Coast ports.
Most U.S. grain exports still move in bulk by rail to the West Coast or by barge down the Mississippi River to New Orleans for loading on bulk ships. But containerized grain exports are growing through East Coast ports.
“We are seeing increasing trends to move grain to the East Coast in railcars, because it’s cheaper to move grain from Iowa to the East Coast than the West Coast, so we are geared up to handle that,” said Jim Newsome, CEO and president of the South Carolina Ports Authority.
Refrigerated exports are growing through the East Coast, too. “Refrigerated exports just continue to explode almost in all markets, and we expect more of the same,” said Curtis Foltz, executive director of the Georgia Ports Authority. “Poultry continues to be extremely robust and strong, really coming from the entire Southeast. We continue to have double-digit, year-over-year growth.”
Two Georgia-based companies, Nordic Cold Storage and Georgia Cold Storage, are building new refrigerated warehouses at the Port of Savannah. “Our customers are forecasting significant growth going forward, so we continue our on-terminal growth in reefer-handling facilities,” Foltz said. The GPA built 20 refrigerated racking systems at Savannah last year and plans another 20 in the coming year.
Driving all of this infrastructure activity is the rapid growth in the last five years of middle class markets in China, India and the Middle East that are able to upgrade their consumption of meat.
“Since 2006, what’s happened in emerging markets like China is the growth of the middle class that made money working in factories where we outsourced our production,” said Walter Kemmsies, chief economist of port design and engineering firm Moffatt & Nichol. “You go from no income to low income, and immediately you are buying canned meat and frozen meat, and then you graduate to fresh meat.”
The outlook for U.S. food exports is strong, because China’s new five-year-plan targets development of an internal consumption market, and “the most fundamental consumer market is food,” Kemmsies said.
But overdependence on the Chinese market could have its own risks. “We’ve got to be very careful in watching the Chinese economy,” Foltz said. “If it continues to slow down, it’s going to have a dampening effect on all our exports.”
Fortunately, other markets for U.S. food are growing rapidly. “There is an enormous amount of packaged food that goes into the Gulf already, and there will likely be more,” Abbe said. That’s why he thinks shipments through the Suez Canal, rather than the expanded Panama Canal, will drive growth in food exports through East Coast ports.
“The more likely uptick you are going to see is the uptick in the bigger ships going through Suez,” Abbe said. “Not to discount the Panama Canal, but there is more trade from the East Coast going through Suez.” With a middle class emerging in many countries, “That’s going to mean more trade, and some of this will go through the (expanded) Panama Canal,” he said. “But it’s not automatic.”