Farmers, railroad and shipping executives agree that if together they can find a way to efficiently ship grain from the rural interior to seaports, the export of containerized grain products would know no limits.
The problem, according to Ed Zaninelli, vice president of trans-Pacific westbound at OOCL, is that containers carrying imports of consumer merchandise move to metropolitan areas. Those containers, when emptied, must be repositioned by truck or rail to grain export facilities hundreds of miles away.
“The match-back of containers is more difficult in North America than anywhere else in the world,” Zaninelli told the Journal of Commerce’s Inland Distribution Conference Sept. 19 in Kansas City.
Despite the inefficiencies of inland distribution, exports of corn, soybeans and animal feed products will increase sharply for the remainder of the year and into 2014, said Bo DeLong, vice president of grain operations at DeLong Co. Unlike last year, when production was curtailed sharply by a severe drought, growing conditions this summer have been favorable.
Exports of distillers’ dried grains, a by-product of ethanol production that is used for animal feed, are especially strong because China has a huge appetite for DDGs, DeLong said.
Ocean service to major markets in Asia is efficient, vessel space is abundant and shipping rates, though volatile, are favorable for exporters. The freight rate from Chicago to China, which was $2,360 per 40-foot container three years ago, is $1,300 today. “That doesn’t even cover the rail costs,” Zaninelli said.
The Chicago area, which generates a significant volume of containerized imports, is one of the few inland locations from which empty containers can be efficiently and consistently repositioned to grain export facilities in the Midwest. “Chicago is 100 percent match-back,” he said.
Dallas, by contrast, is an unfavorable location for exports. “Twenty percent is a generous match-back,” he said.
The upper Midwest, including Montana, the Dakotas, Minnesota and Iowa, is perpetually stretched for empty containers because grain export facilities are hundreds of miles from import hubs, said Robert Sinner, president of SB&B.
Farmers in the upper Midwest grow many specialized grains and identity-preserved agricultural products that are highly valued by consumers in Asia for use in foods like tofu, miso and soy milk. These specialized grains must be loaded into containers close to where they are grown. “It’s all about food safety,” Sinner said.
Farmers in the upper Midwest thought they hit the jackpot several years ago when the Bakken oil shale play in North Dakota burst on the scene. A rail ramp was established in Minot, N.D., to receive fracking sand and oil-field equipment in containers. However, it turned out that the containers, once emptied, were found upon inspection to be unsuited for carrying food-quality products.
However, farmers are optimistic that development of a full-fledged inland port operation in Minot will help to generate the match-back opportunities they are looking for, he said.
Canadian National Railway, which provides intermodal rail service linking Prince Rupert to Chicago and Memphis, is developing creative solutions to the match-back dilemma. Jean-Jacques Ruest, executive vice president and chief marketing officer, said CN has opened or will soon open rail ramps and trans-load facilities in Arcadia and ChippewaFalls, Wisc., Decatur, Ill. and Indianapolis, Ind. to serve grain exporters in the region.
While those cities in no way compare to Chicago, they nevertheless have anchor importers, such as home improvement and furniture stores, that import consumer merchandise from China, thereby generating match-back opportunities for exporters.
Importers in China and Southeast Asia are turning increasingly to container shipping for food products because it is a cleaner mode of transport than bulk vessels, and grain products can be purchased in manageable quantities. Also, the transportation infrastructure in Asia is better suited to moving grain in containers than in bulk.
While there is no grand plan that will work for the entire Midwest, shipping lines and railroads could generate steadily increasing freight volumes by working with importers and exporters to create match-back opportunities in what are usually considered to be remote locations.