CHESTERFIELD, Mo. — The pent-up demand for products in the global market has created congestion in the transportation system.
Bo DeLong, The DeLong Company vice president, said in a U.S. Soybean Export Council-hosted webinar that similar congestion has occurred three or four times in the last 15 years and it will take a month or two to correct itself.
“We’ve seen railroads not being able to perform because the ports are congested.”— Bo DeLong, The DeLong Company vice president
DeLong gave his perspective on the transportation industry, his company’s container export focus, commodity prices and international markets in the webinar with Jim Sutter, USSEC CEO.
Sutter: “There’s been talk about a supercycle in commodities. From your perspective, do you think this is another supercycle or how do you characterize in today’s commodity market situation?”
DeLong: “There sure seems to be a lot of demand currently that’s been led by China in the last six months not only for the grains and oilseeds, but also for the metals and oil. It reminds me back in 2006, 2007 and 2008 when we had commodity prices in general really bull up. What’s separates this is it’s demand-driven.”
Sutter: “Given that, we’ve obviously seen prices move up from where they were six or seven months ago, you’re company is in touch with customers all over the world, what are you hearing about these higher commodity prices?”
DeLong: “Most countries that we serve understand that it is demand driven. China is back in the market looking for all types of grains and oilseeds. When prices go up our customers might hesitate for a few weeks, but they ultimately know that they’re going to have to buy and they’re willing to accept these higher prices.
“So, we don’t see a lot of resistance. For a short term we might, but over the long term we don’t. And obviously our producers are very happy right now. If they’re grain or soybean farmers they’ve very pleased.”
Sutter: “Which countries do you think are going to be increasing their imports of U.S. agricultural products, specifically soy?”
DeLong: “Our primary areas for the last 15 years have been Southeast Asia, Taiwan and China when China is open for imports. Early last summer we did start Phase 1 of the trade deal and we started seeing imports come back from China. We didn’t as a group of container shippers didn’t participate in as much of that this fall, but if that market stays open I think that’s going to be a big growth are for us.
“We dealt in China before with soybeans for both crushing purposes and also China has such a wide range of industries that you can sell No. 1 soybeans, non-GMO beans, No. 2 beans for crushing, you can sell higher protein beans. It’s just an enormous market and I think that’s going to be a big growth market and get back to the area it was prior to the tariffs that were put on.
“As far as new markets, being in the container business we’ve had a tendency to look at markets that offer something a little bit different than a straight No. 2 soybean. We’ve had very good growth in looking for soybeans that possess maybe a little different characteristic — clean soybeans, sustainable soybeans — that we can sell that will differentiate ourselves a little bit from the commodity soybeans. That’s one big avenue of our growth.
“The other big area of growth we think is just becoming more and more efficient in what we do so we can compete against the bulk vessels. That’s been a big area of growth for the last 15 years and I think that will continue to be an area of growth for us.”
Sutter: “As you look into the future and you think about all of the logistics and grain shipping, what do you see in the future in terms of what will change?”
DeLong: “It’s going to be a continuation of the progress we’ve seen over the last 10 years. I think that we’ll see the carriers, the steamship lines, are going to continue to push for their empty containers to get back to the main markets which obviously are China, South Korea, Vietnam and Taiwan. They’re going to look at those markets to where they need empty containers back and I think they’ll continue to put grain in those containers into the future.
“Over the last few years we’ve worked more directly with certain railroads that have given us the opportunity to look at repositioning containers into certain areas that are bringing full train loads to load 200 boxes at one crack.
“The other thing we’ve seen the last few years is there continues to be movement in the East Coast. Since the Panama Canal has been widened it’s offered exporters on the East Coast the opportunity to compete rate-wise and it’s a good location to go to also.”
Sutter: “We’ve heard that importers and buyers are having logistical problems lately with the container situation. What kind of advice would you offer to them to try to minimize their problems?”
DeLong: “If the buyers in general in Asian countries would turn those containers as quick as we can turn them in the United States it would be very helpful. Over the last three or four years there has been a surplus of containers, there’s been a surplus of capacity in the intermodal business, and the steamship lines have been giving out very lenient terms and a lot of the buyers have gotten to where they can take two to three week to unload those containers. That really ties those boxes up.
“We’re having issues now with container velocity and part of the issue is we just tie them up too much at either point of origin or point of destination.”
Sutter: “How is the container availability impacting your company?”
DeLong: “The first four months of this crop year were our best four months in the last 10 years. We had very few issues with equipment until we got close to mid-December and even though our volumes were up we knew the whole system was becoming congested.
“It just isn’t a steamship issue. It’s a port issue, it’s a railroad issue. It’s not that the steamship lines want to turn their containers and get them empty and back into use as fast as they can. But when you have so much demand from the imports, whether it’s got transistors or TV sets or women’s garments when you have so much pent-up demand that we have in this country, the import flow has just been huge, more than we’ve seen in the last three or four years and it overwhelmed the system.
“Because of that we’ve seen congestion at the major ports. We’ve seen railroads not being able to perform because the ports are congested. We’ve seen ocean vessels at anchor at some of the major ports for 25, 30 days when they could be on the water sailing and doing what they’re supposed to do.
“There are a lot of things that have caused problems, but in general it’s just been the overwhelming demand that we’ve seen in the last six months.”