Agricultural exports from the USA for 2019 were 135.5 billion dollars. The United States has one of the best agri-export infrastructures in the world. One tried and true method of exporting agricultural commodities such as oil seeds and grains, is by ocean bulk in a vessel’s hold.
The Process of Transporting Soybeans and Grains
The normal path for the cargo starts at the farm. Using soybeans as an example, farmers load their soybeans into trucks for transport to a processing facility if there is one nearby. More likely the soybeans will be trucked to a grain elevator where the soybeans are unloaded, combined with soybeans from other farms, and loaded to another form of transportation.
One of the common ‘post grain elevator’ forms of transportation is rail hopper cars; these cars can deliver the soybeans throughout North America at 80-90 metric tons per car. For exports, depending on the origin and time of year, the destination may be a bulk barge terminal. Barges use inland water ways to transport bulk commodities to coastal areas to bulk terminals. The commodity may also stay in the hopper car for direct delivery to one of the bulk ocean terminals.
By far, the most likely destination for export is the bulk terminals on the Gulf of Mexico; there the soybeans are consolidated for loading to vessels. Once the soybeans are loaded to the vessel and transported to the destination country, a similar process unfolds in reverse with the difference being the eventual distribution is into smaller lots rather than consolidation.
Soybean and grain growers are now also pivoting to bulk in container shipments to get their products delivered overseas, with focus on Asian markets, and the containerized market is set to grow.
U.S. producers are enjoying a byproduct of the USA – Asia trade imbalance, low container rates to Asia. It is no secret the USA buys more than we sell to Asia. This leaves ocean carriers with a problem of too many empty containers piling up in the USA. Often ocean carriers are forced to reposition empties from the USA back to Asia so they can fill it with more stuff for us to buy. It makes perfect sense ocean carriers would rather get paid, at least something, to bring containers back to Asia; alakazam, cheap container rates for agri-exporters to Asia.
The reason bulk in container works is not all markets are huge and not all soybean buyers in Asia are in China right next to a bulk terminal in Shanghai. China has 34 major ports and more than 2000 minor ports. The secondary markets in China are now accessible to farmers via containerized deliveries. Other surrounding countries like Thailand and Vietnam are also markets containerized deliveries are in demand. Buyers are demanding logistics systems that are more diverse allowing delivery of smaller lots of products with specific product attributes.
Transportation Map for Soybean Exports
Now the transportation footprint looks a little different for our farmers soybean export. The farmer still trucks their soybeans to the elevators, but instead of heading to a barge or rail hopper car to head to The Gulf, if not stored, the soybeans can be weighed, inspected, and certified and bulk loaded into containers. The loaded containers can then be transported (rail most likely) to the most cost-effective port (West Coast to Asia East Coast for Europe) of exit for loading on to a container vessel. Once the container arrives at the buyer’s port of entry, the containers can be trucked, or railed, directly to a crushing facility.
This system is ideal for buyers who prefer to minimize the size of their inventory investment by purchasing more frequently. Buyers who want fast delivery also favor bulk in container delivery time. With the traditional bulk vessel channel turn around time can be 3-4 months, whereas with container transport distribution can be 3-4 weeks from the time of the filling of the containers.
Get the International Cargo Insurance You Need for Soybean and Grain Cargos
While bulk in hold transport is not going anywhere and will remain the main mode of transport for grain and oil seed exports, the benefits of getting product to secondary markets are clear. Bulk in container grain and oilseed exports are here to stay and the needle is pointing up for growth in this sector. Ten years ago, TJO Cargo insured a lot of cargo, but grains and oilseeds were not on the list. Times have changed. Because of the trends discussed in this writing, we have developed specific cargo insurance products, and have insured many shipments of soybeans, grains, and even granular minerals bulk in container, to both Asian and European countries. I expect this opportunity to continue if ocean carriers must reposition empties and buyers want smaller lots and quicker delivery.
If you have any questions, contact us today.