World Grain - October 2008 - 42

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FEATURE: IN IT FOR THE LONG HAUL?

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AFTER
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movement. Upon arrival at the destination, the inland movement is essentially
performed in reverse. The traditional
ocean-borne method of transporting
grain is by dry bulk carrier. Grain is
usually shipped in vessels of 50,000 to
80,000 deadweight tonnes.
CONTAINERIZED MOVEMENT
Containerization represents one of the
most significant transportation innovations of the 20th century. It has resulted
in vast improvements in ocean linehaul,
port handling and inland pickup and
delivery. More than 90% of non-bulk
cargo around the world moves by this
method. Although the container may
change transportation modes several
times during a shipment, the lading is
never touched. Container shipments
are loaded at origin and moved intact
through to destination.
In the U.S., container volumes reflect
the nation's trade imbalance. Imports
outnumber exports by between 2-to-1
and 3-to-1 (remaining containers are
returned empty for reloading). While
dry containers are traditionally used for
merchandise, they can also accommodate bulk cargo, which is either loaded
in bags or blown into the container. According to the U.S. Department of Agriculture, containerized grain exports
to Asia in the first five months of 2008
were up 64% over the same period in
2007.
Containerized movement of grain can
be accomplished with much less handling of the grain product (see table,
page 48). Whereas the traditional transportation method involves handling
grain at least eight times (depending on
destination delivery), grain is handled
only twice in a containerized shipment.
SECULAR VERSUS CYCLICAL
You must consider a range of factors
when evaluating and comparing the secular to the cyclical outcome of shipping
grain by containers. Most of these factors,
which are listed below, would reinforce
the secular trend of containerization.
* Shipment quality: Shipping grain

by container allows for a higher quality
shipment. Containers reduce the amount
of loading and unloading - and concurrent damage to grain. When waiting for
railcars, grain can often sit for a month
or more on the ground, exposed to adverse elements. Immediately loading
containers eliminates such exposure.
* Farmer economics: Using containers can improve the economics for
farmers. Containers can be staged in
the fields during harvest and loaded directly and immediately. This eliminates
the need for the farmer to maintain
storage infrastructure. It also allows annual matching of storage requirements
with expected crop yield. Moreover, it
is less expensive to truck a container to
and from a distant farm site than it is to
move bulk grain.
* Shipment identification: Shipping
in containers allows small batches of
grain to be uniquely identified and closely monitored. It is easy for all involved
in the supply chain to know the source
of the product and shipment details
(i.e., where, when and who handled).
While this feature may affect generic,
bulk grain only slightly, such capability is essential for identity-preserved
grain, where a specific product is being
shipped.
* Elimination of intermediaries:
Theoretically, the ease of shipping containers would enable farmers to contract
directly with end users, thereby eliminating the need for middlemen and increasing the farmer's yield.
* Speed to market: Containers move
to destination much faster than bulk.
This speed to market could enable
farmers to take advantage of favorable
but short-lived market conditions (i.e.,
cash prices rise relatively to the futures
price).
Despite all the secular trends, there are
several overwhelming cyclical realities.
* Bulk vessel capacity: The shipping industry is highly cyclical, with
extreme profit volatility. Vessel values
and charter rates often fluctuate wildly.
Supply of shipping capacity is mainly
a function of the delivery of new ves-

For more information, see Page 86.

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World Grain - October 2008

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