World Grain - October 2008 - 43

FEATURE: IN IT FOR THE LONG HAUL?

Movement

Traditional Method

Containerized
Movement

Farm to local elevator
Local elevator to terminal
elevator

Loaded at local elevator
Unloaded at terminal
elevator

Loaded into container at
local elevator

Terminal elevator to railcar

Loaded to railcar

Trucked to intermodal ramp
and loaded on railcar

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Rail linehaul
Railcar to terminal

Unloaded from railcar to
export elevator

Unloaded from railcar and
trucked to export terminal

Terminal to vessel

Loaded to bulk vessel

Container loaded to vessel

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Vessel Linehaul
Vessel to terminal

Unloaded from vessel to
import elevator

Container unloaded from
vessel

Pickup at terminal

Loaded into delivery vehicle

Container trucked to
destination

Destination

Unloaded from delivery
vehicle

Container unloaded

the farm to the fork.
* Easy process, equipment and
customer changes
* Complete control with
real-time, easy-to-read screens

Source: Theodore Prince

sels and the number of older vessels
scrapped. The industry tends to move in
lockstep. Periods of high profits (capacity shortage) are inevitably followed by
newbuildings coming online (capacity
glut) and pricing collapse. Lately, there
has been a shortage of bulk capacity.
Although there has been a downturn,
attributed mainly to China's Olympic
industrial shutdown, the Baltic Index,
a trade index created by the Londonbased Baltic Exchange that measures
changes in the cost to transport raw
materials, has been at historical highs.
Still, many observers feel that this upturn will be obviated by new capacity
due to enter the trades in the next several years.
* Container capacity: When utilizing containers, shippers need to ensure
sufficient capacity in both vessel space
and containers. It is rare for import
containers - once unloaded - to be
immediately reloaded with export cargo. And the cost to reposition an empty
for reloading can often be as high as
the cost to reposition an empty back to
the west coast. If an export move is not
considered as sufficiently profitable, it
is often better for a line to return the

box to Asia for another import load.
There may also be a repositioning cost
at destination. Because export loads are
much heavier than import loads, container vessels cannot accommodate a
like number of loads. Depending on the
vessel, exports are limited to between
60% and 80% of the import loads. The
rest of the vessel must be made up of
empty containers.
* Pricing: Ultimately, grain shipment
decisions will come down to pricing.
Traditional grain transportation straddles both trends. The ocean-borne portion is cyclical. Rates are high today, but
they may become much lower in the future as larger and more efficient vessels
are delivered. The rail portion is most
likely secular. Rail capacity is somewhat
fungible, and railroads will allocate capacity where it can maximize returns.
This allocation takes place between
commodities (e.g., grain, chemicals,
coal, and merchandise) and amongst
them (e.g., exports grain versus domestic grain and ethanol.)
The containerized outlook is a little
more complicated. There is certainly a
sub-segment of the export grain market
which is attracted to containers, but it is

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World Grain - October 2008

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