Containerized Grain Update For January-September 2017

This article has been reprinted from the Dec. 7, 2017 Grain Transportation Report. 

U.S. containerized grain exports have been well below average all year. 

Compared to 2016, year-to-date (January-September) shipments in 2017 fell 17 percent and were 20 percent lower than the 4-year average. 

Distillers’ Dried Grains with Solubles (DDGS) have dominated the market over the past several years representing around 50 percent of the market share. 

However, beginning in 2016 and even more so in 2017, market share has dwindled. 

The introduction of a Chinese import tax on DDGS in 2016, in combination with decreased feed demand in Vietnam, suppressed these shipments.

Containerized DDGS exports fell 48 percent compared with 2016, pushing these shipments below, exports of containerized soybeans (see table 1). 

However, total shipments of DDGS (including bulk, container, and cross border movements) have not felt the steep impact because of increased demand for bulk DDGS in various countries.

Exporters to key Asian markets for containerized DDGS have seen the largest shifts.

Demand for DDGS U.S. DDGS exports peaked in 2015 with average monthly containerized movements topping 27,000 twenty-foot equivalent units (TEU). 

Strong demand continued in the beginning of 2016 until the Chinese import tax slowed shipments for the remainder of the year, which continued into 2017 (see figure 2). 

China has been the dominant importer of U.S. containerized DDGS exports
for several years, so without the strong Chinese demand, containerized DDGS struggled to top 15,000 TEU per month since April of 2017, well below the previous 4-year average (see figure 1) of 25,000 TEU. 

Further contributing to the downward movement of DDGS shipments was a sharp decrease in shipments to  Vietnam in 2017.

Vietnam ranked second for containerized DDGS exports in 2016, but shipments came nearly to a halt in 2017 with no measureable movements until August. 

Local Vietnamese pork and broiler production decreased in late 2016, slowing feed shipments to this region. 

Because of the slow demand in these previously dominate markets, countries like Korea, Thailand, and Indonesia, rose to the top three export markets for containerized DDGS by the third quarter of 2017 (see figure 2 and table 2).

Total U.S. DDGS exports were not as impacted by the Chinese import tax as containerized shipments.

According to data from the Global Agricultural Trade System (GATS) of the USDA’s Foreign Agricultural Service, total DDGS exports (including both bulk and containerized shipments) have fallen by just 3 percent. 

Demand in countries such as Turkey, Mexico, Spain, and the United Kingdom has increased. 

Many of these countries received mostly bulk DDGS shipments and in the case of Turkey, where shipments have doubled in the past year, nearly 100 percent are bulk shipments. 

Whether or not shipments of DDGS move in a container or in bulk depends on several factors, such as the destination market, ocean freight rates (both bulk and container), the destination’s landside infrastructure, and
sometimes container availability.