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U.S. Containerized Grain Update

Date Posted: February 14, 2013

This article is reprinted from the USDA's Feb. 14 Grain Transportation Report.

Despite an overall slow year for U.S. grain exports in 2012, containerized grain exports to Asia remained above the 4-year average until November, when shipments fell to 5 percent below average.

Total containerized grain exports through November 2012 were 2 percent higher than the same time in 2011.

Summer movements of distillers grains, in particular, were strong due to the pent-up demand in China after the anti-dumping case against the United States in 2011 was settled in early 2012.

By fall, the reduced U.S. corn crop, the start of the Chinese fall corn harvest, and other—frequently less expensive—feed sources from other countries caused demand in China for U.S. distillers grains to fall.

In 2012, exporters were also encouraged to use more containers due to good container availability, as well as relatively low ocean freight rates.

Container rates were competitive with bulk transportation in 2012.

Both bulk and container freight markets have offered low rates because of overcapacity in the market and slow demand in the major world trade lanes.

According to Drewry’s Container Freight Rate Insights Report, from March to December 2012, container rates averaged between $70 and $76 per metric ton for shipments from Chicago to China, down 20 percent from the spring of last year.

Distillers Grains Remain Top Containerized Grain

The 2012 U.S. drought caused a significant reduction in corn production, which led to higher corn prices.

As a result, ethanol production and the co-production of distillers grains (DDGS) decreased in the summer.

Total DDGS exports also fell. According to the Foreign Agricultural Service U.S. Trade data, DDGS exports January-November 2012, were 3 percent lower than the previous year.

Top destination markets for DDGS, such as Mexico, Canada, and Vietnam, saw year-over-year decreases in shipments of U.S. DDGS.

However, other Asian markets, such as China, Korea, Japan, and the Philippines, together comprise more than 40 percent of U.S. DDGS exports and experienced year-over-year increases.

These increases were due to the pent-up demand in China for DDGS after the Chinese anti-dumping case against the United States, and due to continued need for the feed supplement for livestock production in these countries.

The export boom during the summer pushed China to the top of the destination markets for U.S. DDGS in 2012—nearly 55 percent of containerized DDGS were destined for China, but as mentioned previously, Chinese demand moderated by the fall.

Overall through the year, these Asian markets helped increase the waterborne containerized share of DDGS shipments, while total exports of DDGS decreased due to reductions in exports to Mexico and Canada.

DDGS remain the top grain commodity moved in containers.

In fact, the use of containers continues to grow for DDGS exports.

In 2010, 11 percent of DDGS exports were moved in containers.

By the end of 2012, 59 percent of waterborne movements and 37 percent of total DDGS exports were moved in containers.

Moving Forward

The seasonal shutdown of manufacturing in China during the celebration of the Chinese New Year (February 10, 2013), which sometimes lasts for several weeks, will begin to affect ocean shipping schedules in late February, therefore container supplies in late February or early March, particularly at inland locations, could be affected.

On the other hand in an unrelated development, a new non-hazardous classification for DDGS could make logistics easier for DDGS exports.

On January 1, DDGS were officially classified by the International Maritime Organization (IMO) as non-hazardous cargo.

Previously, the cargo had no classification with the IMO, but was considered hazardous for fear the oil and moisture contents may be combustible.

The new classification will make shipping DDGS easier because shipments will no longer be limited to conveyances with appropriate fire suppressing equipment on board.

For more information, call Surajudeen (Deen) Olowolayemo, USDA, at 202-694-3050.

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