By Gerry Whitty and Elise Sommerfeldt
From the Obama Administration’s proposals to improve the nation’s transportation infrastructure to a view of the current state of grain transportation and improving transportation efficiencies at the elevator, FEED & GRAIN looks at what’s at stake and what’s in store for grain transportation in the United States.
With insurance, brokerage and banking giants managing themselves into oblivion, a foundering global economy hurting trade, and unemployment numbers on the rise, it’s becoming increasingly difficult to ferret out good economic news.
At least our grain exports are holding their own . . . well, they were until stronger global grain stores combined with weaker than expected demand, conspired to undercut an already skittish export market.
Is there any good news out there? Actually, yes, there is. Somewhat.
“When it comes to transporting grain to the marketplace, the efficiencies found in systems in the United States is unrivaled,” says Vince Peterson, vice president, overseas operations, U.S. Wheat Associates. “Our ability to originate, move and deliver volumes of grain in a timely manner to our customers is envied around the globe.
“However, if we don’t continue to make the investments required to improve and push our transportation delivery-system infrastructure to an even higher level, that advantage could vanish as the rest of the world makes 21st century investments of their own,” Peterson notes.
Peterson’s observation about foreign infrastructure investment is especially poignant as it has been confirmed at key industry conferences. In March at the GEAPS Exchange in St. Louis, attendees learned how motivated Brazil is in improving its road and rail infrastructure — with the help of huge investment from both private and public/government sectors — in order to sustain an export market that’s exploded in the last five years ($24.8 billion in 2002 vs. $58.4 billion in 2007).
We’ve seen how adept Brazil is at producing grain, beef and poultry products, now imagine how the landscape of the marketplace would change if they moved these products to the market as quickly as their North American counterparts. Especially with an economy that isn’t reliant on foreign oil to keep moving. An eye-opening thought for certain.
WHAT A DIFFERENCE A YEAR MAKES
A year ago the marketplace was defined by high product demand, corresponding price volatility, spiraling fuel costs, and high rail and ocean-going freight rates. Fast forward to today and the only item which remains from that list is the high rail freight rates.
“If you were to ask someone a year ago to predict today’s grain prices, I doubt many people would have landed on the prices seen currently,” notes Jay O’Neil, senior agricultural economist, International Grains Program, Kansas State University. “The high demand and price volatility seen were considered to be part of the ‘new operating environment’ in agriculture, and many projected this environment would remain for awhile. However, few could have predicted that within six months a dire global economy would arrive and bring with it a new operating environment.”
O’Neil says the combination of tight money supplies, a grain glut, reductions in animal units and a corresponding drop in feed requirements have conspired to weaken demand for U.S. products. Nevertheless, he also wants to remind people that if there’s one lesson to be learned, it’s that everything you know as real today can most certainly change tomorrow.
“It’s this volatility that makes having an infrastructure capable of reacting to the needs of a changing marketplace, critical to our agriculture,” he says. “While the stimulus package can offer some immediate benefits to improving roadway infrastructure, its lack of attention for improvements on the Mississippi and Illinois river waterways represents a major lost opportunity for meaningful infrastructure improvement.”