Thinking inside the box
More containers are leaving the U.S. filled with custom grain orders for food and feed companies around the world. Photo courtesy of The Northwest Seaport Alliance.
Demand for specialty and conventional grain helps fill empty containers.
Thousands of containers filled with goods destined for large retailers like Walmart and Target arrive daily in the United States. Many containers are shipped back empty due to high demand, but as global interest in specialty grains grows, an increasing number of containers are returning full.
“There is growing preference among international customers to buy specialty grain by container to preserve identity and quality,” says Yuxi Weng, grain merchandiser, CHS Global Grain Marketing. “Grain shipped by container tends to be cleaner because there is less handling and containers are more airtight than bulk vessels, reducing opportunity for contamination.”
Yuxi Weng, grain merchandiser, CHS Global Grain Marketing, works with local cooperatives to source grain for global buyers who want to purchase smaller quantities by container.
A grain “matchmaker,” Weng works with buyers in more than 15 countries who want to purchase containerized grain, then reaches out to local cooperatives to find producers who can fulfill the buyers’ specifications and needs.
“Many customers looking for specialty grain or a specific grade are willing to sign longer-term contracts,” says Weng.
Sourcing Grain
Taiwan, Indonesia, Vietnam, Korea and Thailand were the top destinations for U.S. containerized grain exports in 2018, according to the USDA. Taiwan was the top destination, receiving 21 percent of U.S. containerized grain.
“There is a big market for No. 2 soybeans in Taiwan for livestock feed,” says Weng. She sources beans for Taiwan from several locations, including Centerra Co-op based in Ashland, Ohio.
Formed by a 2017 merger between Town & Country Co-op and Western Reserve Farm Cooperative, Centerra Co-op has grain, agronomy, energy, feed manufacturing and retail facilities across Ohio and Pennsylvania.
“In addition to corn and wheat, we handle about 7 million bushels of soybeans and sell No. 2 or better,” says Paxton Wood, grain merchandiser at Centerra.
The co-op’s proximity to the Cleveland, Ohio, intermodal yard offers easy access for container shipping. “Our ability to participate in the container market gives producers access to additional export markets that don’t need vessel volumes. And more players in the local market increases competition, which typically results in better prices for producers,” says Wood.
“We load 150 to 500 containers a month, depending on the season,” he says. “To continue growing our operation, we need access to more customers overseas, which CHS provides.”
Growing Options
While containers held only 7 percent of U.S. waterborne grain in 2017, the market is growing at a steady pace.
U.S. soybean exports shipped by container rose from 2.0 million metric tons in the 2015–2016 marketing year to 2.8 million metric tons for the 2017–2018 year, according to USDA Federal Grain Inspection Service. Shipments for the 2018–2019 marketing year are expected to reach 3.3 million tons.
Soybeans account for about a third of CHS container grain exports. DDGS (distillers dried grains with solubles) account for another 60 percent, corn represents about 8 percent and the remaining 2 percent includes wheat, soybean meal and other specialty grains, says Weng.
CHS was the 27th largest U.S. container exporter by volume in 2018, up from No. 46 in 2017, according to the Journal of Commerce.
Weng works with grain merchandiser Tim Landreth at the CHS office in Lincoln, Neb., to source milo and certain types of wheat, including hard red winter wheat and hard white winter wheat, for customers in the Philippines and Taiwan. “CHS is the top U.S. exporter of wheat and specialty grain by volume, and both are growing in container exports,” she says.
“We’re also exploring other options, including peas and lentils, which are big in India and Southeast Asia,” says Weng. “It’s becoming increasingly important for farmers to be able to choose from a diverse mix of crops, and specialty grains can offer premiums.”
Premium Options
Steve Ruh has always grown soybeans, corn, wheat and alfalfa on his 3,500-acre farm near Big Rock, Ill., and this year he planted non-GMO beans in hopes of gaining more value per bushel.
“This is my first year raising non-GMO beans in 25 years of farming,” says Ruh. “There is global demand for non-GMO products, and CHS offers an appealing premium for non- GMO beans.”
Producer John Boncosky, Hampshire, Ill., contracts with CHS Elburn to grow non-GMO soybeans for customers in Southeast Asia.
John Boncosky, who raises corn and soybeans nearby in Hampshire, Ill., is also growing non-GMO beans this year. “I grew non-GMO beans about four years ago, but the logistics became too difficult. When I heard CHS Elburn was starting a non-GMO soybean program and would take beans directly from my field, it was an easy decision.”
Ruh and Boncosky are two of 45 producers in Illinois and Iowa who have signed production contracts with CHS Elburn to grow non-GMO soybeans for customers in Southeast Asia. Many of the beans will be shipped by container once they are harvested.
“The CHS container program is currently demand driven,” says Weng, “but our goal is to grow the program so it’s more supply driven.”
More Flexibility
U.S. soybeans are particularly popular in countries like Indonesia, where soybeans are used almost exclusively for soymilk and other foods, says Caryn Lee, a grain marketer with CHS Global Grain Marketing based in Singapore. “More Indonesians are seeking protein-rich diets, which is driving demand for U.S. soybeans. Staple foods such as tofu and tempeh, a popular soy-based dish in Indonesia, require high-quality soybeans to achieve the right texture. To preserve quality, more customers are buying soybeans by container.”
“Global customers also like the flexibility containers offer,” says Weng. “Customers with limited demand, quality specifications or specialty grain needs can purchase smaller quantities by buying in containers.”
A standard 40-foot shipping container holds 25 tons or about 1,000 bushels of grain, while the average bulk shipping vessel holds 2.1 million bushels of soybeans.
Containers make it easier to manage grain movement, Weng adds. “Customers can track their shipments and have more control over delivery.”
And customers looking to target a specific origin for purchased grain often find buying in containers to be the best option, adds Lee.
The benefits extend to growers, says Weng, since containers can be easily moved by barge, truck or rail. In China, for example, containers can be transferred from ocean vessels to barges and transported by river far into the Chinese interior. “This flexibility creates new opportunities, providing cooperatives and farmer-owners with access to more customers and markets,” says Weng.
Big-City Connections
“CHS facilities in Illinois play a major role in our container program and give us a competitive advantage in the market,” says Weng. Located less than two hours southeast of CHS Elburn and the CHS ethanol facility at Rochelle, Ill., an intermodal freight terminal anchors one of six BNSF rail logistics parks. The terminal is considered the largest inland port in North America.
Containers on semi-trailers are loaded with soybeans, corn and wheat at four CHS Elburn elevators.
CHS Elburn and the CHS ethanol plants at Rochelle and Annawan, Ill., have onsite container loaders. The capability reduces grain and DDGS handling, which appeals to buyers.
“Chicago is a great area for container access,” says Mike Van Houten, facility manager at the Rochelle ethanol plant. “Chicago has an influx of inbound containers full of goods. Those containers must be shipped back overseas, full or empty. If we fill them with grain or DDGS, we can generate backhaul revenue and reduce freight costs.”
“We load 250,000 to 400,000 bushels of soybeans per month,” says Gerry Baker, grain manager at CHS Elburn. “Grain is loaded into containers at four of our elevators, trucked to the intermodal railyards and loaded onto a unit train. The train takes the containers to the West Coast where they are loaded onto a vessel for export.” The cooperative also ships corn and some wheat by container.
But DDGS, a byproduct of ethanol production, currently make up most of CHS container exports.
Kwami Gati, logistics coordinator, monitors DDGS loading at the CHS ethanol facility in Rochelle, Ill.
“CHS Rochelle fills 45 to 50 containers with DDGS every day,” says Van Houten. Many of those containers are destined for major feed companies in Korea.
“Korean customers prefer containers because they can purchase smaller quantities at a competitive price,” explains Rachel Byun, a grain marketer at the CHS Global Grain Marketing office in Seoul, Korea.
“The CHS container program is a great program for middle America,” adds Landreth. “It brings the export market to the interior of the country and creates direct connections between farmers and buyers.”