Word was received in late October that shipment of ag commodities might be disrupted due to the fact that shipment containers from a major shipping company are being discontinued. This announcement was made in a press release from the Specialty Soya and Grains Alliance (SSGA), in which they said the German international shipping and transportation company, Hapag-Lloyd, is suspending overseas ag container shipments for North America.
The decision by the shipping company is being driven by hard economic times during a time of unprecedented demand for higher-value North American consumer imports by containers from Asia at premium prices, according SSGA. They report that Hapag-Lloyd has decided it needs to quickly reposition empty containers back to Asian shipping centers, even if it means forgoing the hauling of critical food and agricultural products back to manufactures overseas.
SSGA members in the Upper Midwest, including shippers of bulk and identity-preserved (IP) soybeans and specialty grains, note the decision will especially hit exporters hard in the Minneapolis-St. Paul region. The strong Twin Cities market frequently finds itself short of inbound containers to meet demand and has long relied on Hapag-Lloyd's services to reposition containers for exports.
“Hapag-Lloyd has been one of the most reliable and dependable carriers for rural, inland ag shippers, so this announcement is devastating and shocking,” said Bob Sinner, president of North Dakota-based SB&B Foods in Casselton, N.D., and chair of SSGA’s competitive shipping action team. “For those of us in the food soybean arena, we are just coming off a harvest that our overseas food manufacturing customers are anxious and desperate to begin receiving.”
Those shipping containers mentioned are steel boxes, 8-foot wide and come in either 20-, 40- or 45-foot long and are used to transport dry or refrigerated goods. According to a recent report from the Ag Marketing Service (AMS) of the USDA, grain movements in containers comprise around 10 percent of the total grain export market and provide an opportunity to access new international niche markets. A twenty-foot equivalent unit (TEU), is the standard shipping container size used in describing container ship capacity.
To show the scope of container shipment of ag products in the U.S., the past five-year monthly shipments of grain in container shipments have averaged between 50,000-65,000 TEU each month. These figures were reported from the AMS April 2020 monthly Grain Transit Report.
The impact of Hapag-Lloyd’s suspension of container deliveries can also be related to numbers. According to available information from the global trade data company Panjiva, as read by SSGA, Hapag-Lloyd delivered 878 shipments of U.S. bulk soybeans at a volume of more than 17,000 TEU between Oct. 22, 2019, and Sept. 25, 2020, to destinations around the world. The majority went to Japan, Indonesia, Hong Kong, Taiwan and Malaysia, as well as to Thailand and South Korea. Over that same span, there have been 172 shipments of IP non-GMO food-grade specialty soybeans at a volume of 780 TEU.
“This disrupts the food supply chain,” Sinner said, noting that consumption of soy foods has been strong throughout the COVID-19 pandemic and that worldwide food inventories are low. “Companies in those countries rely on us for their food manufacturing. We’ve got our new crop harvested and we’re making significant and consistent bookings with carriers to get our products shipped quickly and as soon as possible.”
The move by Hapag-Lloyd poses an ominous sign for U.S. ag exporters if other ocean carriers decide to follow suit or delay ag shipments. SSGA is encouraging Hapag-Lloyd and any other carriers considering similar decisions to re-examine this policy. SSGA will explore all options to work on behalf of its members to try to help resolve this issue and is encouraging exporter members to talk to their shipping representatives.
This shortage of containers actually started during the spring when agricultural shippers began feeling the pinch of overseas destinations and here in the U.S. due to the effects of the coronavirus outbreak, according to Bruce Abbe, SSGA strategic adviser for trade and transportation. He said exporters of soybeans and specialty agricultural products in the Upper Midwest had begun to experience problems getting all of the empty containers they needed. They have everything ready to ship with the use of order fulfillment solutions, but their only issue is that they don’t have a container to ship their products.