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Regaining Export Markets
The U.S. is becoming more competitive in export markets, but quality and shipping capacity are already challenging the system.
If there's a theme to the U.S. Grains Council board of delegates meeting in Omaha, Nebraska, this week, that one dominated speeches Monday morning.
"If Colombia is buying grain from the U.S., it means you are competitive with the South," said Juan Jaramillo, who heads buying and logistics for one of that country's largest feed manufacturers, Solla, South America.
In the first half of the current marketing year, Colombia ranks just behind China as the fourth-largest buyer of corn from the U.S.
Our country has traditionally had an advantage over competing exporters from Argentina and Brazil for the food and feed that goes to Colombia's 47 million people. Gulf Coast ports are the closest to Colombia's ports, with just five days of shipping. But nearly a decade of delay in getting a free trade agreement in place meant that corn from Argentina was cheaper than paying tariffs on corn from the U.S.
The free trade agreement with Colombia was negotiated in 2004, signed in 2006, and approved by Colombia's congress in 2008. But not until 2011 did the U.S. Congress vote it into effect.
"I will say that most of the market that used to belong to the U.S. was lost to Argentina," Jaramillo told delegates to the Grains Council meeting.
It's starting to come back. In 2013, Argentina was Colombia's biggest corn supplier, with 49% of that market. This year, the U.S. has 70% of the market. At one time, it had about 90%.
Jaramillo said that Argentina's river grain terminals are newer, larger, and closer to crop production than those along the Mississippi in the U.S. Argentina's ports can be tied up by strikes and political instability, however, giving another advantage to the U.S.
"Sometimes we have ships that take almost 35 days to load," he said of Argentina's ports.
However, Gulf Coast ports had similar problems caused by a long winter in the U.S., he said. While the upper Mississippi was frozen, terminals in Louisiana had to close for several days due to fog and rain.
"It was worse than when [Hurricane] Katrina came to New Orleans," Jaramillo said.
The loading capacity of U.S. export elevators could become an issue as this nation increases production to meet global demands.
"During certain times of the year, U.S. elevator capacity looks insufficient to feed the world," he said.
When asked by one of the farmers in the audience how U.S. corn quality compares with that from Argentina, Jaramillo said that his company's nutritionists say the corn from Argentina has higher protein value.
"They tell us, as a buyer, to pay a little bit more for the corn from Argentina than from here," he said.
Jaramillo added that the freight advantage from the U.S. means his company is still more likely to buy U.S. corn.
Exports also account for about 19% of the business for Union Pacific Railroad, Hasan Hyder, assistant vice president of grain & grain products for the company told delegates Monday.
"We have a strong presence in Mexico," Hyder said. "Particularly in the last few months, that seems to be growing."
The railroad also ships grain to the Pacific Northwest, both or U.S. and Canadian shippers, and it will be opening a new export terminal in St. Charles, Louisiana somtime between September and the end of the year, he said.
Unlike other railroads, Union Pacific wasn't affected directly by petroleum shipping, which has contributed to a rail car shortage in the Dakotas and Minnesota.
In the second quarter of this year, "crude oil for us was actually down 24%," he said. Oil is part of the railroad's chemical shipments, which accounted for 1% of shipments. Shipments of sand for fracking were up 25%, however, originating in Minnesota and Wisconsin.
This year Union Pacific will spend $4.1 billion on improvements. "For us, that will be a record year in capital spending," he said.
Most -- 42% -- will be for rail improvements and mainteance. It will also include 1,500 covered hopper cars for grain shipping, bringing the railroad's total from 15,000 to 16,500.
"I would love to order more but I can't get them," he said.