Trade

Container Shipping Can Help Diversify International Sales of U.S. Soybeans

The soybean industry has been a vital engine of the American economy for years. One measure of its economic contribution is in global trade: soybeans are America’s largest agricultural export, and among the nation’s top 10 exports. In 2017, the U.S. exported $21.6bn worth of soybeans.

At the end of February, total soybean export sales in the current marketing year, which includes shipped and unshipped beans, were down 18 percent compared with a year ago, according to the U.S. Department of Agriculture. A decrease of that amount isn’t something to dismiss. But the downside could have been much worse.

China has curtailed imports of U.S. soybeans by 66 percent through the end of February because of trade tensions with the U.S. The Asian power has been America’s biggest foreign soybean customer for many years, purchasing about 60 percent of the U.S. soybeans sold internationally.

When your biggest customer buys so much less, it’s hard to see silver linings. But the statics underscore the worldwide popularity of U.S. soybeans. Other countries are easing the pain of China’s actions by importing more soybeans, including:

  • Mexico, up 30 percent,
  • Indonesia, up 16 percent,
  • Japan, up 20 percent, and
  • Netherlands, up 92 percent.

Soybean exporters are also seeing big spikes in demand in Egypt, Pakistan, Bangladesh, Malaysia and Thailand. Buyers in some of those countries have quickly shifted to take advantage of the available supply in the U.S.

It’s also no coincidence that some of the expanding markets for U.S. soybeans, especially in Southeast Asia, take advantage of beans shipped in containers, instead of in bulk. Containerized shipping has played a pivotal role in diversifying U.S. soybean exports, and its continued growth in agriculture can help secure new markets.

Indonesia is a good case study to highlight the importance of container shipping for exports. It’s one of the five largest importers of U.S. soybeans, which are used almost exclusively for human consumption. Most of the soybeans Indonesia consumes are for the making of tofu and tempeh, a fermented soybean cake. Quality and texture is very important for tofu and tempeh manufacturers.

One of the biggest benefits of container shipping is that it preserves the quality of soybeans during the long transit from the Midwest, where most of the crop is grown, to Southeast Asia. Maintaining quality is critical because any variation in soybeans from origin to destination could result in lower prices to shippers, and ultimately to farmers as well.

When compared to bulk shipping, soybeans shipped in containers are handled less because shipments can seamlessly move between truck, rail and ship.

The shipping container provides watertight and nearly airtight protection of its contents, which reduces heat damage and helps maintain moisture levels between origin and destination, according to a study by the Illinois Soybean Association. Containers also limit damage from insects, fungi and sprouting, and help prevent beans from splitting.

Indonesia is one of the biggest markets for containerloads of soybeans, according to research by Rob Hatchett, a senior economist at Farm Journal Media. His analysis of federal inspection reports revealed that Indonesia imported about 1.3 to 1.4 million metric tons of soybeans via containers over the past four marketing years. Container shipments represent more than half of Indonesia’s U.S. soybean imports.

Led by Indonesia, U.S. soybean exports shipped in containers has risen by 2 million metric tons in the 2014-15 marketing year to 2.8 million metric tons in 2017-18, according to Hatchett. Based on inspection data since September, he expects containers to carry 3.3 million metric tons by the end of August, the end of the 2018-19 marketing year.

Other top destinations for containers of U.S. soybeans include Taiwan, Thailand, Malaysia and Vietnam. All of these markets are much smaller than China, which until now was annually importing about 30 million metric tons of U.S. soybeans. To accommodate Chinese buyers, most soybeans sent to Asia are shipped on vessels that can carry 60,000 metric tons.

Many other countries don’t have the port and transportation infrastructure to handle such bulk shipments. Containers are ideal for the smaller volumes sent to other Asian markets.

There’s another economic factor in favor of containers to Asian destinations. America’s trade imbalance with China and other countries means that a lot more containers arrive in the U.S. than leave with cargo. By some estimates, the difference is 8 million 20-foot equivalent units (TEUs). In short, container availability is not an issue.

Repositioning empty containers costs ocean carriers billions of dollars a year. Back-hauling more containers with soybeans would help alleviate a significant problem in global trade, and bring value to soybean exporters and farmers.

Eric Woodie
Eric Woodie

Trade Analyst

Illinois Soybean Association