ProFarmer and Hellenic Shipper News reported that China’s soymeal futures are increasing as soybean crushers suspended operations due to a shortage of soybeans as the novel coronavirus and weather have delayed South American shipments. Chinese soymeal futures are currently at their highest level since October 2019, while inventories are at their lowest level since at least 2010. Shipments have also been disrupted to some degree by worries that China may stop imports to prevent the spread of coronavirus from other countries. The issue is not with the safety of the soybeans, but how to handle sick crew members.
In reality, from farm to market, soybeans are not handled by humans. A combine harvests the soybeans, unloading them directly to a truck that transports the beans to various locations: on and off farm elevators, crushing plants, shuttle elevators, barge terminals, or transloaders where they will stuff a container. The soybeans are offloaded from the truck by being dumped into a pit. Transferring the soybeans from elevator to truck, rail, or barge does not involve humans touching the soybeans. Also, transferring soybeans from barge to ocean vessel or elevator to ocean vessel involves only one person driving a bobcat inside the vessel to level the load distribution. All exported soybeans are inspected, along with all vessels or containers. To pass inspection, the soybeans must meet all health regulations.
Once in the vessel, shipping from the Pacific Northwest to China takes approximately 21 days; from the Center Gulf, it is 48 days. In addition, the crushing process and food manufacturing processing are designed to reduce viruses.
For ocean vessel operators, the risk of the vessel either being stuck in port or not being allowed to unload is a serious concern. If a company charters a Panamax vessel and it is quarantined, the company eats the cost.
North provides a summary of all the countries’ actions to limit the spread of COVID-19. Brazil’s clause states, “Vessels with possible cases of coronavirus will be submitted to quarantine and the infected crewmember moved to a hospital for treatment.” For vessels that come to port, the crew is not allowed to go onshore and no embarking or disembarking of crew is possible. Resupply is easy but discarding trash is not. Daily crew health reports are required.
Summarizing North, Argentina regulates vessels coming from ports abroad; they would be authorized to proceed alongside as long as they comply with special sanitary requirements in force, such as crew health declaration, daily body temperature reports, details of crew changes that took place since December 1, 2019, copy of medical logbook, maritime health declaration, and a special questionnaire for detecting potential COVID-19 cases.
In the U.S., in conjunction with the novel coronavirus (COVID-19) guidance provided to commercial vessels by the Coast Guard in Marine Safety Information Bulletin (MSIB) Numbers 02-20 (as amended) and 06-20, the Coast Guard is providing the following information to port and facility operators as it relates to COVID-19. The facility compliance regulations outlined throughout 33 Code of Federal Regulations remains in force, and facility operators are expected to continue to comply with these requirements. Questions or issues that arise as a result of COVID-19 should, where possible, be addressed in accordance with regulations outlined in 33 Code of Federal Regulations (200 pages long), and any plans and manuals already approved/reviewed by the Coast Guard. The real issue is simple actions that were once ignored are now under the microscope, such as unloading trash.
Another issue is the availability of labor at the port to service the vessels. In China, this was caused by people not coming to work. All current indications are that the Chinese ports are back in full swing. In the U.S., ports depend on unions that in turn, depend on traveling labor. The Pacific Maritime Association (PMA) and the Coast Labor Relations Committee agreed to restrict all workers to their home ports, thereby suspending all voluntary and ordered travel coastwise, effective 8:00 a.m. Friday, March 13, 2020. In addition, the committee agreed that all currently authorized visitors on 30-day travel cards are required to immediately return to their home port. Longshore members are only permitted to work in their home port area; for example, Astoria, Oregon longshore will no longer be permitted to travel to Coos Bay, Oregon; Longview, Washington; or Olympia, Washington, etc. As such, it is possible that this will affect cargo operations as some ports rely on travelling ILWU members to fill labor gangs. In addition, the state government of Oregon has declared the State of Oregon to be a “stay at home” zone for all non-essential workers, but ship agencies have been deemed essential.
If a large container vessel lands in port that wants to unload quickly, extra labor cannot be pulled in to fill a third shift. Although the same is true for bulk vessels, if the calendar was September, this restriction could potentially impact vessel turn rates and slow exports. In March and April, the vessel operators are usually not willing to pay the cost for faster turn rates because export volume is down. So far, grain elevators as well as other cargos in the Columbia River, are continuing to work well.
Vessels entering ports turn over control to pilots who guide the vessel into port. For obvious reasons, pilot associations do not want their employees boarding a vessel where everybody is sick. Without a pilot, the vessel will not be able to reach port and unload.
Until virus fears subside, the operators of ocean vessels will have to assess a very large risk. Another issue is low ocean freight rates. On the positive side, fuel is a major cost that has declined approximately 60% over the last couple of weeks.
For U.S. soybean growers, the prospect of Brazil and Argentina slowing exports to China at a time that China needs soybeans could provide a surge in exports. The situation is fluid and can change at any moment.