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November 11 2019

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4 The Journal of Commerce | November 11 2019 Mark Szakonyi FOR THE FIRST time in four years, US containerized agriculture exports have fallen compared with the pre- vious year. Chinese tariffs in the first nine months of 2019 cost the out- bound supply chain roughly 40,000 TEU of containerized cargo compared with the same 2018 period, according to data from PIERS, a sister product of The Journal of Commerce within IHS Markit. Still, the 0.5 percent decline pales in comparison to the last time volume contracted — in 2015, when outbound containerized agriculture shipments fell 3.7 percent. The most recent dip reveals the damage of the US-China trade war in the short-term and the darkening outlook for containerized ag exports globally. Through September, US agri - cultural exports to China fell 28 per- cent year over year, pulling total ag exports to Asia down 3.3 percent. The loss compounds last year's 11 percent decline of agriculture exports to China, largely due to a ban on distill- er's dried grains (DDGs) and retalia- tory tariffs imposed by China in July. Despite a strong dollar and rising competition from Brazil and Russia, US ag exporters have been able to find new markets, particularly in Southeast Asia. But even that demand has begun to cool, with US ag export volumes to Asian countries other than China rising just 2.6 percent in the first nine months of this year, compared to a 12.3 percent jump in 2018. With African swine fever in China culling more than 100 million pigs and counting, the outlook for US soybeans and other grains used as animal feed is darkening further. Asia accounts for 65 to 70 percent of total US ag exports annually. Scott Sigman, transportation and export infrastructure lead at the Illinois Soybean Association, said exporters have made up "some" of the loss of soybean exports to China. "But China is so big that we haven't been able to capture it all, and even if China does come back, we're not expecting to capture it off the bat. It's more likely going to take time to build the relationship again, which has been shattered," he said. Containerized soybean exports to China were cut in half in the first three quarters this year, after plunging 28 percent in the same period in 2018 from 2017, according to PIERS. Soybean exports to Asia excluding China grew by double digits in 2018, but volume to that Asia market, which includes Japan, South Korea and Viet - nam, has been virtually flat this year. It will take two to three years to restore the reputation of US agri- culture exports, which are generally viewed as "high quality with high delivery certainty," Bruce Abbe, stra- tegic advisor for trade and transporta- tion for the Specialty Soya and Grains Alliance, told JOC nland Distribution Conference in Chicago on Oct. 23. "Are we going to turn it around? Yes, [Chinese buyers] know we are here, but it's going to take a while," Abbe said. For some export shipments, the demand switch will be immediate, and that would challenge the inland logistics network, warned Don Lake, senior vice president of enterprise development at Dunavant Logistics Group. Some so-called goodwill purchases by the Chinese in bulk shipments following the freezing of an escalation of US tariffs in early October have raised hopes for a deal that would remove the 25 percent tar- iffs on agricultural commodities. If a deal is reached, agriculture exporters "will be drinking water from a firehose. It will put a huge burden on everything in logistics from chassis to containers," Lake said at the JOC Inland event. The Chinese "can buy a lot of cotton in three months and expect to have it in three months." Although containerized US cotton exports rose 6.2 percent in the first nine months of this year, shipments to China fell 18 percent in the same period. Orders from Chinese buyers also would spur buyers in other Asian coun - tries to rush US agriculture shipments, lest they allow China to scoop them up, added Sean Mulford, a broker at Agniel Commodities. Barring a trade deal, the upcoming peak shipping season for soybeans, other grains, and cotton — starting in December and running through the winter — is mild but not without logistics potential hiccups, the experts said at Inland. Foremost is the concern of whether there will be enough inbound marine containers for commodity loading, considering the weak import peak season. An earlier Lunar New Year, beginning Feb. 8 and lasting roughly two weeks, may help in mak - ing inbound containers available as US retailers restock before Asian factories, but container availability would then fall as inbound shipments peter out. In the meantime, competitors in eastern Europe and Russia are enhancing Baltic port facilities and inland networks to make their agri- cultural commodities more compet- itive, and Brazil is doing the same, Mulford said. And while improved US dams and locks won't solve the chal- lenge of costly container reposition- ing to import-light regions, there's still room for freight infrastructure improvements to reduce landed costs. "We are in such a deficit on freight infrastructure," Mulford said. "When we do come back [from China tariffs], we need to take a hard look at investing in our infrastructure." JOC email: twitter: @MarkSzakonyi Agonizing exports The Journal of Commerce (USPS 279 – 060), ISSN 1530-7557, November 11, 2019, Volume 20, Issue No. 23. The Journal of Commerce is published bi-weekly except the last week in December (printed 25 times per year) by JOC Group Inc., 450 West 33rd St., 5th Floor, New York, N.Y. 10001. Subscription price: $595 a year. Periodicals postage paid at New York, N.Y., and additional mailing offices. © All rights reserved. No portion of this publication may be copied or reprinted without written permission from the publisher. POSTMASTER: Please send address changes to The Journal of Commerce, Subscription Services Department, 450 West 33rd St., 5th Floor, New York, N.Y. 10001. Letter From the Editor "Chinese buyers know we are here, but it's going to take a while to turn it around."

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