World Grain - December 2014 - 36

FEATURE: JUST LIKE OLD TIMES?

This was a consequence of the fall in
corn prices while petroleum prices were
still high before their collapse in October.
"We think there will be a big push in
ethanol exports," Ruikka predicted, but
pen as elastic economic events."
One source of increased ethanol
demand could be more countries requiring ethanol blending to reduce air
pollution. The U.S. mandates a 10%
ethanol blending in gasoline, but outside the U.S., average blending is still
less than 3%.

Marty Ruikka provided comments on the coarse grains markets.

drivers of agricultural product demand," he observed.
BARRIERS AND BOTTLENECKS
Though the long-term market outlook
appears bright on both the supply and
demand side, many of the conference
participants were preoccupied with more
immediate and medium-term issues concerning distillers grains (DDGS) exports
and inland transportation bottlenecks.
In August, China declared a ban on
imports of DDGS from the U.S., citing
GMO concerns. China accounted for 52%
of total U.S. exports of 9.7 million tonnes
in 2013-14, a record level and 18% of all
DDGS consumption. Suppliers have scurried to divert the supply to other markets,
but the rate of increase of U.S. exports is
expected to slow. The surge began in 2006
when distillers grains DDGS exporters
were only 1 million tonnes at the onset of
the U.S. ethanol boom.
DDGS has become a major new component in the rations of many livestock
in the U.S. and around the world. Of the
130 million tonnes of corn now being
processed for ethanol, up to 30% is con36

verted to the feed byproduct. Supply is
abundant. Cost of other feed grains and
oilseeds determines the share of DDGS
in compound feed once corporate livestock nutritionists have been brought up
to speed on its uses.
It was news to many overseas attendees that the U.S. transportation infrastructure is currently not up to the task of
moving record grain harvest to ports for
delivery to burgeoning overseas markets.
Grain must compete with unprecedented
volumes of petroleum now being moved
by rail as a result of the fracking boom in
regions without pipelines.
"We think changes in internal transportation in the U.S. are structural,"
Ruikka said. "Getting grain to market
will cost more. It is a permanent feature
of the U.S. having more oil."
The advent of corn ethanol exports
from the U.S puts additional strains on
the railroads' capacity to move grains.
About 7% of U.S domestic ethanol
production will be exported in 2014.
"For most of summer, ethanol has
been one of the cheapest motor fuels
in the world," he said.

BULK SHIPPING
When it comes to ocean transport of
grains, the picture turns rosy again. Peter
Borup, president of Lauritzen Bulkers
A/S, observed, "If you can get crop to
port, there is no problem to transport it.
The problem is with U.S. infrastructure."
He predicted 5% to 20% annual increases in global bulk shipping capacity and assured the audience, "There are
lots of new ships on order."
This was supported by data showing
almost 200 dry bulk carriers of all sizes
scheduled for delivery from 2014 to
of 747 million dwt. "We can expect very
decent and low shipping rates for years
to come," he said.
Lauritzen Bulkers, which specializes
in the handy size segment (less than
40,000 dwt), handles 25% grains, said
Borup, while estimating that 85% of
bulk ocean freight is destined for Asia.
Containerized shipment of bulk agricultural commodities has increased
greatly and helped to keep down bulk
vessel rates.
Mathew Hill, Maersk Lines' general
"In 2013, 10% of waterborne grain out
of the U.S. was in containers, mainly due
to increased DDGS from 2010 to 2013."
Farm exports have provided a backhaul for ocean containers across the
mand from agricultural commodities, a
high percentage of containers are still
returned to Asia empty, particularly dur-

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World Grain - December 2014

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