Agricultural exports are important to Minnesota. The U.S. Department of Agriculture ranks Minnesota fourth out of the state for agricultural exports valued at more than $ 6 billion in 2019.
Tobolt Seed in Moorhead is a relatively small exporter that ships around 500 containers of soybean specialties to Japan every year. These exports make up about half of the company’s business. The other half sells seeds to farmers in the Midwest.
In the company’s warehouse, machines clean the soybeans, remove the pods and any discolored beans to deliver the high quality, non-genetically modified crop desired by the food industry in Japan.
Earlier this year, Tobolt Seed had to close for a few weeks when it couldn’t get shipping containers and the warehouse was overflowing with soybeans waiting to be shipped.
“It was kind of a fight all year round, it seemed like I was trying [containers]. I’ve been on the phone quite a bit trying to make an appointment to get in [the soybeans] out of here, ”said Brandon Ferris, shipping plant manager.
“We usually got them all shipped by the end of June, and we left in mid-August this year.”
The same is true of Fargo-based Healthy Food Ingredients, a company with processing operations in Minnesota, North Dakota, South Dakota and Nebraska. The company exports high quality grain from farmers in the Midwest and also imports grains such as amaranth and quinoa from overseas.
“It’s extremely difficult, we’re seeing lead times like never before in my nearly 10 years here,” said Chris Wiegert, Chief Sustainability and Business Development Officer.
“We have customers to whom we say, ‘We’re going to get this on the water as soon as possible,’ but we don’t promise a product for four months.”
This is a big change from the pre-pandemic just-in-time shipping model with fast order processing to ensure a smooth flow of production.
Export of air
Delays and significant shipping costs make planning difficult, and not only affect exports of crops that Midwestern farmers grow. The cost of importing specialty grains like quinoa has also risen sharply, an influence that is sure to be felt in the aisles of grocery stores. And Wiegert does not see a return to normal anytime soon.
“The volatility in the market is the frightening situation for all of us that it would be better if we just knew what it was going to cost for the next month. Every time we call someone about pricing, the price changes from up to 50 percent to 400 percent, “said Wiegert.
“I’m pretty optimistic for the next two years. I think we haven’t seen the top yet.”
So far, the company has kept its international customer base, according to Wiegert, because it delivers a high-quality product and maintains strong customer relationships.
However, many of these customers will have to adjust to the delivery disruptions and may need to build additional storage facilities so that they can have more grain on hand and not be so dependent on just-in-time deliveries.
Thousands of containers with consumer goods flow into the US markets from Asia every day.
But instead of returning filled with grain from US farmers, more and more containers are exporting air.
Officials at the Port of Los Angeles, the largest container port in the United States, said they shipped a record number of empty containers in August.
International shippers are making a decision based on profits and thereby hurting US exporters, said Eric Wenberg, executive director of the Specialty Soya and Grains Alliance, a national trading group based in Mankato.
Maritime transport companies can make more money by quickly bringing empty containers back to China for another load for American consumers.
“Look, there is no argument that companies should pursue a high fee,” Wenberg said. “But these airlines have given their consent through our maritime law and are obliged to allow our companies access to the system with regard to their activity in the US market.”
“There is a shock here and that is causing a bottleneck here”
In the Midwest, the current shipping disruptions are exacerbated by the location.
“Minnesota, the northern central states, the Chicago traffic market are at their peak, so to speak, the furthest removed from the international system,” said Wenberg. “So when it’s so out of whack it can certainly be difficult to find the equipment you need to fulfill your order.”
“This increases prices, contributes to inflation and makes it harder for businesses in our neighborhoods that are trying to export,” he said.
Congress and the Biden administration should force international shippers to make more containers available for US exports, Wenberg said.
That month, more than 70 national agricultural organizations called on the Biden government to intervene.
The Ocean Shipping Reform Act of 2021, passed in Congress last month, would set minimum service standards for international shipping lines.
It’s a complex subject and many factors play a role, said Marc Bellemare, professor of applied economics at the University of Minnesota.
Because the international shipping system is so interdependent, something like a COVID-19 outbreak in a shipping port can have global repercussions.
“There is a shock here and that creates a bottleneck here. And then it just multiplies, it gets more and more complex and complex,” he said.
And while agricultural exporters face higher costs and delays, Bellemare says it’s important to remember that their competition in other parts of the world faces similar challenges.
“This is not like Minnesota producers are falling into a vacuum; this is happening all over the world.
Supply chain disruptions the new normal?
Consumers should expect to pay more for groceries for several years as the shipping industry adapts, Bellemare said, and they should prepare for the possibility that supply chain disruptions caused by the pandemic or extreme weather conditions could become the new normal.
“Because with climate change, global supply chains are increasingly exposed to these disruptions,” said Bellemare, who believes the pandemic has exposed weaknesses in the international supply chain.
“We’re not ready for prime time,” he said. “How can we do better? How can we anticipate shocks that will almost inevitably come due to climate change? “
Significant infrastructure improvements are needed to create a more resilient international shipping system, he said, a process that would require political will and years of investment.
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