U.S. Grain Exports to China Picked up Last Year

U.S. exports of grain, particularly grain bound for China, during 2020 exceeded expectations, which is good news for railroads.

Grain exports began rising during last year’s harvest season and by mid November had risen by 34 percent compared with September 2019.

China has been the third-largest customer for U.S. wheat and during October 2020 it accounted for 73 percent of U.S. soybean exports.

The sale value of those soybean exports of $3.5 billion nearly broke the monthly record of $3.51 billion set in November 2013.

The U.S. Department of Agriculture expects soybean exports this year to be nearly 61 million tons.

It noted that China received more than 1 million tons of U.S. soybeans during the first week of January 2021.

Railroad executives have talked about increasing grain traffic during earnings calls with investors to discuss fourth quarter 2020 financial results.

A Union Pacific executive said volume for grain and grain products was up 20 percent largely due to export grain.

A BNSF spokeswoman told Trains magazine that although grain and grain product traffic was down in early 2020 due to trade policies and smaller crop harvests, grain volume picked up in the latter months of the year.

During the fourth quarter BNSF set a quarterly record for grain and grain products volume.

Analysts say one factor behind the recent rise in U.S. grain exports to China may be trade and diplomatic disputes between China and Australia, and limited supplies of soybeans from South America.

China uses most of its soybean exports as livestock feed, mostly for pigs and of late the hog heard in China has been growing.

Another factor in the rising export of U.S. grain to China has been implementation of a trade pact reached between the U.S. and China during the Trump administration.

That deal, signed in January 2020, called for China to “reduce and eliminate structural, non-tariff barriers to U.S. agriculture in China’s market.”

Container Imports Ticked Up in May

Trans-Pacific container traffic showed an unexpected uptick in May which could be good news for intermodal traffic.

However, it is unclear what prompted the increase although there are a number of theories as to what prompted it.

The uptick came after container traffic plunged in late March and throughout April amid an economic downturn linked to the COVID-19 pandemic.

But now shipping companies are reinstating canceled sailing from China and are adding extra sailings.

During the depths of the pandemic, shipping lines had canceled 20 percent of sailings of container ships between China and the United States.

One theory for the uptick is that shippers canceled too many sailing after overestimating the near-term demand declines stemming from stay at home orders issued in numerous states.

Another theory is that consumer demand is stronger than predicted after states began relaxing and removing stay at home orders and allowed businesses and other activities to reopen.

Yet a third theory is that buyers of imported goods anticipate the collapse of a U.S.-China trade deal that could lead to new tariffs imposed by both countries.

At other times during the global trade war importers have ramped up buying in advance of tariffs and the same might be playing out now.

The e-newsletter FreightWaves repoprted market watchers saying this moving orders forward behavior is still being tempered by reduced demand due to the economic downturn.

Some observers have theorized that the upturn in shipping is temporary and will fall in early summer.

Railroads Continue to Feel Effect of Trade War

As the United States and China engage in a war of words and dueling tariffs in a trade war, the effects continue to be felt by North American railroads.

The carriers are hauling fewer aircraft, plastic products, chemicals and agriculture products among other commodities due to the effects of the tariffs that each country has imposed on the exports of the other.

“China’s announcement of imposing additional tariffs on $75 billion of U.S. imports signals more trouble for American agriculture,” said Zippy Duvall, president of the American Farm Bureau Federation.

Thus far in 2019 soybean exports to China are nearly half as much as they were at this point in 2018, U.S. Department of Agriculture statistics show.

In a news release, the American Soybean Association said farmers still have unsold product from last year and are worried about where they will be able to sell the crops that are in the ground this year.

Auto exports to China have also felt the pinch of tariffs. Last year, auto exports from the U.S. to China totaled nearly $10 billion, but rail shipment of motor vehicles and parts are off 2.3 percent this year while intermodal traffic is down 3.8 percent.

Although President Trump called on U.S. companies to move operations that are now in China back to the United States, much of the production that is being shifted out of China is being moved to Malaysia, Mexico, Vietnam, India and Thailand.

That has led to changes in the world’s supply chains although those changes are not necessarily harmful to North American railroads if it simply means that items once made in China for export to the United States are now being imported from other counties.

Nonetheless, one large container shipper, Maersk, has projected that if all of the announced tariffs are implemented, worldwide container volume next year could fall by up to 1 percent, a loss of 7.5 billion TEUs (20-foot equivalent units).