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Deregulation sparks rise in grain container trade
Deregulation of grain trading in Australia has led to an explosion in shipments in containers rather than bulk, a trend that may be repeated in Canada although on a less spectacular scale, industry sources said.
Australia, where grain markets were deregulated in 2008, now ships around 2.0 million to 2.5 million tons of wheat a year in containers, up from about 200,000 to 300,000 tons when the market was controlled by the Australian Wheat Board.
“A lot of it is done by smaller, regionally based, container packers who hopped on a plane and ferreted out new markets,” Geoff Honey, chief executive officer of Grain Trade Australia told Reuters.
“For instance there are Vietnamese flour millers who can’t handle bulk (shipments) but they can handle a few containers,” he said on the sidelines of conference organized by the International Grains Council.
Containers may individually contain about 20 tons of wheat compared with about 40,000 to 50,000 tons which may be shipped in a bulk cargo.
Honey said most of the container shipments were going to south-east Asian customers including Malaysia and Indonesia while trade to China had also been significant.
“About 400,000 tons of sorghum has gone to China in the last six months from southern Queensland and New South Wales for liquor production,” Honey said.
The rising popularity of a liquor in China known as Baijiu, which is made from sorghum, has led to increased shipments of the grain from Australia to China.
Canada has recently followed in Australia’s footsteps and deregulated grain exports and a rise in container traffic is anticipated, albeit less dramatic.
“We probably will see some level of increase in container traffic… That is the beauty of having many players looking at how they can take a product and market it,” Ian White, president and chief executive officer with the Canadian Wheat Board said.
White said, however, the key market for containers in south-east Asia was harder to reach for North American suppliers.
Financing has also played a role in the growth of the trade.
“Customers in Asia are using containers because of the financing scenario,” one industry source said, explaining that buyers preferred to minimize the stocks they carried due to the difficult credit environment.
“Sending in bits and pieces allows them to manage inventory via a steady flow,” the source said. “The downside is administration as it multiplies the paperwork which is a pain for traders.” (Reuters)
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