Ag exports critical to Minnesota in a changing world
The season’s first grain ship loaded this week at the Port of Duluth-Superior. The 620-foot Solina is bound for Algeria with 720,000 bushels of durum wheat.
That’s the equivalent of about 200 train cars of grain, grown on about 20,000 acres of farmland in the Upper Midwest, said Daniel Vandenhouten, operations manager at CHS Terminal in Superior, Wis. It’s one of several grain terminals in the port.
The CHS facility stores grain in about 500 towering concrete silos that fill 35 to 40 ships with grain every year.
The Duluth-Superior port is a small player in the ag export business, but it's important for some crops like durum grown in northern Minnesota, the Dakotas and Montana. Durum is milled into semolina flour, primarily used to make pasta and couscous.
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Grain exports from Duluth-Superior have been down significantly the past couple of years.
That's because fewer ships brought products into the Great Lakes from other countries.
“And vessels aren't going to come all the way from Europe empty-handed all the way to the Great Lakes,” said Vandenhouten. “There really needs to be something being imported locally so we can have the opportunity to backhaul it with grain going back to Europe or North Africa.”
A boutique port
Those limitations will continue to slow exports from the Duluth-Superior port, but some ag groups are hoping for more opportunities to export specialty crops.
“We would consider that Superior will remain the boutique corridor that it is today,” said Brian Schouvieller, a senior vice president for CHS Ag Group.
Exports could incrementally expand for identity-preserved grains that have stringent quality requirements, or specialty crops like beans, said Schouvieller.
“That [market] continues to grow as consumers appreciate understanding more about where their food is coming from and what's in their food and they’re willing to pay a slight premium for that,” he said.
Those specialty crops could also benefit from an expansion of container shipping.
In 2021, the port of Duluth announced a significant expansion of capacity to ship containers.
About a year ago, Wisconsin-based Chippewa Valley Bean company shipped its first container loads of kidney beans from the port.
“We are the largest processor and exporter of kidney beans in the world,” said Charles Wachsmuth, company vice president. Most of the kidney beans the company exports are grown in northern Minnesota.
A top destination is Italy. The company faced hurdles throughout the pandemic with shipping container and rail traffic delays, said Wachsmuth. The primary export route has been moving the beans by rail to Montreal and then by ship to their final destination.
“The idea of using the Twin Ports and Duluth is a game-changer for us,” he said. “It provides multiple months out of the year that we can get regular service from Duluth to ports in Europe.”
But realizing that potential will take time, said Wachsmuth, because the agriculture industry alone can’t provide enough containers to regularly fill ships.
“It's going to take a collaboration and cooperation amongst all industries, not just agriculture to really bring up the Twin Ports to capacity,” he said.
Deep water advantage
Soybeans and corn are the top ag exports from Minnesota. Most of that grain flows west to ports in the Pacific Northwest or south to ports on the Gulf of Mexico.
Those deep-water ports can fill much larger ocean-going ships, making transportation more cost-effective.
CHS has invested hundreds of millions of dollars in those port facilities.
TEMCO — a joint venture with CHS and Minnesota-based agribusiness giant Cargill — owns several port facilities in the Pacific Northwest and recently purchased a facility in Houston.
CHS is also expanding a port facility in Louisiana, said John Griffith, senior vice president for global grain marketing.
“And it gives us great flexibility to provide competitive prices to U.S. farmers and give them a full suite of options to market their grain any place in the world,” he said.
Record exports
In recent years, access to world markets benefited Minnesota farmers as higher prices for grains and meat pumped up the value of ag exports from the U.S.
“2022 would be the highest level of export for Minnesota, total export, to the world,” said Su Ye, chief economist for the Minnesota Department of Agriculture. “We hit a record.”
Minnesota is the fourth largest agricultural exporting state in the U.S.
Overall ag exports from the U.S. set a record last year. The final state export numbers won't be released until later this year, but Ye says there's no doubt it was a record year, likely approaching $10 billion.
Ag exports generate more than $14 billion in total annual economic impact and support more than 50,000 jobs according to the Department of Agriculture.
Ye points out from 2000 to 2021, Minnesota’s total agricultural exports tripled — a growth rate higher than the nation as a whole.
“Over one-third of Minnesota's total agricultural production is exported,” she said. “Of course, it's hugely important for the state to keep the exports strong.”
The value of ag exports is expected to decline this year because prices are lower.
Tumultuous time
Ag exports could face headwinds in a rapidly changing world.
The U.S. has long been a dominant force in exporting farm commodities but is increasingly being challenged as agricultural production substantially increases in other countries like Brazil and Argentina.
“And a lot of that new production will find an export market,” said Schouvieller. “So, in our traditional markets where we are very competitive and dominant, we're going to start to see more competition coming from other production areas in the world.”
Managing trade on a global scale is always a challenge, but the past five years have been particularly tumultuous, said Ed Usset, a grain market economist at the University of Minnesota.
“We've had a trade war, we've had African swine fever in pig production in the world, we've had COVID-19 and we've had the war in Ukraine,” he said. “Any of those events is a headline event for a decade and we suffered them all in a five-year period.”
And Usset sees another significant market disruption on the horizon. There’s a big push to reduce greenhouse gas emissions by increasing the use of biodiesel, made with soybean oil.
Climate implications
There are at least 16 new soybean crushing plants in the works across the country.
“That's going to be a big game-changer because if they all come about, we're going to need 10 million more acres of soybeans planted,” said Usset. “And that will impact every other commodity because it's going to have to steal acres away from something else.”
About 60 percent of soybeans grown in Minnesota are exported to foreign markets.
If the new soy oil plants all go online in the next three years, the extracted oil will be used in biofuel but the crushed soybean, called meal, will need to find new export markets. Soy meal is primarily used as livestock feed.
“We're seeing kind of a shift now in the markets, looking at how we're going to export meal,” said Joe Smentek, executive director of the Minnesota Soybean Growers Association.
While the U.S. will use the soy oil for low-carbon fuels, the country doesn’t have enough livestock to use all of the additional soybean meal.
“We're really going to have to shift our system away from whole soybeans and looking at shipping meal,” said Smentek.
There’s another climate-related impact that’s still developing. If countries incentivize sustainable crop production with a reduced carbon footprint, what will that mean for global competition?
Smentek said Minnesota farmers are making changes to be in a position to benefit from climate-driven world market forces.
Adapting for the future
CHS executives said they are preparing for those changes and others, and in an increasingly fractious world, they are pursuing a strategy of building deeper relationships with international customers in an effort to be the supplier of choice, despite shifting geopolitics and climate-driven market forces.
Ye is optimistic despite all of the turmoil and increasing global competition. She said there is expanding demand for ag products across the world and quality still matters.
“We supply the world with the best food and agricultural products, and nobody can really compete or challenge us with that.”
