A Localized Supply Chain in a Global Marketplace

By: Mike Steenhoek, Soy Transportation Coalition

“Who is your customer?” is perhaps the most elementary of questions for any enterprise or industry to answer if they are to enjoy success. When posing this question to farmers, the answers can be quite varied. Is it the local elevator? After all, that is where soybeans are often first delivered and who pays the farmer for the bushels produced. Is it the soybean processor that purchases the soybeans from the local elevator? Is it the livestock industry since it ultimately consumes the meal produced from soybeans? Is it the consumer, whether in the U.S. or another country, that purchases the piece of meat?

One of the reasons this elementary question can produce such a variety of answers from farmers is due to having a supply chain designed and created to involve multiple steps of consolidation and aggregation.

As Missouri and U.S. soybeans journey from the farm to elevator to rail or barge loading facility to export terminal, a number of degrees of separation emerge between the farmer and the ultimate consumer. This supply chain has overall served the Missouri and U.S. farmer well as it has and continues to transport billions of bushels of soybeans and grain significant distances in a cost-effective, reliable manner. It remains one of the key sources of competitive advantage for Missouri and U.S. soybean farmers in the global marketplace.

Conceptual images provided by American Patriot Holdings.

While this current supply chain – designed to transport soybeans and grain in bulk quantities – must be maintained and enhanced, an increasingly attractive complement to this model is transporting soybeans and other agricultural products via shipping containers. A new, innovative maritime vessel offers the potential to transport containers along the nation’s inland waterway system to export facilities near the Gulf of Mexico.

If realized, this new supply chain will enable Missouri farmers and local elevators to more directly access international customers while better preserving the quality of the soybeans delivered.

American Patriot Holdings, LLC. (APH) has developed a patented vessel design that would enable the transport of shipping containers throughout the nation’s inland waterway system. The company’s larger, “Liner” vessels will be able to transport 2,375 twenty-foot length containers (TEUs) in a liner service between Plaquemines Port Harbor and Terminal District (PPHTD) – the port complex along the lower Mississippi River closest to the Gulf of Mexico – and both Memphis and St. Louis. Expected roundtrip service between PPHTD and Memphis is seven days and ten days between PPHTD and St. Louis. The vessels will be able to travel at 13 miles per hour with virtually no wake – mitigating shoreline erosion throughout the inland waterway system. A traditional barge flotilla will travel up river between four and five miles per hour.

In addition to the liner service to Memphis and St. Louis, APH has designed a smaller, “Hybrid” vessel capable of transiting the lock and dam and more distant portions of the inland waterway system. These vessels – able to transport approximately 1,700 TEUs – are designed to provide access to additional regions located along our navigable waterways – potentially including Kansas City, Jefferson City, and other communities along the Missouri River.

In an effort to determine the economic feasibility of exporting soybeans and other agricultural products via this new container on vessel approach, the Soy Transportation Coalition (STC) released a report comparing the cost, speed, and quality preservation of this potential alternative to the currently utilized options of shipping containers via rail to the West Coast and bulk barge transportation to Mississippi Gulf export terminals.

The research concluded that transporting soybeans from St. Louis via bulk barge to an ocean vessel at a Mississippi Gulf export terminal and onto a customer in Shanghai, China, would cost $79.80 per metric ton. Loading soybeans into a container near St. Louis, transporting it via rail to the West Coast, and finally an ocean vessel journey to Shanghai would cost $140.33 per metric ton. The proposed APH Liner service would transport soybeans from St. Louis via container to an ocean vessel at PPHTD and onto a customer in Shanghai at a cost of $87.07 per metric ton – a 38 percent cost savings compared to containerized shipping through the West Coast.

The speed of the APH vessel will enable shipments of soybeans and other agricultural products to reach the Mississippi Gulf export terminal six days faster than bulk barge shipments. Given the increased congestion on the West Coast, the APH vessel will be able to depart the export facility at PPHTD 14 days faster than containerized shipments via rail to West Coast facilities. Combining the transit times of the three options both to the export facilities and from the export facilities to a customer in Shanghai, the APH option will enjoy a 14 day advantage over the bulk barge option and will be six days faster than containerized shipping via the West Coast.

It is important to have the mental image in one’s mind of an international customer purchasing a piece of meat fed by U.S. soy and then consider the multiple logistical steps between the growth of U.S. soybeans and that piece of meat. It should always be the aspiration of the Soy Transportation Coalition to explore opportunities to remove any of these logistical steps. In doing so, U.S. soybean farmers would profit. Containerized shipping via the inland waterways has the potential for expanding opportunities for Missouri and U.S. soybean farmers to have a localized supply chain in a global marketplace.

Read the entire June 2019 issue here.