Investment Pays

SOY’S INVESTMENT IN GRAYS HARBOR PAYS AS U.S.-CHINA TRADE WAR DEEPENS

BY AARON PUTZE, APR

The distance from Des Moines, Iowa, to Washington State’s Port of Grays Harbor is roughly 1,800 miles, or 26 hours by car, give-or-take. But significant investments made in the strategic export hub over the past 20 years by the soybean industry have bridged the space between the two, benefiting Iowa farmers.

“We hit the nail on the head with our investments in the harbor, and those aren’t easy to come by,” says Iowa Soybean Association President-elect Jeff Jorgenson while touring the facility in September. “The challenge is to score on more of these opportunities and more often.”

The farmer from Sidney joined fellow ISA board members on the fact-finding mission to the Pacific Northwest (PNW). It included conversations with Grays Harbor authorities and guided tours of Ag Processing, Inc.’s (AGP) export facility and Renewable Energy Group’s largest biodiesel production facility.

“There’s no question about our capacity to produce and export products, including protein and energy,” Jorgenson adds. “All we need is access to destinations and markets that need what we produce.”

Oldest maritime port

Port of Grays Harbor was chartered in 1911 and is the second-oldest port district in Washington State. Located just 12 nautical miles from the Pacific Ocean, it’s the nation’s closest maritime port to the Pacific Rim. Vessels leaving the harbor filled with soybean meal, soybeans and dried distillers grain can dock in the Philippines, Thailand or Vietnam in just 23 days.

The location is ideal for Omahabased, farmer-owned AGP. Created in 1983 and representing more than 250,000 farmers, the company specializes in soybean processing, vegetable oil refining, renewable fuels, international trade and grain procurement. Of tremendous interest is serving growing populations and appetites for soy and protein in the Philippines, Thailand, Vietnam, Malaysia, Indonesia and China.

Nearly 20 years ago, AGP began conversing with Grays Harbor officials. The port was struggling as timber exports from the Pacific Northwest, a longtime linchpin of its economic vitality, continued to decline.

To survive, port officials looked to the east at companies like AGP. A long-term relationship quickly flourished. The soybean industry recognized the Pacific Rim’s growing appetite for soy and strategic benefits of exporting products via the Pacific Northwest. The port and surrounding area calculated the economic benefits to the region by diversifying its tenants.

If ever there was a win-win partnership, this was it.

“We are so aligned with AGP and REG and our friends in the Midwest and always will be,” says Leonard Barnes, the port’s deputy executive director, during a free-wheeling question-answer session with ISA directors. “We’re a deep-water port connected by rail to the Midwest. AGP, REG and the tax base they create cannot be overstated. It’s an ideal fit.”

Barnes, an outspoken and enthusiastic champion of the harbor and its workforce, has forged strong partnerships with farmers from the heartland. He mingled effortlessly with his guests, shaking hands with purpose and welcoming an embrace or slap on the back.

“AGP and the investments made by soybean farmers put us on the map,” he says matter-of-factly.

Barnes recited a lengthy list of benefits stimulated by his soy-based tenants: employment generated by offloading unit trains, loading vessels and export-related service, numerous support jobs and growing tax base created by their presence and facility upgrades and expansions that continually renew the local economy.

“We’re connected with the Midwest soybean grower,” he says. “What matters to you are things we’re paying attention to.

“People here keep track of what’s going on in agriculture because they know how much we depend on farmers from the Midwest and the business they sustain here in the Pacific Northwest,” Barnes says.

Leonard Barnes

Aaron Putze/Iowa Soybean Association

Time is money

On the flip-side, farmers also benefit from having a major presence adjacent to a deep-water port.

After all, time is money.

“One advantage we have as a company is moving product from the Midwest to Asia in a shorter time,” says Chris Schaffer, AGP’s Sr. Vice President of Ag Products.

“Vessels freight is expensive. Shipping from the PNW compared to South American export terminals saves well in excess of a week in voyage costs. It’s worked out well for AGP and our farmer-owners,” says the native of Lake City, Iowa.

When asked if business in the port runs smoothly, Schaffer didn’t hesitate.

“The main bottleneck was simply getting enough product out here to export,” he says. “It takes time to accumulate 45,000 metric tons to load a boat.”

That concern was addressed when AGP’s newest processing facility in Aberdeen, South Dakota, came online in July.

The facility is the company’s 10th tenth soybean processing location and can process more than 50 million bushels of soybeans annually. Train cars loaded with soybean meal are on the tracks and headed west from Aberdeen to Grays Harbor every three to four days.

Iowa Soybean Association directors, staff and guests get a first-hand look at the efficiency and strategic importance of Port of Grays Harbor as discussed by Ag Processing Inc.'s Chris Schaffer.

Aaron Putze/Iowa Soybean Association

Despite its nearly two-decades-old success story, the future vitality of the port cannot be assumed.

For harbor officials, loading vessels properly and efficiently in all kinds of weather remains a challenge. Obtaining timely permitting from federal and state agencies for upgrades to the harbor and surrounding area is increasingly problematic.

Canada, a worthy competitor to the north, has a shot clock on permit approvals, say port authorities. Washington State and U.S. federal agencies don’t. “Time kills deals,” says Barnes. With 80% of the port’s revenue derived from trade, the current U.S.-China trade war is closely monitored. To date, the direct impact has been minimal. Barnes says very few whole soybeans are shipped to China via the port. Most soybean meal exported via the harbor is destined for Thailand, Philippines and Malaysia.

But he was quick to add that any downturn in trade is likely to create business disruptions elsewhere.

“Other ports are feeling the bite,” he says. “And that can cause additional competition for us as they look for ways to diversify their business.”

Strategic partner

ISA CEO Kirk Leeds says the association has many partners but few more strategic and important than AGP.

“It’s difficult to think of another partner with deeper connections to ISA and Iowa’s farmers than AGP,” he says. “As a soybean processor owned by farmers through their local co-op, partnering with AGP to fully explore the opportunities to export soybeans and soybean products out of Grays Harbor in the state of Washington continues to make perfect sense.”

Leeds says the ISA feels a sense of pride knowing its leaders were there for the first groundbreaking ceremony held at Grays Harbor almost 20 years ago.

“And we’ve been there for additional groundbreaking ceremonies over the years as the port continues to expand. We need to sell more soybeans to markets all over Southeast Asia and the AGP facility is helping us do that.”

Moving forward, AGP’s Schaffer agrees the port holds tremendous opportunity for the company and Iowa’s soybean farmers.

“We see expansion in Southeast Asia, Thailand, Vietnam and continued growth in the Philippines,” he says. “India will soon be a net importer of soybean meal, which won’t necessarily be a direct market for the U.S. but will pull supplies from other locations.”

That is welcomed news to soybean farmer and ISA President Tim Bardole of Rippey.

“Facilities like Grays Harbor and the transportation routes that connect it with the Midwest are vital,” he says. “It’s also a call to action for ISA and our partners to create new opportunities and remove barriers for growth, regulatory and otherwise.”

“The macro trends are all heading in the right direction as the numbers show the world is going to need more protein and more soybeans,” Jorgenson adds. “That says, you hate to think of how dire the near-term is. The fuse is lit on correcting these current challenges and time is running out.”

ABOUT PORT OF GRAYS HARBOR

• Chartered in 1911

• Second-old port district in Washington State

• Led by three-person commission

• 125 tenants, including Overstock.com and Hesco

• Moves soybeans, soybean meal, dried distillers grain, vehicles, timber and pulp products

In 2018…

• Handled 3 million metric tons of cargo (90% for export trade)

• Guided 125 vessels in and out of the port

• Landed 150 million pounds of seafood, the 11th most of any U.S. port (with five upland seafood processors serving U.S. and 70 countries)

SOYBEANS FROM IOWA TO SOUTHEAST ASIA IN 33 DAYS

• Load 10,000 metric ton train in Iowa: 4 days

• Travel time by rail to Port of Grays Harbor: 5 days

• Load vessel: 3 days

• Travel time from Port of Grays Harbor to Southeast Asia: 21 days

Contact Aaron Putze at aputze@iasoybeans.com.