Port Congestion & Volatility: Transparency Key to Better Business
Each year at Annual Meeting, a much anticipated panel discussion is held to discuss major issues affecting TEGMA's members. This year's topic: "Business and Operational Issues - Export Capacity and Related Logistics" opened many doors to discussion for our members.
Bill Eilbracht, General Director of Ag Products at Union Pacific, began the panel discussion with a look at UP's performance this past year. In 2010, Union Pacific had record performance, with customer service at a high, and UP recording their safest year ever. Eilbracht's company has also bought on 1100 new cars in 2010, with a commitment to spend $3.2 million in 2011 on 500 new cars.
With regards to the topic at hand, Eilbracht spoke from the shipper point of view, stating that port congestion is measured in grain trains held and that last year alone over 22,000 hours of customer caused delay happened at terminals last year. His hope for the coming year is to add capacity across the board, spend more money on elevators and tracks, and to work on the forecasting process for terminals.
David Pope, Senior Merchandiser of Rail Transport for CHS Inc., however, was the first to bring up the importance of transparency on the rails. Pope stated that one of the major problems today is that railroads have to decide how to allocate the available railway space. Furthermore, Pope questioned when space is allocated to marketplace, does the railways want them to go to slippers or let the market sort them naturally.
Pope's answer: transparency. "We need to figure a way to be truly transparent," he stated. "The more transparent the better for business." With true transparency, Pope believes, we can better have an understanding of the true capacity of the railways. As long as railways are consistent with their programs, the market will follow, and Pope hopes, it will eliminate volatility.
TEGMA's third panelist, John Roby of the Port of Beaumont, spoke of how TEGMA's mission is reflected in the current Port of Beaumont Rail Improvement Program. Slating completion for July 2011, Port of Beaumont's 18 month project began with a relationship with Louis Dreyfus in concurrence with a $10 million project to improve their current elevator.
Port of Beaumont's improvements have fully automated their systems. The project also doubles holding capacity at port with a new interchange yard, which will now be able to handle 3 complete unit trains. Roby's positive remarks left TEGMA's members with an optimistic outlook on port congestion.
Tom Sexter, Merchandising Manager for Louis Dreyfus Commodities, spoke on the Pacific Northwest. With the growth and addition of a Bunge export facility, port congestion at the Seattle Terminal will theortically go from 11 to 15 trains a day, seeing an increase of 11.5 million metric tons in PNW port capacity.
However, Sexter also spoke on the factors affecting port congestion. Terminal switching, cargo size, rainy and windy weather conditions, are a few things affecting his terminal every day. Not to mention following holiday and labor rules, as well as accounting for down time for maintenance. Sexter also spoke of secondary market volatility.
After Sexter's mention of Bunge's new PNW facility, Ryan Warner of Bunge spoke on their new facility: EGT LLC in Washington. Warner also circled back to previously mentioned topics such as volatility in the secondary shuttle market. Warner's bottom line: "Transparency and consistency in the car programs are the key to the future."
Topic then shifted to the importance of forecasting to all sides of the grain industry. Said one representative from a major carrier, "Shipping is only as efficient and as good as the forecasting information from the commodity merchants."