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Grain business bounces back in Twin Ports

After back-to-back years of record-low grain shipments, 2007 has brought a rebound to Twin Ports elevators. Just look at the steady stream of salties that have been calling on Duluth and Superior in recent weeks.

After back-to-back years of record-low grain shipments, 2007 has brought a rebound to Twin Ports elevators. Just look at the steady stream of salties that have been calling on Duluth and Superior in recent weeks.

The export market for U.S. wheat has been stoked by poor crops in rain-soaked Europe and drought-stricken Australia. European grain dealers would typically turn to Ukraine and other former Soviet-bloc nations during an off year, but wheat production was poor there too this year.

Meanwhile, favorable weather helped farmers in North Dakota and northwest Minnesota to produce a bumper crop of high-quality wheat this year.

Producers with wheat to sell are reaping the financial rewards. Dave Torgerson, executive director of the Minnesota Association of Wheat Growers, said a bushel of spring wheat that would have sold for about $3.50 a few years ago now fetches farmers between $7 and $7.50. But Torgerson said many producers aren't receiving the full benefit, as they were already under contracts to sell their latest wheat crop at lower prices than the spot markets now offer.

Some premium wheat, such as high-protein durum, has been selling for more than $10 per bushel.

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At such prices, grain has begun to flow briskly through the Twin Ports again, despite high transportation costs.

Current international freight rates of about $100 per ton are about triple what they were five years ago.

Dan Sydow, general manager of Fedmar International, a Duluth ship agent, said marine transportation costs have been driven upward largely because of the growing economies of nations such as China and India and an ensuing rise in demand for vessels.

"Rates have gone berserk for all sizes of vessels," said Ron Johnson, trade development director for the Duluth Seaway Port Authority.

Rising shipping costs may actually create an incentive for people to move freight now, rather than later. "The outlook is that rates will only get worse," Johnson said.

High transportation rates have depressed exports of relatively low-value commodities. But Sydow said wheat prices have reached a threshold where shipping costs represent a small enough percentage of the whole that Europe is buying again.

"Our business really broke loose in July," said Lance Helgeson, superintendent of the Cenex Harvest States grain elevator in Superior.

"For the last few months, we've probably been as busy as we've ever been in the past 10 years," said Helgeson, noting that demand for U.S. grain shows no signs of abatement.

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Some elevators are running out of capacity to store all the grain heading their way. Grain has been piled on the ground outside the Peavey Co. elevator on Connor's Point in Superior,

"We haven't seen piling like that since the early 1990s," Johnson said.

The Port Authority lacks up-to-date statistics on Twin Ports grain shipments, but Johnson remains confident the year-end numbers will show a solid increase in exports.

Sydow believes the benefits could spill into next shipping season, as well.

"I have a strong inkling that business will be good through the spring," he said, noting that he's already booking grain orders for next year.

Sydow said the resurgence of grain exports is good news for the Twin Ports' economy. He observed that ton-for-ton, loading grain onto ships is a more labor-intensive and lucrative enterprise than handling other bulk commodities.

The relative strength of the euro relative to the dollar has certainly played a role in making American wheat more attractive to foreign buyers, but it's not the primary motivator for this year's sales, according to Torgerson of Minnesota Association of Wheat Growers.

"The weaker dollar helps," he said. "But that's not as important as having high-quality grain to sell."

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While Sydow welcomes the recent rebound in grain sales, he said it may be short-lived, barring other crop failures abroad.

"I don't think we'll see a return to the kind of grain business we saw in the 1970s, '80s and '90s," he said.

PETER PASSI covers business and development. He can be reached weekdays at (218) 279-5526 or by e-mail at ppassi@duluthnews.com .

Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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