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Straw Dilemma: Fuel Prices, Port Pullouts Put Processors in a Bind by Sean Wolfe, Associated Press The Oregonian, October 17, 2004

ALBANY, Ore. -— Following a year that saw record straw prices, this season is showing a significant dip.

Rising fuel costs, which make trucking and other petroleum-dependent operations more expensive, combined with the recent pullout of two container shipping lines at the Port of Portland are forcing some processors to cut back on production.

Calvin Cox, general manager of ACX Pacific Northwest's straw processing operation in Albany, said the extra shipping costs are putting his company at a price disadvantage against straw from neighboring states and Canada.

"Canada, Washington and Southern California have a huge freight advantage over us right now. It makes rice straw from China and other low-end forage products look more appealing to those buyers."

Cox said as a result of the changes in the freight market, he's processing about a third of what he does during a peak season and about half of what he might process during a slow season. He's cut an entire shift from his plant, reducing his labor by half. The plant employs seven people.

"There's economic issues — if you're not moving the product through your facility it puts you in an extreme liability," Cox said. "In the straw business, you buy a large portion of the product through the summer harvest in anticipation of selling it on the export market. You may buy up several thousand tons and put it in barn storage, and that's money just sitting there. It's not going anywhere."

The straw processing industry involves around a dozen companies in and around the Willamette Valley, clustered primarily between Salem and Junction City.

Typically, straw processors buy up the excess straw produced by the grass seed industry and either bale it or pack it into shipping containers for export. The export market is driven by a huge Asian appetite for straw, which is used to feed domestic animals, particularly cattle. While straw remains one of Oregon's top 10 exports to China, Korea, Japan and elsewhere, Oregon also competes with Canada, Washington and California to keep the straw flowing overseas.

The recent pullout of two container shippers from the Port of Portland means that if Oregon straw is to reach Asian markets, it needs to travel to Washington ports. That means more road time for truckers, with the additional wages, fuel, and maintenance that implies.

Those costs mean that the price of Oregon straw is on the rise and as a consequence less competitive against straw from neighboring states and Canada.

Stan Boshart, owner of Boshart Trucking Inc. in Tangent, said he hasn't started to deliver to Washington just yet, but he foresees he'll have to in coming months.

"The handwriting is on the wall. We're going to have to hire more truckers and start going up to Tacoma," Boshart said.

He estimated it costs an additional $230 per container for fuel, road time and labor. But that ends up being the preferred solution, because even though shipping by rail costs about half that much, the fees to load the container on a railcar make it more expensive.

John Kratochvil, international trade manager for the Oregon Department of Agriculture, said the trend for the past three years has been an increasing emphasis on freight services to international destinations out of Washington. For Willamette Valley farmers, that means higher costs for exporting straw and other agricultural commodities.

"When we are shipping out, whether it's straw, grain, or whathaveyou, we have competition, and a few dollars on a container may sway the sale to someone else if we're not competitive," he said.