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Going Against the Grain by Cami Joner, Business Journal staff writer Vancouver Business Journal, September 11, 2004

Wheat industry analyst defends channel deepening, despite container pullouts

Wheat exporters say their future still rests on deepening the Columbia River shipping channel, though companies that ship other goods have announced plans to bypass the river.

Proponents have long said deepening the 600-foot-wide channel by three feet – from 40 feet to 43 feet - would enable container ships to arrive at the Port of Portland fully loaded, thus keeping the region competitive as a distribution center for imports manufactured overseas.

The argument seems to be losing water now that container shipper Seoul-based Hyundai will drop calls to Portland this month, followed by Tokyo-based “K” line in December.

The pullouts leave Hanjin, of South Korea as the Columbia’s only trans-Pacific container service. Opponents of the proposed $150 million channel deepening project now question the economic benefits of the project when weighed against environmental concerns.

Earthjustice, a Seattle law firm representing Northwest Environmental Advocates, drafted an Aug. 23 letter asking the Corps of Engineers for a new analysis of the project based on the loss of container business.

“At the very least, the departure of these two carriers ensures that the touted benefits from channel deepening will not materialize for many more years,” the letter stated.

But those who ship bulk quantities of wheat say that like the container business, protecting the future of the $4 billion wheat industry depends on the project.

“It might not make an impact in the near future, but beyond that, it might be the only way we can do business because there will be larger vessels,” said Ronny Plushnick, treasurer of United Grain Corp., one of the owners of United Harvest, which oversees terminals at the Ports of Vancouver and Kalama.

As the nation’s No. 1 wheat exporting route, the Columbia-Snake river system ships 43 percent of the nation’s wheat exports and 25 percent of all U.S. grain exports.

Plushnick and others say the region will be better positioned to maintain that position with a deeper shipping channel to accommodate a new generation of larger, Panamax vessels. The vessels, named for their ability to fit through the Panama Canal, have twice the load capacity of the Handimax ships currently employed to carry bulk shipments of grain and wheat from lower Columbia River ports.

“The Handimax will probably be phased out over the next few years because it’s cheaper to ship larger quantities,” Plushnick said.

Those who’ve been in the shipping business for years say similar predictions came true for container vessels, which 30 years ago handled about 2,000 TEUs, or 20-foot-equivalent-unit containers.

“A vessel of 2,000 TEUs in the 1970s was a large vessel. Today, the vessels calling on Portland are in the neighborhood of 4,000 TEUs-plus, and the ones currently being manufactured are 8,000 TEUs,” said Wayne Plaster, general manager of operations for Northwest Container Services Inc., a Portland company that moves cargo by rail from Portland to Tacoma and Seattle, and also moves agricultural products out of the Port of Pasco, Wash.

Plaster said grain vessels would also grow to answer increasing demand.

“It will be important to the bulk market to have those three extra feet (of channel depth) to expand and ship to markets like China,” he said.

Larger ships will move to the most economically viable sources of grain, according to Glen Squires, analyst for the Washington Wheat Commission, which represents more than 3,500 state wheat producers. Squires said the state expects to produce 145 million bushels of wheat this year.

“As a whole, the Pacific Northwest produces about 300 million bushels of wheat annually. Ninety percent of what we produce is exported,” Squires said.

That makes getting the product to market just as important as producing the wheat to compete against exports out of Canada, Australia, Argentina and in some cases, the U.S. Gulf.

“Buyers consider ‘what’s the price of the wheat and what’s it going to cost me to get it?’ It’s all part of the package,” Squires said. “Essentially, the more grain you can haul on a ship, the lower the cost. The deeper channel will keep us competitive as a region.”

Squires said he believes the promise of maintaining that edge justifies the $150 million deepening project.

“Every country is enhancing its infrastructure and we’ve been trying for 20 years to enhance ours through a deepened channel,” he said. “It’s important. If we can grow the product but not get it to market, it’s important.”