To say that 2020 was an unusual year is a bit of an understatement. It was true for us, soybean growers, and for the entire population who was hit hard by the COVID-19 pandemic.
Today, we want to take the time to recount what happened on the export front at Prograin, which is the part of the business that’s raising our profile on the international scene.
Let’s zoom on 2020, a year that we will not soon forget.
The challenges of exporting soybeans in 2020
Here’s an interesting fact: 2020 was an excellent year in terms of production. Actually, it was a record year. In total, 70,000 containers of soybeans were harvested starting in November 2020—an impressive amount that we will finish exporting this November.
In fact, and you might have guessed it, the major issue lied with exports and the transport abroad—especially Europe and Asia—of soybeans produced in Canada that are highly valued for their nutritional value despite increased competition from non-GMO soybeans.
But where have all the shipping containers gone?
We only rely on maritime transportation to ship our soybeans overseas. In normal conditions, it is a smooth-running machine. However, we have faced several logistics challenges last year.
We should first explain that soybeans are stored in shipping containers before they are loaded on cargo ships. However, containers were hard to come by in 2020 because certain maritime shipping companies, such as Hapag-Lloyd, have reduced the number of containers allocated to the agriculture industry. But why would they do that?
When transporting products, shipping companies must comply with weight limits on their ships. Because agricultural products are quite heavy, a cargo loaded with such products will often reach its weight limit long before its storage capacity.
These weight limits negatively impact shipping companies’ profitability, especially since they were forced to haul lighter loads due to low water level in certain waterways caused by the recent drought that will also hamper yields for the 2021 crop.
Moreover, the lockdown period we’ve experienced drove demand for a lot for products imported from China and, as a consequence, China’s needs for shipping containers. Chinese containers arriving in Canada were then for the most part returned immediately back to China empty—without soybeans or any other product in them.
This significantly reduced the number of containers we had access to. Given the shortage, you understand that it was sometimes difficult—for us and a host of other agricultural companies—to secure the containers required to meet our needs.
A year marked by walkouts
The operations were disrupted or suspended at certain Canadian ports, including Montréal, Halifax and Vancouver, due to protests and walkouts. In total, these walkouts spanned three months, which contributed to extend shipping times and, ultimately, make 2020 especially challenging for soybean exports.
Let’s also not forget the impact of the recent massive forest fires in Western Canada. The fires caused rail service disruptions on the Canadian National and Canadian Pacific lines, extending even more shipping times for commodities such as soybeans.
Rising soybean prices have become unavoidable
The year 2020 was marked, among other things, by a container shortage and extended walkouts at major ports. These events put pressure on maritime freight rates, which reported a sharp increase in 2020. As a result, soybeans’ price per tonne also climbed about 30% on the Chicago Mercantile Exchange, with the export customers bearing the increase and the growers benefiting from it.
This situation led to a number of bankruptcies and fusions among export customers and forced us to boost our direct sales because margins were too slim to work with an intermediary.
The year 2020: focus on crisis management
As you can understand, we’ve seen it all during this very unusual year 2020. Nonetheless, we have reacted swiftly to minimize the impact of the situation on all involved parties and we are very optimistic about the current year. As they say, we have to take it one year at the time!
This concludes our overview. We hope that you liked this quick behind-the-scene recap of the 2020 events of the soybean export business. To learn more about the soybean world, visit the Blog section of our website or contact us.