Wheat piling up as lockout continues

Although President Bush asked negotiators to resolve their dispute, sources said the two sides remained far apart on job retention, an issue the longshoreman’s union has said it is not willing to compromise on.

Government officials estimated the impasse between the International Longshore and Warehouse Union and the Pacific Maritime Association was costing the U.S. economy $2 billion a day.

Officials with the U.S. Wheat Associates, the export promotion arm of the wheat industry, said the week-long shutdown of western coast grain shippers is directly impacting the wheat export industry, from growers through the transportation chain to the importers. They said nearly half of the wheat grown in the United is destined for export, and 40 percent of all exports are shipped from Pacific ports.

"We're facing disastrous consequences in both the short and long terms from this dispute," said Gary Broyles, president of the National Association of Wheat Growers.

"We've spent decades developing markets for U.S. wheat exports," said Jim McDonald, chairman of U.S. Wheat Associates and the Wheat Export Trade Education Committee. "This shipping stoppage has the very real potential of damaging our reputation as a reliable supplier if shipments don't resume soon."

Anticipating the fallout last week, "failing an imminent agreement between the two parties to reestablish shipping," on Friday the national wheat organizations urged President Bush, to "use your full authority to take whatever legal steps necessary to bring an immediate end to the work stoppage on the West Coast."

The organizations welcomed news Monday that President Bush is convening a board of inquiry as a first step toward intervening in the dispute.

“The president’s message to labor and management is simple: ‘You are hurting the economy,’” White House Press Secretary Ari Fleischer said at a briefing.

One of the most direct hits is in Oregon, which is the home to the vast majority of western coast wheat shippers. "The biggest short term impact in Oregon is economic. Things weren't good before and this is not going to make it any better," reports Tana Rosebrook, administrator of the Oregon Wheat Commission. "Not only is our wheat not moving, but people aren't working. Not just the longshoremen but the rail workers, the truck drivers, exporters, importers, etc."

Ominously, "the price of wheat is continuing to decline," Rosebrook says, following several weeks of rising prices.

Even wheat growers as far away as the Great Plains are feeling the financial hurt. "The basis on wheat has dropped 10 to 15 cents per bushel as a result of the shutdown," says Randy Englund, executive director of the South Dakota Wheat Commission. "Our total hard red spring wheat production is estimated at 24 million bushels. Ten cents on 24 million bushels is a direct impact of $2.4 million to South Dakota wheat farmers."

"Although South Dakota wheat production is considerably lower this year, it is a high quality crop. As a result of quality issues elsewhere, this reduced crop is in high demand," Englund points out. "But what good will this do for farmers and overseas millers if we can't get it to them?"

Englund brings up an issue that is quickly turning into a major problem for the wheat industry, namely a potential impact on exports. As of the end of September, wheat exports had been running 8 percent higher this marketing year. But that positive trend may come to an end, if the ports aren't opened soon.

Japan, for many years a leading customer of U.S. wheat, is by far the largest purchaser this marketing year. Their government officials recently announced a new food policy, however, indicating that they were going to pursue higher domestic wheat production in the coming years. This port shutdown may serve to solidify that policy.

Officials from the Japanese Food Agency, which is the single desk government buyer of wheat, tell U.S. Wheat Associates country director Takeo Suzuki that they "realize again there is a considerable potential risk in importing wheat from overseas."

"The Food Agency, as of today, has two vessels suspended afloat in the Columbia River District. They were to load 20,000 metric tons each of hard red spring wheat and western white wheat," Suzuki says. "They keep more than 2 months wheat stock on hand, protecting against the situation like the current labor disputes in exporting countries such as Canada and the U.S." So while the shipment delay -- so far -- does not directly affect the operations of the Japanese Food Agency, it has a far greater impact on future food security decisions.

This concern is equally, if not more, evident in the Middle East, where customers are very nervous about shipment delays "and this increases each day the shutdown continues without resolution," reports Dick Prior, U.S. Wheat Associates vice president based in Cairo. "Buyers will opt for other origins if it continues or becomes a chronic problem," he predicts. It's an easy prediction since, as Dick points out, "time is money."

Time is certainly money for grain traders based in the U.S. and Canada. The North American Export Grain Association last week informed the industry that they estimated at least half a million dollars of costs direct to the grain export industry for each additional day we're unable to ship. For this week, "we would estimate this number to be in the range of $1 million to $2 million a day as more ships, rail, barges, et cetera, continue to accumulate," said Gary Martin, NAEGA chief executive officer.

With no grain shipping out, inland transportation systems are backing up. "The major concern now is soybean harvest," South Dakota's Englund observes. "Some shuttles are stuck out west, but we had rain this week in northeast South Dakota, so harvest has slowed. The impact will be felt in the coming week if the shutdown is not resolved."

And it doesn't end there, Englund explains. "There are major pressures on storage capacities, and the upcoming corn harvest will further exacerbate the situation."

U.S. Wheat Associates, the National Association of Wheat Growers, and the Wheat Export Trade Education Committee, in their letter to President Bush last Friday, explained that one of America's export wheat industry's primary advantages is a reputation as a reliable supplier, painstakingly rebuilt after the grain embargoes of the 1970's.

"Unless this work stoppage ends quickly, the U.S. will once again lose our reliable supplier reputation along with our valuable customers," the letter said.

"We welcome the President's help in this matter," said Broyles. "He has allowed an appropriate amount of time for mediation to work, but the break off in negotiations yesterday indicates that mediation is not likely to put the ports back to work very soon. There is bipartisan support on Capitol Hill for intervention, and there are serious ripple effects moving upstream through the entire economy."

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