Tuesday, October 14, 2008

More News About Grain Piling Up in Ports

Another story about credit crunch affecting shipping. International trade is slowing down. Think this is some arcane subject that doesn't affect the average American? Think of all the goods that come from overseas. Oil. Metals. Food. Textiles. What is going to happen if this continues for more than another month? This is the stuff that really causes an economy to contract. Unfortunately, these stories are reported in the Canadian media while ignored by the money honeys. When are they going to start doing their jobs?

Foreign Policy's blog writes:
"Still think the global credit crunch is all about the TED spread and collateralized debt obligations? Think harder. Export-bound grain has started piling up in Canada as sellers have begun refusing to trust the credit lines and financial institutions linked to their foreign buyers.
The problem is that Canada's export cargoes don't get loaded until buyers can prove their ability to pay -- proof that has been increasingly hard to come by in the wake of bank defaults and shrinking credit markets worldwide.
Unable to get credit lines, many buyers have left the grain market, generating big losses for Canadian shippers. Add to this the greater costs that shippers now shoulder because of delayed payments, and the picture starts looking pretty bleak.
And Canada isn't the only country suffering from the crunch. U.S. and South American shippers are taking even harder hits. Los Angeles and Long Beach -- home to two of the biggest ports in the United States -- have already seen a 9 percent drop in imports this year. Global shipping rates are down 74 percent from last May.
With 90 percent of the world's trade in goods going by ship, credit access is key to trade's survival.
It's also key to investment in product development, which surely will fall as manufacturers face greater declines in profits
. ..." http://blog.foreignpolicy.com/node/10010

The Financial Post on October 10 reported:
"The fall in commodity prices is being exacerbated as international buyers delay or even back out of purchases in the hope that the market will go still lower.......
While the retreat of buyers from the market is a key contributor to the price free fall, industry insiders say some purchasers are backing out of deals at the last minute, leaving piles of unsold grain, coal and other raw materials backed up at ports in the United States and Canada....
Speaking in an interview earlier this week, Mr. Temple said the phenomenon is happening mostly at U. S. and South American ports but is starting to appear in Canada.
While declining global demand is a factor in commodity prices, the biggest driver is the credit crisis. Thanks to the near-evaporation of credit, even willing buyers have been unable to step up to the plate.
Banks have ceased to trust one another and letters of credit backed by once-revered global banks no longer carry weight.
According to Mr. Jensen, some companies have managed to get around the problem by using alternative financing but in some areas trade has dried up completely.
A spokesman for Export Development Canada declined to comment

Still don't believe The Kingfish? Reportonbusiness.com confirms such stories:
"At Port Metro Vancouver, the country's largest port, the early impact of the credit crisis is being seen. With traditional lines of credit drying up, some bulk cargo such as grain is stuck because buyers' proof of payment isn't considered adequate...."

A quick check of the Baltic Dry Index (See chart above), a leading indicator of shipping prices and volume, shows the Index has plunged since early September (52% decrease. The Baltic Exchange describes the Index as "an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a timecharter and voyage basis, the index covers Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain."). The Index confirms in part the reports on the grain piling up in ports as international trade slows down due to the credit crunch. Keep in mind the freezing up of international trade (due to the Smoot-Hawley Act jacking up tariffs to 60%) was one of the leading causes of The Great Depression. Same problem, hopefully a different result. People need to start demanding more answers from our leaders as well as the media.


Anonymous said...

Nice work on coming up with a post that doesn't include a Youtube video or a quote from The Market Ticker. We're still waiting for some original material...

Kingfish said...

Gee thanks Tom. I'll be sure and take your comments under advisement.

Anonymous said...

We're still waiting for some original material...

Point us to your original material asshole.

Kingfish said...

Go back to the JFP business blog where she inserted stock charts she doesn't know how to read and is running feeds from business sections of newspapers and calling that her business blog. better yet, go to the Clarion Ledger business section where they don't know the difference between a credit bureau and a credit rating agency.

Anonymous said...

Why do you guys criticize someone writine on their own blog? Geesh.

Anonymous said...

Tom? Tom Head? Couldn't be.

The shipping problems are very real. Few Americans can begin to fathom the extent and complexity of our nation's supply chain which put goods and perishables in our stores as if it was some sort of magic. It isn't that they lack the ability to understand but rather they do not possess the information to realize how truly vast an enterprise it takes to support the effort.

Anyone who has ever driven I40 from Amarillo westward has seen the never ending march of 100+ car long BNSF trains as they move freight from the ports of the Los Angeles area to the interior of these United States. It truly is an unforgettable sight as you watch the clockwork frequency of trains after trains after trains moving loaded slowly, steadily east and then quickly west, unloaded, on the return leg to re-supply. What is more, our ports and rail lines operate 24/7/365. There are no days off.

Our system of supply has only small windows built-in for disruptions. Three, five, seven days where significant quantities of goods get stuck in ports here and around the world due to this credit crisis will easily lead to noticeable supply shortages -- that DOES NOT mean shortages of consumer electronics, designer clothing, something made of fine Chinese plastica or other similar discretionary junk.

The first significant shortages will let the genie out of the proverbial bottle and then all bets will be immediately off. Because once people wake up to realize how dependent they are, how tenuous the supply chain and that we, as a country, are on the verge of economic upheaval then they'll begin to hoard as if the next hurricane was about to make landfall.

Once the hoarding starts then we'll be off to the UGLY races. To be prepared for the coming chaos people a good place on the net to follow is the SurvivalBlog. The precipice upon which we stand as a country won't be as bad as Katrina, it will be worse. IT CAN HAPPEN HERE AMERICA.

Kingfish said...

People don't have a clue about this. Mass media has missed this one. Forbes had a story about it recently and that was it. They are focusing on stocks, bonds, and equities and ignoring this.

Keep watching the BDI. Good indicater of what will happen in this area.

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This is definitely a Beaver production.

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