Reviving US Grain Production Paves Way for Gulf Coast Terminal Expansion21 Apr 2011 • by Natalie Aster
BMI believes a planned grain export terminal on the US Gulf Coast will be well placed to take advantage of an uptick in US grain production. The construction of the terminal involves investment from several private companies as well as the state of Louisiana, reflecting BMI's view that public-private partnerships (PPPs) will become more common in the US port sector as federal funding decreases.
New York-based IFG Port Holdings is to spend US$59.5mn on constructing the terminal at the port of Lake Charles in Louisiana. When completed the new grain terminal will handle rice, wheat, corn, soybeans and dried distillers' grains from across the US for shipment to foreign customers from the port of Lake Charles, Louisiana, midway between New Orleans and Houston. 'This will be the first new export grain terminal developed in the state of Louisiana in over 25 years and will connect south-west Louisiana to the nation's grain export system, making the port of Lake Charles a premier export point for grains', said IFG's CEO, Kabir Ahmad. 'Through the development of enhanced rail capacity, the port will be better equipped to compete amongst the nation's ports.'
BMI notes that as well as the US$59.5mn that ING is investing in the terminal itself, other sources are to invest to ensure that the new facility has adequate rail links. Rail company Union Pacific will support the project with a US$6m investment in rail infrastructure improvements. 'This investment will allow Union Pacific to better serve customers by expanding our network for exporting grain and grain products', said Union Pacific's chairman and CEO, Jim Young. 'This project also serves as a great example of how public-private partnerships can work to support industrial development in Louisiana.' The port of Lake Charles will invest US$10.1mn in a loop track to handle IFG's unit trains for the project, which also includes an upgraded rail connection to the new bulk grain elevator at the port. Louisiana State will provide another US$6mn through its Port Priority Programme and grant a 5-6% rebate on new payroll expenses to IFG.
On The Up
US Corn Production, '000 tonnes
The new terminal will be well placed to take advantage of growing US grain production. The recently released USDA Plantings Prospects report has bolstered our prediction for a significant rebound in US grain production. Corn acreage is forecast at the highest level since WWII, while soybean acreage has been pencilled in at the third-highest rate on record. Wheat supply should also improve, with plantings estimated 8% higher than in 2010/11.
We caution, however, that the new facility will face competition from the nearby port of New Orleans. The port has recently started containerising grain using a new vacuum-loading system. BMI believes that containerising grains will become a more popular strategy in the future. Containerisation of grains eliminates the need for single-purpose dry-bulk facilities, and allows terminals to handle a much more diverse range of goods. We note that this option is already gaining popularity in the US, with Union Pacific recently announcing that it is to invest in a transloading facility to containerise grain through the ports of Los Angeles and Long Beach.
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