Outlook for the US Export Peak Season
By Tim Simpson
Article | Wed, Sep 19, 2018 | 7 Minute Read
Octoberfest, Pumpkin Spiced Lattes and cooler days generally signal that "winter is coming." But, if you work for NYSHEX, there is nothing to fear as your mind defaults to one thing: peak harvest season for U.S. agriculture.
October-December (OND) is the time when grain, feed, oil seed, soybeans and corn exporters need ample container equipment, capacity and freight rate stability to move their perishable products without fail.
In 2017, having just officially launched a few months prior, NYSHEX made a major impact on last year’s OND peak season. NYSHEX experienced a 20% surge in new members joining which resulted in dozens of contracts secured in the initial weeks of OND, accounting for thousands of TEUs moved.
Leading up to OND for 2018, NYSHEX is positioned to provide an even greater number of guaranteed contract offerings. In this Q&A, VP of Sales and Marketing for NYSHEX, Kim Cockrell, discusses all the progress and outlook for this year’s OND.
How important is reliable container shipping for this agri export segment and why?
Agri shippers have a truly difficult role. First, their product is perishable, so it must move on time to guarantee freshness. If for any reason shipments don’t arrive on-time, agri shippers may even owe their consignees financial penalties. This is due to GAFTA (The Grain and Feed Trade Association) terms which govern most agri trade contracts. Ultimately, late departure means lost revenue and an impact to the bottom-line.
Second, agri shippers are moving cargo from the interior of the U.S. where import equipment flows don’t match export volumes. The availability of container equipment is an ongoing challenge since import equipment tends to be concentrated on the coasts.
Third, these shippers know the price of the commodities they are buying and selling months into the future, yet they only know their freight costs for the calendar month they're in.
The NYSHEX Forward contract has already been adopted by many leading grain exporters, such as the Lansing Trade Group, CHS and Fornazor. What feedback are you getting from agri members as to why NYSHEX is right for their container shipping needs?
The feedback I hear from our members is that NYSHEX has become a valued tool to complement their existing procurement strategies. They have direct contracts to handle a vast portion of their business, but when they need guarantees they look to NYSHEX.
Our members love the ability to lock in freight rates months into the future; some even picked up November freight back in July! They value knowing that every contract secured via NYSHEX comes with guaranteed equipment. And ultimately, they love that 99.8% of the time, their cargo will sail on time and in full. Our ocean carrier members guarantee that the shippers’ cargo is loaded and out of the terminal within a seven-day departure window. If they fail to do so, the carrier pays liquidated damages of 35% of the freight back to the shipper.
It’s also exciting to see our members in strategic discussions with their trusted ocean carrier partners regarding business they want to conduct through the exchange. Carrier sales executives are starting to add NYSHEX into their sales meeting agendas with customers. They’re seeing firsthand how contract enforceability is strengthening their client relationships.
We even hear of members asking non-NYSHEX carriers why they are not part of the action. This has initiated discussions with new potential carriers for the exchange.
How has NYSHEX worked over the last year to improve its technology to help U.S. agri exporters during this important export period?
So many of the tech enhancements we have made were at the suggestion of our agri members. Here are a few which were rolled out in just the last few months:
- Market Alerts: Our members asked for a way to subscribe to real-time notifications when offers are published on the exchange which meet their price targets. This automation has led to a sustained spike in members logging in and an increase in TEUs contracted.
- Binding Requests: This core feature allows shippers to input and digitally send their own offer criteria to carriers. If a carrier accepts, it becomes binding. We recently enhanced the user-experience significantly and added the capability for our ocean carrier members to digitally respond with a counter-offer.
- Additionally, we have added a new reporting functionality, the export of contract details and combined or separate demurrage and detention capabilities. We also added terminal specifics within the offers since the difference between one inland rail yard and another could be significant.
New changes were also made to the Rulebook which governs the exchange as a whole:
- Departure windows were reduced from 14 to 7 days to minimize the risk of GAFTA penalties incurred from departures outside of Letter of Credit terms.
- We also added a force majeure clause for instances in which shipper and carrier members are faced with chassis stock outs. We’re also working with chassis providers to provide real visibility to stock levels at various container yards.
Our improvements will be ongoing. We’re in the middle of a couple of exciting new pilot programs, testing out new value-added initiatives for agri shipper members as we speak.
What scope of offerings will be posted by NYSHEX ocean carrier members this OND?
Our carrier members have already begun posting agri offers for inland points such as Chicago, Columbus, Detroit, Minneapolis and Cleveland, and coastal ports on the USEC and USWC to China and Southeast Asia. We expect to soon have over 30,000 TEUs of offers on the exchange available for OND sailings.
Are U.S. Agri exporters able to book services for all of Q4 2018?
Yes, they can. Today, there are offers available as far out as end-December. Additionally, shippers have the ability to submit Binding Requests if they want to buy freight even farther into the future. Exporters can lock in guaranteed space and equipment now and know their freight cost with certainty. In fact, just this week we've seen over 1000TEUs contracted for OND!