Friday, September 25, 2020
Sept. 25, 2020

Linkedin Pinterest

United Grain celebrates 50 years

Milestone for firm at Port of Vancouver comes amid trade war troubles

By , Columbian business reporter
Published:
9 Photos
The entrance to the main control office at United Grain’s Port of Vancouver facility.
The entrance to the main control office at United Grain’s Port of Vancouver facility. Nathan Howard/The Columbian Photo Gallery

Vancouver-based United Grain Corporation reached its 50th anniversary in June, and the company has been enthusiastically celebrating its half-century milestone.

But while the achievement naturally lends itself to long-term discussions about the grain exporter’s next 50 years, it’s hard for those conversations to avoid a thornier short-term problem: the company is facing increasing uncertainty stemming from a protracted trade war with China.

It’s been more than a year since China slapped a 25 percent tariff on U.S. soybeans — a move made in retaliation for tariffs on Chinese goods imposed by the Trump administration.

China is the largest importer of U.S. soybeans, and the impact was immediate — massive piles of harvested soybeans began to grow throughout the United States, while marketers like United Grain scrambled to find new international buyers.

“I think (Chinese soybean importers) are down about 60 percent from their usual purchase rate,” says United Grain CEO Augusto Bassanini.

United Grain Corp.

Founded: 1969

Owner: Mitsui & Co., the Japanese parent company, is one of the world’s largest corporate conglomerates.

Location of operations: Port of Vancouver

Number of employees: 100

Grain silos at Port of Vancouver: 230

Ships loaded per year: 100

Rail cars unloaded per year: 50,000

Total storage capacity: 220,000 metric tons

Bassanini has said from the beginning that he hopes the trade dispute will be resolved soon, and he’s sticking to that message. But at the same time, he’s sounding a note of caution about the impact the dispute is starting to have on the company’s long-term decisions.

“We don’t have the luxury to just turn off the lights for a few months while this gets resolved,” he says. “That would be the end of this company.”

50-year history

United Grain is well-positioned at the center of what has become one of the world’s biggest grain export markets; the United States ships an estimated 93 million metric tons of grain annually, more than half of which leaves via the Columbia River.

The company operates the largest grain elevator on the West Coast at its Port of Vancouver facility. The sprawling complex occupies much of the east end of the port, and its towering grain silos dominate the city’s western skyline.

United Grain began operations at the port in 1969, taking over a facility that had been built in 1935, but has seen expansions and additions over the years as the product lineup grew more diverse.

“We started off with our core business being a wheat exporter,” Bassanini says.

The company has since expanded into other grain markets, most notably corn and soybeans. The Chinese market for soybeans experienced exponential growth in the early 2000s, Bassanini says, but United Grain wasn’t initially equipped to tap into that emerging segment.

In 2011, the company embarked on a $200 million project to add a new set of silos, boosting United Grain’s overall capacity by 30 percent and allowing it to turn its attention to China, Japan and other East Asian countries. The project was completed in 2012.

Grain ships have grown too, Bassanini says — back when United Grain began, the average vessel could haul about 15,000-20,000 metric tons, but modern ships carry closer to 70,000. The transportation industry as a whole has leaped far beyond where it was half a century ago, and the terminal now unloads roughly 50,000 railcars and loads more 100 ships per year.

“Now everything is at a much larger scale,” Bassanini says. “Our company has had to, for the past 50 years, really try to keep up with those demands.”

Sheer volume can certainly offer a competitive advantage, but Bassanini says the other critical component that sets United Grain apart is a skilled team that builds and maintains strong relationships with other members of the supply chain, enabling the company to respond quickly to dynamic shifts in the schedule caused by weather events or delayed ships and trains.

“It’s tested every day,” he says.

Looking toward the next 50 years, Bassanini says United Grain plans to keep doing a lot of what enabled it to grow during the first 50 years; diversifying its lineups of producers and buyers, building stronger relationships and making long-term infrastructure investments.

Port facility

United Grain’s headquarters is in the Riverview Tower building in downtown Vancouver, and its quiet sixth-floor offices are a stark contrast to the always-in-motion facility at the port. On a July 26 tour, United Grain executive assistant Stephanie McClintock offered a snapshot of the port facility.

At one end of the sprawling complex, corn is being unloaded from a freight train. A technician maneuvers back and forth on a chair rig with an attached tool to open the hopper doors on the bottoms of the railcars.

The corn spills onto the tracks, falling through grates between the rails into an underground trench. From there, massive belts convey kernels to the various silos. The rattling sound of grain and the smell of corn are pervasive. It takes about eight hours on average to unload a train, according to McClintock.

At the dock, a ship is paused partway through loading, with one of its massive bay doors open and awaiting the next haul of wheat. Meanwhile in the central control room, technicians Zac Town and Curtis Williams oversee the automated systems that are mixing several blends of wheat to meet the specific protein demands of the customer’s order.

They sit at a bank of more than a dozen screens displaying information from every system in the facility, as well as each of the 230 grain silos. The facility’s official storage capacity is 220,000 metric tons, but Town describes the size of individual silos in terms of the number of railcars’ worth of grain they can hold.

The biggest silos are the 22-car towers in the 2012 expansion building. Its official name is D&E House, although Town says staff refer to it internally as “the castle” due to its 300-foot height, which the company claims makes it the second-tallest grain storage facility in the world.

Ducking into a side room, Town operates a series of tubes that allow staff to pull grain samples directly from the load being processed, in order to run extra tests for composition and make sure contaminants like pebbles and thistles are filtered out. The grain shipment has to pass tests from both United Grain and the government before it’s cleared to be loaded.

The terminal runs 24/7, McClintock says — the only exceptions are a twice-yearly pair of week-long shutdowns that are used to deep clean all the equipment and perform maintenance. Shorter pauses only tend to happen if a train or ship is late, and are followed by a scramble to catch up.

“This place is always three days away from being plugged, and then three days away from being empty,” Town says.

The control room is an example of how things have changed throughout the company’s half-century history, Town says — go back 20 or 30 years and the same room would be full of dials and push buttons instead of screens and keyboards. Before that, there would be no automation at all — just teams of longshoremen hauling sacks of grain around the site.

The trade war

Even as the company looks to its long-term future, it’s impossible to ignore an increasingly pressing short-term problem: the trade war. In November, when the dispute was still in its first year, Bassanini told The Columbian that he hoped the dispute would be resolved soon.

That was eight months ago.

Trade negotiations between the United States and China have dragged on, and although there have been goodwill gestures from both sides, Bassanini says – including limited soybean purchases from China — it’s nowhere near enough to counteract the U.S. surplus.

In the meantime, there’s intense competition among exporters to land deals with the remaining buyers, as well as to open up new destination markets.

“China demands such a volume that there’s simply not enough demand for soybeans (elsewhere in the world) to be able to fill that gap,” he says.

And the piles of soybeans in the U.S. are becoming a problem in their own right. The clearest example is a giant soybean pile in Missouri that made headlines a couple weeks ago when it caught fire in the middle of a heat wave.

Spontaneous combustion isn’t a concern for United Grain’s own supplies, Bassanini says, but the beans will eventually spoil, and they’re taking up valuable storage space as farmers prepare for the next harvest season.

“The government is trying to do something about it for the producers,” he says, referring to a $16 billion farm aid package that the Trump administration announced in May, “but as a supply chain, we don’t have such a package.”

United Grain’s volume is still growing, Bassanini says — total shipment volume is actually higher than at this point last year — but it’s taking a financial hit from the soybean situation. The company sells grain weeks or even months before the ships dock, he says, and future soybean sales are down more than 50 percent.

“The financial impact is already felt today,” he says.

The most frustrating part, Bassanini says, is that the trade war isn’t really about soybeans at all — the dispute with China stems primarily from alleged theft of intellectual property in the technology sector.

“Agriculture has, in essence, been a proxy to try to leverage both sides,” he says. “And we don’t feel that food should be used as that proxy.”

The loss of the soybean market means the company has less money to work with, Bassanini says, limiting its ability to make long-term infrastructure investments to stay competitive and forcing it to alter or shelve existing plans.

Looking to the future

Bassanini remains confident that the trade war will be resolved, but he says there are still good reasons to take a longer look at the long-term future of the Chinese soybean market.

The market has been growing for 15 years, he says, but there are additional issues that raise questions about how long that growth rate can be sustained. Another big impact comes from swine fever, which has been decimating China’s pork industry.

“There’s no cure for swine fever — you basically just have to cull herds,” Bassanini says.

The Chinese pork industry is a major consumer of secondary soybean products, Bassanini says — crushed soybeans are purchased to use as pig feed, and soybean oil is used for cooking — so the swine fever crisis has had a ripple effect on the soybean market.

Due to that uncertainty, Bassanini says United Grain isn’t just focused on the hunt for new soybean markets — the company is also looking for additional specialty products to supplement soybeans — products that would be moved in smaller volumes, but with higher margins.

One possible example would be legumes, Bassanini says, due in part to the rapid growth of the plant-based meat industry, which relies on them as a protein source. If plant-based meat starts to take off in Asia the way it has in the U.S., the international demand for legumes could see a major boost.

But those new products will require the company to adapt its infrastructure and possibly build new storage space, he says, so the short-term financial impact of the trade war again comes into play.

The company has weathered tough periods at prior points in its 50-year history, Bassanini says, such as a U.S. grain embargo against the Soviet Union 1980 and the Asian financial crisis in 1997. There have also been disruptions closer to home, such as the 1980 eruption of Mount St. Helens, which created interruptions up and down the supply chain.

In each of those cases, United Grain pulled through by carefully watching its costs and staying focused on the task at hand, Bassanini says, and by leveraging its good relationships with suppliers. Those crises provide a model for how to successfully respond to the trade war and future disruptions, he says.

Climate change is another long-term problem, which has the potential to cause substantial disruptions through increasingly extreme weather. But again, Bassanini says the best way to proactively prepare is to build and maintain good relationships with other groups.

Adaptation is a perpetual challenge, but Bassanini says he’s confident that there will always be a market for grain exports, and he points to United Nations forecasts that estimate the global population will exceed 9 billion by 2050.

“There’s always going to be a need for food,” he says. “Our vision is to feed the world.”

Loading...