Farmers could feel pinch if no settlement soon

News
Oct 5, 2012
by DTN

A looming labor strike has been delayed as the Pacific Northwest Grain Handlers Association and the International Longshore and Warehouse Union (ILWU) have agreed to continue contract negotiations at least through the middle of October.

“The grain elevator operators anticipate normal operations during the period of continued bargaining. It remains the employers’ preference to reach an agreement,” a spokesman for the grain handlers group said in a statement released Sept. 28.

A labor strike by the union could complicate shipping logistics as harvest season reaches its peak. Roughly one quarter of all U.S. grain and soybean exports are shipped by rail to ports in Oregon and Washington.

“The timing is really unfortunate,” said Mike Steenhoek, executive director of the Soybean Transportation Coalition. In an average year, about 75 percent of U.S. soybean exports take place between September and February, but because of last year’s short crop in South America, some groups estimate as much as 90 percent of U.S. soybean exports will occur before February. Ports in the Pacific Northwest (PNW) are responsible for 22 percent of U.S. soybean exports and nearly half of all wheat exports.

Tensions have been building between the longshoremen and the grain handlers for more than a year. ILWU protested and held up the completion of the EGT export terminal in the summer of 2011. EGT, a collaborative partnership among Bunge, Itochu and STX Pan Ocean, wanted to operate with non-union labor. ILWU picketed, and its members stood on train tracks, delaying the first 110-car shipment of wheat, according to EGT press releases. The local chapter’s president was arrested.

A judge issued a restraining order against the longshoremen, the train arrived at the terminal and they eventually worked out a labor agreement. EGT agreed to hire union labor, but not go through the union hall to hire. It also gained the right to fire workers without cause and to hire non-union replacement workers in the case of a strike.

The rest of the grain handlers in the PNW decided to wait on renegotiating their labor contract until after EGT and ILWU had reached a settlement, so they extended the previous year’s contract by one year, and it expired on Sept. 30, 2012, and has been extended.

Now, the rest of the grain handlers want concessions similar to what EGT received.

Steenhoek said he expected that negotiations would be extended. The ramifications of a strike, if it comes to pass, could be felt quickly in farm country. Although he couldn’t say if that would mean a few days or weeks, whenever there are freight disruptions, detouring or rerouting shipments is complicated and costly.

“Whenever there’s a stoppage in the logistic chain—whether natural like a hurricane or manmade like a labor strike—the costs are disproportionately passed on to farmers,” he said.

Steenhoek referenced Hurricane Katrina as an example. The transportation system couldn’t handle all of the bushels, so elevators discouraged farmers from delivering grain by dropping prices.

But so far, the logistical issues are under control, DTN Basis Analyst Mary Kennedy said. All rail moving to the PNW on the Burlington Northern Santa Fe railroad must apply for a permit, and so far, none have been denied.

“As of [Sept. 25], according to the USDA Portland Daily Grain Report, there were still no spring wheat bids being issued for October, and some exporters were not quoting HRW wheat bids,” Kennedy said. “But there has been very little, if any, effect on the basis. And as for what happens if there should be a strike, it is hard to try to compare it to past labor disruptions.”

But labor disputes can damage the U.S.’ reputation as a reliable, cost-effective agricultural supplier, Steenhoek said. Labor strikes are fairly common in Argentina and that’s given it a reputation as being unreliable. That’s not a path the U.S. wants to walk, Steenhoek said.

“If customers get burned, it takes a lot to regain that trust,” he said. — Katie Micik, DTN

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