Feedstuffs in Focus

American shipbuilding vs. agricultural exports: The trade-off timeline

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A tug-of-war is brewing between building America's shipbuilding capacity and maintaining the competitiveness of U.S. agricultural exports. As Mike Steenhoek, Executive Director of the Soy Transportation Coalition, explains, this tension stems from recent USTR actions addressing Chinese dominance in global shipbuilding—a position China achieved through 25 years of focused development to capture over 50% of vessel production worldwide.

While promoting domestic shipbuilding represents a worthy national goal, Steenhoek argues the implementation timeline creates impossible expectations for critical export industries. "I'd rather have government policy be predictably good than sporadically great," he notes, highlighting how short-term trade disruptions often lead to permanent shifts in global supply chains. When the 2018-2019 trade dispute with China redirected agricultural purchases toward Brazil, it accelerated Chinese investment in Brazilian infrastructure—investments that remain in place regardless of future U.S.-China relations.

The immediate effects of current policies are already visible at American ports. The Port of Los Angeles projects a 35% decrease in vessel arrivals compared to last year, with retail inventory shortages expected within 5-7 weeks. For agricultural exporters, the situation threatens both immediate access to shipping capacity and long-term market relationships. When fees remain on vessels both built and operated by Chinese entities—vessels that currently transport substantial volumes of U.S. grain—the available shipping pool shrinks while export demand remains constant, inevitably driving up transportation costs. As Steenhoek aptly summarizes using an aviation metaphor: building domestic shipbuilding capacity requires a runway length appropriate for takeoff, not an aircraft carrier deck that sends the economy plunging into the ocean.

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Sarah Muirhead:

The effort to promote US shipbuilding is a laudable goal, but would require an extraordinary long runway in order to achieve. The essential question, therefore, is what is the appropriate length of a runway that will be necessary to achieve the goal without penalizing other made-in-America industries, such as agriculture? Welcome to Feedstuffs in Focus, our podcast taking a look at the big issues affecting the livestock, poultry, grain and animal feed industries. I'm your host, Sarah Muirhead. On today's episode, Mike Steenhoek, Executive Director of the Soy Transportation Coalition, joins us to discuss the proposed actions by USTR and what that could mean to the US farmers and their ability to compete in the international marketplace. Lots going on out there, Mike, with the tariffs and the trade discussions and all of that, but let's start with the USTR's shipbuilding rules. Where are we at at this point with restoring and promoting US shipbuilding and ending the Chinese shipbuilding dominance? Where are we at in all of that? Give us a quick update, if you would.

Mike Steenhoek:

Yeah, so all of this really originated in last year, with a number of plaintiffs submitted to the US Trade Representative Office to investigate Chinese shipbuilding and whether that country has historically engaged in a number of unfair practices in order to stimulate that industry. And clearly, since the year 2000, so over the last 25 years, it has been an industry that the Chinese have heavily emphasized. It's something they want to be very influential in, and so this and the results speak for themselves Now over 50 percent of ocean vessels are produced and manufactured in China. Investigation and they came to the conclusion that Chinese activity has artificially stimulated that industry to the detriment of the US economy, and so they made a number of decisions that were originally advertised and communicated to the public in February of this year, and they really kind of fall into two baskets. One is to impose some punitive measures on the Chinese shipbuilding industry, and there were a collection of fees that were imposed on ships coming to the United States that were built in China or owned and operated by Chinese entities. And then there was also another goal was to try to stimulate US shipbuilding. And then there was also another goal was to try to stimulate US shipbuilding, and so there was an obligation that was increasing with time for US exports to utilize ships manufactured in the United States. So it was really those were the two goals. And then there's a comment period that was unleashed and the comments really, with the exception of the plaintiffs and other entities like them and the plaintiffs were unions that were involved in US shipbuilding to some degree, shape or form, With the exception of those interest groups the feedback was overwhelmingly negative that this would be very harmful to importers, but then also exporters like US agriculture, and our contention with agriculture was not, we don't have an objection with the goal, the goal of stimulating US shipbuilding.

Mike Steenhoek:

That's a laudable goal. But whenever you have a goal whether it's a personal goal, a company goal, a national goal, an industry goal, personal goal, a company goal, a national goal, an industry goal the elementary next question is what is the appropriate implementation period or time horizon in order to achieve that goal? And that was the concern that we had is that these remedies, these policies that were being advertised, were very punitive and some of these fees that were associated with shipping very punitive, and some of these fees that were associated with shipping. Our concern was that, in the effort to try to promote a made in America industry, shipbuilding, you are going to simultaneously harm other made in America industries agriculture and others. So we provided some very concerning feedback to that.

Mike Steenhoek:

They amended the US Trade Representative Office recently amended those policies and those recommendations. They're considerably better than what they were originally were, but there's still some areas of concern to us that there are some of these additional fees that do remain. A lot of it is exempted now, so a step in the right direction, but it's still there's some real concerns that we have that there are some of these fees still involved with shipping. When it comes to government policy on promoting transportation, I would like the government to really focus on subtraction math. How can you reduce the cost of getting product from point A to point B, particularly if it's international, Not addition math adding costs to our supply chain. When you engage in subtraction math, you make us more competitive in the global marketplace. When you do addition math, we're less competitive, and so that still remains a concern for us.

Sarah Muirhead:

So right now you see it affecting profitability of US farmers the way the rules are currently standing at this point, even though there's been some initial concessions made.

Mike Steenhoek:

Yeah, and again, very much a step in the right direction, but there's still some real challenges. One of them is that they will exempt from these fees if it's a Chinese-made vessel, if it's owned and operated by a non-Chinese entity, another European country, a company or what have you but they will not exempt from fees if it's a Chinese-built vessel but it's owned and operated by a Chinese entity. And there's a considerable amount of ocean vessels that handle US soybeans and US grain serving our export market, that do fit that category, that are owned and operated by Chinese entities. And so what you're going to do is, in order to avoid that fee, those vessels are going to essentially be removed from the pool of viable pool for ocean vessels to transport US commodities. So you have a smaller pool, but now you're going to have a given amount of freight that still remains competing for that pool, and the inevitable outcome of that will be higher rates when it comes to transporting our exports. And so that's the aircraft carrier.

Mike Steenhoek:

Well, the result of that would be that 747 would fall into the ocean. You need about 9,000, 10,000 feet of runway for a 747 to be able to take off. The fact that that 747 would be in the ocean is not the fault of the 747. It's not the fault of the aircraft carrier. The fault would be in the fact that there was an unrealistic expectation imposed on the two, and that's kind of. Again. The concern that we have is not that we don't have a problem with the goal of trying to promote US shipbuilding, it's just that there's an unrealistic expectation in order to achieve that, the time horizon is not nearly appropriate, and so now again, in the efforts of trying to promote that industry, you're going to be harming other industries like agriculture.

Sarah Muirhead:

What is a good time frame if we're to move in that direction? I mean we're talking probably multiple years, correct to move a lot of the shipbuilding here to the US.

Mike Steenhoek:

Yeah, I mean it's in the years kind of category. And so you know, consider that you first have to determine. You know, if you're going to try to increase your shipping capacity, you need to have shipyards. In order to have shipyards, you have to know where you're going to put them and that's the available land to do that. You first have to assess that and then, of course, you have to build the shipyards. So you think about the times in order it takes to get to that point.

Mike Steenhoek:

You know China with its central planning, you know regime. They got to where they are from basically minimal amount of shipbuilding to now being the dominant supplier, over 50%. But that took them 25 years in order to do that. And that's with a central, centrally planned economy where the government basically says you will do that. And that's with a centrally planned economy where the government basically says you will do this, and without any kind of environmental kind of barriers or obstacles that they have to overcome in doing things like that. So, yes, the answer to that is it's going to take years to be able to achieve that, and so that's the real concern that we have.

Sarah Muirhead:

So let's talk about what's going on at the ports. We're hearing reports that there are not a lot of ships that are coming in and the numbers are down considerably, even at some points being non-existent. What are you hearing out there? What's the situation as we look at the ports? Probably we're talking mostly on the West Coast, but what are you seeing?

Mike Steenhoek:

Yeah, and I was just seeing a report from the port of Los Angeles, which is our number one port in the United States in terms of volume of containers that we handle and you're able to project that so you know where the ships normally come from, and so in this case, China is a big source of that ships normally come from, and so in this case, China is a big source of that. We're seeing that there's very little vessels being loaded in China with the US as its destination. So you can just basically back up from that, knowing that really, starting next week, you're going to see a major downturn in the amount of ocean vessels arriving to the United States, particularly from China. Port of Los Angeles estimates a 35% decrease from last year, and then you kind of roll back from that that. It will be about five to seven weeks before you really see it.

Mike Steenhoek:

Impact on department store shelves, where you're seeing less inventory, because it takes time for what gets unloaded at a port to eventually make its way into the retail channel, and so that's kind of what people are estimating that you're going to start seeing some noticeable differences when people go to a department store or even a grocery store. When people go to a department store or even a grocery store. Yeah, no one's arguing that it's going to be a carbon copy of what we experienced during the COVID pandemic, where you just had empty shelves all over the place, but it's going to be something that's going to be noticeable unless there's some kind of intervention or some kind of course change on what we're seeing. So you know, this is again. This is something that it's going to become more and more real. Right now it's kind of more of a theoretical to a lot of people, but with increasing time it's definitely going to become more real.

Sarah Muirhead:

And we know that transportation system all depends not only on the ships coming in but the ships also taking things out as they come in. So that's going to put a strain, I would imagine, on farmers. From a commodity standpoint, there's not going to be those ships that can take those commodities to other parts of the world. Is that what you're seeing, or is that not going to be a concern?

Mike Steenhoek:

Yeah, it's going to be a significant concern.

Mike Steenhoek:

So, for whether it's for soybeans or soybean meal or DDGs, most of that goes out in bulk vessels.

Mike Steenhoek:

But there is a percentage of that that do go out via containers and in order to be able to take advantage of that supply chain option, you have to have the front haul movement, because we're the backhaul movement back to Asia and other countries, and so if all of a sudden you're having a dramatic decrease in imports coming into the United States, there's going to be a curtailed opportunity for exporting back to some of those other countries, and this is going to be something that's going to impact a lot of different aspects of agriculture.

Mike Steenhoek:

So I mentioned earlier that soybeans and other grains we use a lot of bulk vessels. But if you're in the meat export industry and again the domestic livestock is our biggest customer so if you have an adverse impact on domestic livestock and their ability to ultimately export, you're going to simultaneously harm US soybean farmers. So most of their exports go via refrigerated containers, fresh fruits and vegetables. All of those exports utilize shipping containers to be able to serve their international markets Again, but it's all predicated on having ships coming to the United States in the first place, delivering consumer goods that we buy at various retail options, and that's what we're seeing already. We're seeing a decrease in that and that's only going to become more augmented as time proceeds, unless there's some kind of course change.

Sarah Muirhead:

What about from the trucking and rail standpoint? Are you anticipating any ripple down impacts from the shipping situations in our ports that would also affect those entities?

Mike Steenhoek:

Yeah, I mean, when it comes to supply chains, it's very akin to a relay race, where you get a baton that gets passed around the track and in this case the baton is consumer goods or it's freight that's getting passed around and it gets handed off from ocean vessel to rail, from rail to truck, and so if you're having, all of a sudden, a significant decrease in imports coming to the United States or exports leaving from the United States, that's going to have a real impact on rail service, on trucking. Those who are in the supply chain industry are very worried about a significant decrease in volume getting moved around the country and there, you know, there's a lot of jobs in the United States that are related to the supply chain industry. So you know, clearly, you know, the trucking industry is very concerned, the rail industry is concerned and there's certain reason for that.

Sarah Muirhead:

What else are you watching for soybean farmers out there on the transportation shipping front?

Mike Steenhoek:

Yeah, I mean, the tariff issue is certainly a notable one. You know, farmers were among the earliest of international entrepreneurs, because there was this recognition decades ago by farmers that we as a country can grow more food than we have the ability to consume, and so farmers naturally turn their attention to the international marketplace, and they've worked very diligently for years to try to build and establish and maintain these markets, and it's worked out wonderfully, not only for US agriculture but for these international customers, because many of them don't have the ability to meet their own protein and nutritional needs, and so it worked out really well. And so now, all of a sudden, you're having some real, you know, changes being imposed on that, and the concern that we have is there's the short-term concern. And the concern that we have is there's the short-term concern, which isn't very sizable, but it's also the long-term concern that is arguably even more menacing to our industry trade dispute with China. What happened during that time is that was a reason for Chinese investment in Brazilian infrastructure to receive a really big shot of adrenaline.

Mike Steenhoek:

Now that kind of investment in Brazilian infrastructure by China had been occurring, but it just got turbocharged with that 2018-2019 trade dispute that we had, and now, all of a sudden, they've invested China have invested billions of dollars in Brazilian infrastructure, and even if you have this great reconciliation between the two countries, the United States and China, what China would say is yeah, I'm glad we're getting along once again, but you know all that billions of dollars of investment in Brazil that we made, yeah, we're going to continue to use it. And so you can have. These temporary trade disputes result in long-term change in trading patterns, and that's one of the real concerns that we have is that you're providing incentive for that to occur, and the United States has prided ourselves for years of being the most cost-effective, reliable, dependable supplier of food on the global marketplace. That's a reputation that we achieved through lots of hard work by farmers and others for many, many years, and now, all of a sudden, that good reputation is being questioned right now.

Sarah Muirhead:

And now, all of a sudden, that good reputation is being questioned right now. Well, and it takes time to reset up an infrastructure. If you're going to go, you know you haven't been shipping to China. You're going to go back to shipping to China.

Mike Steenhoek:

You got to get all the rail and the trucks and everything back into play to make that kind of a you know of an infrastructure to make that all happen. Yeah, I mean, there's certain industries. You know when you're, when you're selling halfway around the world, when you look out the windshield of your, of your industry, you don't just care about what the next 50 feet will provide. You have to know what the next mile, the next two miles, the next 10 miles, what the forecast is for that, and so that's really important is to have that kind of certainty, that predictability. One of the things I often mention when it comes to government policy and trying to support industries like agriculture and others is that I'd rather have government policy be predictably good than sporadically great. It doesn't do us a whole lot of good to have sublime government policies and programs on Monday, wednesday and Friday if the pendulum swings to really challenging policies and procedures on Tuesday, thursday, saturday and Sunday. You can't build an industry around that. You have to have that predictability, and so that's something that we really do implore our elected leaders to really take into account In the midst of having some of the challenges that you know we legitimately have some concerns and some challenges between countries like the US and China and some other countries around the world.

Mike Steenhoek:

But when you have disputes, I think it's always wise to also consider within this relationship are there good things that are happening that are happening? And if there are good things that are happening, then let's try to encourage and protect and even fortify, improve what's the good things that are happening, while simultaneously working to address the challenges and the arguments that may need to occur. And one of the good things that's happening and has been happening is that you've got a group of people called farmers that are growing food and that are helping supply the protein and nutritional needs of a variety of countries, including some countries that we are at odds with, including China. That's a good thing. We want to continue that. We don't want to disrupt that in any way. So, again, it's my hope that we can really, as a country, can address some of these legitimate disputes concerns that we have, while protecting the good things that are happening. And one of those good things at the top of that list, in my opinion, is farmers growing food for other countries.

Sarah Muirhead:

Our thanks to Mike Steenhoek, executive Director of the Soy Transportation Coalition, for joining us here today. I'm Sarah Muirhead and you've been listening to Feedstuffs In Focus. If you would like to hear more conversations about some of the big issues affecting the livestock, poultry grain and animal feed industries, subscribe to this podcast on your favorite podcast channel. Until next time, have a great day and thank you for listening.