An uncertain world

by Emily Wilson
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The Sept. 11 terrorist attacks in the United States and the retaliatory bombing in Afghanistan in the weeks since so far have had relatively little effect on the global grain processing industry. Grain is still being grown, harvested, stored, processed and manufactured into food.

As of October’s end, there were no signs of any direct effect of these events on global grains trade or export prices, according to the International Grains Council in London.

"Ocean freight rates on routes involving the Middle East went up because of higher insurance charges, but the freight market fundamentals — oversupply of tonnage, stagnant trade in bulk commodities and low fuel costs — all point to weaker rates, so there hasn’t been much impact on grain import prices," said Richard Woodhams, IGC assistant executive director.

In the U.S., however, where concerns over bioterrorism are mounting, it is anything but business as usual.

U.S. Agriculture Secretary Ann Veneman in mid-October announced that President Bush had proposed allocating U.S.$45.2 million to the U.S. Department of Agriculture as part of a U.S.$20-billion submission to Congress for emergency funding to strengthen essential programs and services related to biosecurity issues.

A U.S. senator also introduced legislation that would spend about U.S.$1.1 billion next year and about U.S.$271 million in each of the next 10 years on a program that would help prevent threats of terrorism against America’s agriculture industry.

"Our nation’s crops and livestock are now at very high risk," Sen. Pat Roberts of Kansas told a recent meeting of farm groups in the U.S. "We must move quickly to prevent attacks on grain and livestock production, and we must begin a massive research effort to develop vaccines and antidotes to halt diseases that could damage our food supply in the future."

The Minneapolis-based Grain Elevator and Processing Society is planning an educational program at Exchange 2002 next March in Vancouver, British Columbia, Canada, that will deal with the how the events since Sept. 11 have affected the grain industry.

"People are just starting to talk about this now, and we have had several e-mails from our members that GEAPS should have an educational program about this subject," said Chuck House, manager of communications and professional development.

Brad Hover, president of the Association of Operative Millers, based in Leawood, Kansas, said he has not heard much discussion among U.S. millers about increasing security. "The milling companies already have good procedures on product integrity, with seal procedures on bulk trailers or railcars, but I haven’t heard of increased security at plants," Hover said.

The American Feed Industry Association, Arlington, Virginia, U.S., quickly addressed the biosecurity concerns of its members following the events of Sept. 11. Within days, AFIA had approved a plan to appoint a task force of industry experts to identify possible security breaches and effective methods of protection in such areas as plant security, ingredient integrity, product integrity and dealer/retailer/customer service.

"We plan to identify strengths and possible areas of concern throughout the feed industry," said AFIA Chairman Dwight Armstrong, who also works for an Ohio feed and ingredient company, Akey, Inc. "This will be accomplished without providing insights for those who may wish to exploit those vulnerabilities."

The program will be given highest priority, according to David Bossman, AFIA president. The framework is already in place in the existing Food Safety Leadership Plan, which will facilitate its rapid implementation.

AFIA will also be prominently involved with impending U.S. government actions on biosecurity. Several meetings have already been scheduled.

Despite biosecurity concerns, feed companies and allied suppliers contacted by World Grain report little direct effect on business. In practical terms, a restriction on travel imposed on employees by many American companies and by some non-U.S. companies on travel to the U.S., has made doing business less convenient. However, e-mail, phone calls and personal visits to customers have kept sales moving.

Scott Halvorsen, director of sales and marketing for Jacobson, LLC, a grinder manufacturer based in Minneapolis, Minnesota, U.S., said the company has seen a noticeable slowdown in calls and inquiries immediately following the tragedy. "But now things seem to be back to where they were before," he said. "Orders are coming in and the phones are ringing."

Tom Barber, market manager for North Carolina-based Aeroglide Corp.’s Food and Feeds Group, a cooler/dryer manufacturing company with major clients in feed, grains and pet food worldwide, had an upbeat reaction.

"I would expect publicly traded companies to come under greater scrutiny for profitability so new capital projects may be postponed while they have to ‘make do’ with what they have for now," Barber said. "Over the last couple of years there has been a mass of mergers and takeovers in the feed sector. Capital investment has been on hold while the new companies assess and complete their capacity planning with their new structures.

"We would normally expect major projects to be picked up in the next couple of years as these new restructurings settle out. Animals have to eat, so I don’t anticipate a drop in production requirements."

Many suppliers that do business internationally with grain storage and processing companies also are reporting little effect on their business.

"We haven’t seen a significant negative effect yet, but I’m not going to say it won’t happen — it is just too early to tell," said Jack Fox, vice-president of sales for Neuero, Chicago, Illinois, U.S., when asked what effect recent world events have had on Neuero’s shiploading and unloading business.

"We’re just trying to get our work completed in an orderly fashion," Fox said.

A large part of Neuero’s business currently is in Southeast Asia, particularly Indonesia, which has a large Muslim population. Fox said that the only concerns he has noted within the company were supervisors worried that they might be stranded abroad if commercial air traffic is delayed or postponed again.

Although the world events since Sept. 11 are not likely to have a positive effect on business, Fox said other forces, such as political changes, were more likely to slow down or halt project closings. The unstable political climate in countries such as the Philipines or Indonesia affects surrounding countries in the region, he said. "Companies that were ready to do an expansion may wait," he said.

John Haugh, director of international sales for Riley Equipment, Inc., Vincennes, Indiana, U.S., cancelled a recent trip to Oman for an Association of Operative Millers’ Middle East and East Africa District conference (see related story on page 30). Although travel uncertainties played some part in his decision not to make the trip, the anticipated lower attendance at the conference was the biggest factor.

"It wouldn’t have been good use of my time or money," Haugh acknowledged.

Haugh said business has been slow across the industry in recent years, and ground to a near halt shortly after Sept. 11. However, Riley in recent weeks has seen an increase in quoting projects, particularly in the Middle East and North Africa. He is optimistic about new business in Latin America as well.

"Customers need the equipment, they want the equipment, they have projects planned and are going to go forward with them as long as it makes economic sense," Haugh said.

He added, "Our international business has been a bright spot for the company. We don’t expect a record year in 2002 but we expect a respectable year."

While these are still tough times for the industry, there is no reason for panic, Haugh said.

Larry Prager, international sales manager for MFS/York/Stormor, Grand Island, Nebraska, U.S., said it was human nature to be nervous during these troubled times. Prager was in East Germany when terrorists crashed commercial airliners into the World Trade Center and the Pentagon in the United States. And he, like many Americans, live in some fear over the spread of anthrax and other biochemical warfare.

However, the only business-related problems Prager has observed since Sept. 11 were some initial logistical problems getting documents to projects outside the United States.

"You have to be patient when you do business internationally," he said. "We have projects that will be finalized in the next 90 days that we have been working on for three years."

He added, "We’re not seeing anything that diminishes our prospects for next year. It should be strong for us internationally."

William McLean, president of Essmueller, a supplier of conveyors and bucket elevators based in Laurel, Mississippi, is expecting a long, lean winter, however. "For a week after Sept. 11, the phones hardly rang at all," he said. "The whole country shut down for about a week."

The market, especially in the U.S., has been soft for over a year, McLean said. He said he had hoped that low interest rates in the U.S. might spur some companies to go ahead with expansions or equipment upgrades, but most are taking a "wait and see" attitude.

McLean said he understands that reasoning. He said his company had planned to buy a new machine for its workshop, but has decided to get by with what it has until business picks up.

"There is a lot of uncertainty in the world, and a lot of our economy is driven by what people think," he added.