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Trade War Stranded Huge Ship Full of American Soy Beans at Sea

The Peak Pegasus is both a casualty and a metaphor for Donald Trump's trade war.

STAFF/REUTERS/NewscomSTAFF/REUTERS/NewscomThe Peak Pegasus left Seattle on June 8 with a a cargo of American soybeans destined for China. It was supposed to be a month-long voyage.

The ship is still at sea, still loaded with soybeans, drifting in circles off the coast of China—both a casualty and a metaphor for the trade war between the world's two largest economies.

The ship was closing in on its destination when China threatened to impose a series of retaliatory tariffs on American agricultural products, including soybeans. Over the next two weeks, the boat sprinted—to the extent that a fully loaded 47,000-ton cargo ship can sprint—toward the Chinese port of Dalian, hoping to clear customs before the new trade barriers took effect. On Weibo, China's Twitter-like social media platform, messages about the ship actually outnumbered posts about the then-ongoing World Cup soccer tournament.

But the Peak Pegasus didn't make it.

The ship was about 25 miles away from Dalian on July 6 when Beijing announced that the tariffs were taking effect. That announcement came just hours after the White House announced that it would put a 25 percent tariff on $34 billion worth of Chinese goods. The soybean-laden ship slowed, stopped, and turned around.

And for the past month, it has just kept turning.

The Peak Pegasus been drifting in circle in the Yellow Sea, waiting to hear what it should do with $20 million worth of soybeans. China's 25 percent tariff on American soybeans will increase the cost of buying the Peak Pegasus' cargo by about $6 million.

The cargo is owned by Louis Dreyfus, a Dutch commodities trading company. According to The Guardian, the company is paying about $12,500 per day to charter the ship, which means the extra month at sea has cost more than $400,000. Louis Dreyfus won't have to pay for the tariffs—tariffs are import taxes, and will be paid by whomever buys the soybeans in China—but trade barriers create other costs and unintended consequences.

Soybeans have been caught in the crossfire of the U.S.–China trade war because America is the world's largest exporter of soybeans—with nearly half the U.S. crop sent abroad annually—and China is the largest importer of them. There are few singular products that better illustrate the benefits of global trade between the world's two largest economies than the humble soybean.

But it's not just soybeans caught in the middle of the trade war. It's soybean farmers, international commodities companies, buyers and wholesalers in China who have had to find alternate suppliers, and of course the crew of the Peak Pegasus. Supply chains aren't just lines on a map and lists of goods—they're people too. The sad saga of the Peak Pegasus is a Darkest Timeline version of "I, Pencil," in which thousands of people all around the world who have never met one another are linked by the problems created by Washington and Beijing's trade barriers.

Perhaps the soybeans' owners were hoping to keep the ship at sea until the trade war comes to an end. If so, those hopes appear to have been dashed. This week, America imposed another round of tariffs on an additional $16 billion worth of Chinese goods, and China vowed to retaliate again.

And so the Peak Pegasus is finally heading to port. CGTN reports that the ship is now heading once again for Dalian. As the trade war escalates, it likely won't be the last ship to encounter unexpected troubles on what should be a routine trip with a mundane cargo.

Photo Credit: STAFF/REUTERS/Newscom

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  • RoyMo||

    My heart weeps for Louis Dreyfus, a $19 billion firm that had a net income of $317 million last year. Where will they find that $400,000 to pay for that ship?

    I am a good libertarian and see this as an injustice, but I also see lots of other injustices which beggar this one.

  • Oli||

    That's kind of a "Think of the children!" strawman. There will always be bigger injustices, but this one serves as a nice example of what's to come.

  • SQRLSY One||

    Yes, such as for one like this: That GOP voters at the GOP primary could NOT decide on a better candidate than Der TrumfenFuhrer!

  • Chipper Morning Baculum||

    Everything about this story is ridiculous.

  • turco||

    The article is making the "unseen" cost of tariffs visible.

  • loveconstitution1789||

    No. Just more TDS

  • loveconstitution1789||

    What idiot company ships tons of soybeans without a purchase contract?

  • H. Farnham||

    Hopefully those beans had a moisture content below 14%. Otherwise, the seller might be getting hit with heat and mold damage discounts once they're offloaded and graded.

  • ||

    On average, the moisture content will be

  • ||

    Arg! Less than 14-15% at harvest and frequently dried and stored before shipping. Suffice to say, unless they're some kind of 'farm to plate' deal or the boat has a leak, moisture isn't a problem.

  • H. Farnham||

    Origin export specs are almost always (in my experience anyway) 14% moisture, and mix & blend is a pretty exact science. So yeah, you're right that the moisture isn't a problem. The problem is that safe grain storage is a function of moisture, temperature, and time. So assuming the grain temp is somewhere around 80 degrees, they'll be running into trouble soon without being able to turn or put air on the beans.

    I'll bet the merchants for that company are starting to get pretty nervous. Actually, no, merchants always assume #2 grade and then blame operations for any grain conditions problems... even if the operations guys are screaming at the merchants to get 'em sold and moved.

  • ||

    On Weibo, China's Twitter-like social media platform, messages about the ship actually outnumbered posts about the then-ongoing World Cup soccer tournament.

    Suddenly, I find myself slightly less opposed to state-run social media.

    Too bad Elon Musk wasn't on board, they could've rolled in several hours after the tariffs were put in place and then just declared that they made it.

  • dchang0||

    Re: "Suddenly, I find myself slightly less opposed to state-run social media."

    It's not the Chinese state that we should thank for the free exercise of speech. It is the fear of the people doing the speaking that kept the Chinese censors at bay. They know they can't crack down on too much or on certain topics.

    In other words, the Chinese censors would have LOVED to shut down chatter about the trade war with the USA, but they can't pull it off. This free speech is in spite of their control.

  • loveconstitution1789||

    No buyers in Japan, Korea, or other parts of the Pacific Rim?

    Sounds like a fable to me.

  • ||

    Sounds like a fable to me.

    You mean this fable?

  • loveconstitution1789||

    What is that from? I always liked that guy sitting.

  • H. Farnham||

    Grain logistics, handling, and trading operates on very thin margins. I'm sure they could find a buyer elsewhere, but there's a good chance they'd end up taking an overall loss.

  • perlchpr||

    I'm sure they could find a buyer elsewhere, but there's a good chance they'd end up taking an overall loss.

    Well, maybe, but how does that compare to that extra $400k operations hit? (I'm asking because I seriously have no idea.)

  • H. Farnham||

    A panama vessel can hold well over 2 million bushels. So assume, arbitrarily, a $0.20 margin and you're looking at $400k right there.

    I'd bet they're going to take a hit no matter what at this point.

  • H. Farnham||

    panamax vessel*

    And I don't know what margins to expect with export, I worked with unit train shuttles (to export facilities mostly) and $0.20 was fairly typical.

  • loveconstitution1789||

    If you ship such a valuable cargo without a purchase contract, you are a moron.

    I dont send shit via common carrier or shipping unless there is a purchase order contract.

  • H. Farnham||

    How do you know this wasn't contract delivered?

  • loveconstitution1789||

    The ship was circling instead of pulling into port.

    You want to deliver as quickly as possible to receive full payment.

  • H. Farnham||

    ........ never mind.

  • loveconstitution1789||

    Yeah, because your comment was beyond stupid.

  • H. Farnham||

    No... contract delivered is another term for destination contract whereby the s... just never mind it. Good day sir.

  • loveconstitution1789||

    You just keep blabbing.

  • Ken Shultz||

    Outrageous!

  • sharmota4zeb||

    I remember when I was a kid and adults said to finish my dinner because people were starving in China. Now, China can afford to put tariffs on food, because they have enough in the country already. This is a positive change. How long does the US ship full of food have to stay in the same place before it counts as an island and we can claim the waters surrounding it?

  • Fats of Fury||

    Chinese children are told to clean their rice bowls as there are women starving themselves in Beverly Hills and Manhattan.

  • Sevo||

    "The cargo is owned by Louis Dreyfus, a Dutch commodities trading company. According to The Guardian, the company is paying about $12,500 per day to charter the ship, which means the extra month at sea has cost more than $400,000. Louis Dreyfus won't have to pay for the tariffs—tariffs are import taxes, and will be paid by whomever buys the soybeans in China—but trade barriers create other costs and unintended consequences."

    Suffice to say, there are several questions raised and left unanswered by this paragraph.

  • Leo Kovalensky II||

    Funny, I don't see a single question mark. The point is that the market had determined that these beans could be sold in China. Along comes a trade war and they're no longer marketable because of the tariffs. What question is left unanswered?

  • Sevo||

    "The point is that the market had determined that these beans could be sold in China. Along comes a trade war and they're no longer marketable because of the tariffs."
    Which is false; they are marketable,either to the Chinese at a lower margin, and possibly a loss, or they are marketable elsewhere.

    "What question is left unanswered?"
    Why is Dreyfus paying the demurrage?
    See, that wasn't so difficult, was it?

  • Chipper Morning Baculum||

    Are you defending tarrifs now, Red Michael Hihn?

  • Sevo||

    Chipper Morning Baculum|8.10.18 @ 1:06PM|#
    "Are you defending tarrifs now, Red Michael Hihn?"

    Sarc or stupidity?

  • Giant Realistic Flying Tiger||

    That's a low blow, CMB.

    That's a low blow.

    Hihn isn't necessarily blue. He's just nuts and left-leaning.

    Sevo may be pretty red, but he's not Hihn.

  • Sevo||

    "Sevo may be pretty red"

    First time to my knowledge I've been called "red"; what makes you think so?

  • Giant Realistic Flying Tiger||

    The fact that you're one of the more conservative posters on this board (although not the most; at this point that's between Longtorso and loveprostitution).

  • Chipper Morning Baculum||

    You are right that Hihn isn't totally blue, but he definitely leans blue. Sevo isn't totally red, but he definitely leans red. That just shows they are mirror images of each other, in addition to all the other similarities.

  • Giant Realistic Flying Tiger||

    [CMB conveniently ignores the fact that Sevo isn't crazy]

  • Chipper Morning Baculum||

    Just as not all of Hihn's posts are incoherent, not all of Sevo's are. I would say the percentages are mirror images of each other.

  • Giant Realistic Flying Tiger||

    I don't see Sevo calling you a cyberbully for comparing him to Hihn.

  • Sevo||

    [CMB conveniently ignores the fact that Sevo isn't crazy]
    CMB is a fucking ignoramus.

  • ||

    The point is that the market had determined that these beans could be sold in China.

    Nothing says 'free market' like selling to a state-owned grain stockpiler named Sinograin.

  • PaulS||

    Which means that China would be paying the tariff to itself (if I pay myself $100 how much does it cost me?). Chinese tariffs are a fiction

  • sharmota4zeb||

    Seriously, though, tariffs are bad. Hopefully, the trade war will end soon.

  • Brandybuck||

    You think tariffs are bad? What are you, some sort of shill for Team Blue leftists! GET WITH THE PROGRAM! Tariffs make this nation great again! All hail Trump from whom all memes flow!

  • Sevo||

    "Seriously, though, tariffs are bad."

    Yes, they are, and you'd think Reason could come up with a better example than this. Just a couple of days ago, they were flogging a story about 126(!!!!!!!) jobs, for pete's sake.

  • H. Farnham||

    I dunno Sevo. This article seems like a pretty good example of how government imposed trade barriers cause inefficiencies and disruptions in the market.

    I'll agree that, though, that the 126 jobs article had a little too much appeal to emotion for my liking.

  • Sevo||

    "This article seems like a pretty good example of how government imposed trade barriers cause inefficiencies and disruptions in the market."

    I'd go for that if there is actually a loss here. So far, we do have a disruption, but the owner of the goods is obviously casting about for a profitable alternative.
    If he does take it in the shorts, you got a case.

  • H. Farnham||

    $400k demurrage is a direct hit to their P&L. I'd have a hard time believing they'll be able to sell at margins to recoup that loss and maintain the original expected profit.

  • Sevo||

    They seem to think otherwise, or they'd have sold it at the (distorted) market price.

  • H. Farnham||

    That's my point though. If the price had not have been distorted (by tariffs) in the first place, then they could have unloaded at their original expected price and not had to worry about the disruptions and inefficiencies.

  • Happy Chandler||

    It seems to have been a bet that they could wait out the tariffs. They lost the bet.

  • H. Farnham||

    Exactly. Although, to Sevo's point, shipments are generally delivered on futures contracts. So it's possible that the seller collected a cancellation fee, which would have given them a cushion. China does have a history of finagling their way out of contracted shipments though. Hard telling what any of the details are.

  • Sevo||

    "That's my point though. If the price had not have been distorted (by tariffs) in the first place, then they could have unloaded at their original expected price and not had to worry about the disruptions and inefficiencies."

    OK, sort of like an arrest; the process is the punishment. Point taken.

  • kevrob||

    Dreyfuss should have renamed the ship MV Tom Dooley.

  • Brandybuck||

    +1 Insightful

  • Drave Robber||

    I wonder where Peak Unicorn is.

  • Salero21||

    Tariffs, trade wars, and the Wall are all Stupid. Only a DRAFT-DODGER like Trump would believe they're good ideas.

  • Elias Fakaname||

    I am a war vet, and support Trump on building the wall.

    I'm not thrilled with tariffs., but I understand the strategy. And I am willing to give him a shot.

  • loveconstitution1789||

    I am a veteran and I support pressuring China and the EU to lower trade restrictions and the wall.

  • Deconstructed Potato||

    A lower wall might be a workable compromise.

  • Ornithorhynchus||

    I always thought Louis Dreyfus was a French company. I just looked them up, and they are headquartered in Amsterdam now, but they were originally founded in France.

    If I remember correctly, Julia Louis-Dreyfus is a great-great granddaughter of the founder. Or it might be three greats, I'm not sure. I wonder how big her share of the company might be.

  • Happy Chandler||

    Being Jewish, they apparently didn't fare well under Vichy.

  • Happy Chandler||

    Wikipedia reports that her dad, Gerard, headed the Energy Services division. Estimated worth in 2006 was $3.4 billion.

    I never knew any of this.

  • loveconstitution1789||

    We all know that YOU dont know much.

  • nehaguptasagar||

    If you are looking for glamorous girls in Chandigarh then get http://www.lovelyrani.com/ all the sensual entertainment from Chandigarh Escorts Service

  • Deconstructed Potato||

    Have they also spent some time in a shipping container?

  • Mark22||

    Don't you see how evil Trump is? He is stranding innocent orphaned soy beans on boats, without their parents, subject to abuse and horrible living conditions! Is this who we want to be?

    #ImpeachTrump #NotMyPresident #ForTheSoyBeans #IHaveTDS

  • AlishaQuinn||

    I think I somewhere about this, too, saw an article on the site https://redacaopronta.com/ I can certainly be wrong, but I think it's worth checking out to someone who is really very interesting, good luck)

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