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The shipping container shortage is getting worse

Paul Taylor / Getty Images shipping-containers-on-ship-GettyImages-94985762.jpg
Container shipments of U.S. agricultural exports could slow even more in the coming months as maritime shipping companies favor the higher charges collected by shipping consumer goods from Asia to the U.S. Since the world economy began to reopen from the pandemic, maritime shipping companies have chosen to return empty shipping containers to Asia for quicker turn-around and higher paying loads of consumer goods back to the U.S.
On the eve of major West Coast specialty-crop harvests, sending products overseas is getting more expensive and taking twice as long.

Concerns that the international shipping crisis will get worse for U.S. agricultural exports before it gets better are being raised again. Shipping container costs continue to rise and incentives to "dead-head" empty containers to Asia for quicker turnaround are at the root of these concerns.

California nut marketers have seen their shipping times increase dramatically, if they're able at all to move product to international markets. Yet, monthly reports from the Almond Board of California still point to record export shipments of California almonds. If the trends hold, California will have exported over two billion pounds of almonds in the 2020/21 marketing year, which ended Aug. 1

Jim Zion, managing partner of Meridian Nut Growers in California, said he recently had a load of tree nuts take 77 days to get to Spain, up from more typical transit time of 35 days.

"I'm just trying to brace our customers for longer shipping times, delays and cancellations," he said. "These issues are out of our control."

Carrier consolidation

A Rabobank report points to the consolidation of maritime carriers from 18 companies to an alliance of three. This consolidation was done to improve efficiencies, said Xinnan Li, vice president and supply chains analyst with RaboResearch Food & Agribusiness.

Li said that while the consolidations were initially met with optimism, the outcome has been anything but positive as the maritime shipping companies continue to increase container fees, shipping costs and enforce other restrictions to the detriment of U.S. agricultural exports. All U.S. agricultural exporters are said to be facing a difficult time moving commodities overseas because of the restrictions and fees charged by maritime shipping companies.

Related: Port congestion issues causing havoc for ag shippers

Shipping container fees that once were $2,500 pre-covid are now much higher, she said. A shipping container from Hong Kong to Los Angeles now costs over $7,600, she said. That doesn't include shipping costs on the vessel and other assorted costs. Spot market container costs are said to run between $12,000 and $15,000 per container.

Peter Schneider, president, T.G.S. Logistics in Fresno, Calif., said that cost spread between what specialty crops pay for a container and what the shipping companies can charge for consumer goods coming from international suppliers, when combined with the three-week turnaround time it takes to unload, process, and return a container that once held U.S. agricultural goods, has become a financial incentive for the maritime shippers.

Conversely, an empty container landing in China can immediately be loaded with consumer goods and returned to U.S. ports.

Port constraints

Schneider says the port backups along the West Coast, particularly at Oakland and Los Angeles, have eased somewhat with fewer ships at anchor or drifting as they await port assignment. This is largely due to a Chinese port that was closed for a period but has now reopened and trying to move product once again.

Vessels awaiting dock assignments at Los Angeles fell to under 10 ships at anchor recently because of the Chinese port closer but could quickly return to over 30 ships in wait as almond, walnut and pistachio harvest activities pick up in California.

Schneider said many of his tree nut customers are getting booked now with existing nut availability. He said the higher projected shipping prices are motivating old crop to be moved out ahead of new crop supplies that are just starting to be harvested.

Related: Group: Ports should run 24/7 to ease congestion

According to the California Farm Bureau, the port slowdowns and container restrictions are of particular concern at West Coast ports because of the significant percentage of U.S. agricultural exports shipped from California ports. Of the total U.S. agricultural exports leaving Long Beach, Los Angeles or Oakland, edible nuts make up 78% of the total. Other U.S. crops shipped predominantly from the three West Coast ports, by percentage of total U.S. agricultural exports, include:

  • Oranges: 77%
  • Prepared tomatoes: 75%
  • Hides and skins: 62%
  • Cotton: 62%
  • Wine: 53%

Nearly half of all U.S. meat exports leave from the three California ports.

Perishable commodities

California citrus growers and shippers are watching the port and logistics issues as harvest for the new crop is set to begin this fall. California Citrus Mutual President Casey Creamer said impacts from last season's shipping slowdowns forced more fruit to be sent to domestic markets, depressing grower prices with a glut of fruit on the U.S. market.

According to Creamer, 70-80% of California citrus is typically shipped domestically. Conversely, California and Arizona tree nut growers tend to export a similar percentage of their crop to foreign markets.

West Coast lemon producers are also stinging from lemon imports from Argentina that can be delivered to East Coast ports by ship at prices below what it costs to truck them from California and Arizona.

Related: Regs will hamper recovery after ports logjam recedes

Still, Creamer said that U.S. citrus marketers have found "creative ways to deliver fruit to our customers" despite the challenges.

Schneider said he moved 20% less citrus last year because of the shipping issues.

Political answers?

Li points to the consolidation of shipping companies through mergers, acquisitions and alliances as an issue now having negative consequences.

"We really can't get any answers from the carriers over these rates and delays," Zion continued.

Schneider said that there may be some movement by the U.S. government after a recent video conference call with U.S. officials from the Department of Transportation and Federal Maritime Commission.

"They may be looking to make an example of one of the maritime carriers," Schneider said.

Meanwhile, the California Farm Bureau Federation reports that discussions between various farm groups and Congress are working to address the "exorbitant charges" assessed against U.S. exporters by the maritime companies through the infrastructure package. One idea is to amend the shipping act to "tighten up and streamline compliance" among the carriers, according to Sara Neagu-Reed, associate director of federal policy with the California Farm Bureau.

Union contract

Labor union contracts for the dockworkers are said to expire in mid-2022. Schneider says the motivation to have signed contracts in place before they expire is high, given the issues related to the last contract negotiation period and the port congestion issues.

"We cannot have a breakdown in port production," he said.

Potential challenges to labor negotiations will be the desire by some to automate port activities, which the unions do not want. The only other option, according to Schneider, are more dockworkers. He said Los Angeles recently signed up over 400 permanent and 1,200 casual dock workers to address the need for more labor.

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