The Shipping Container Shortage is Getting Worse

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 to move product to international markets at all. 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 August 1^st.

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."

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 and 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.

“Shipping container fees that once were $2,500 pre-COVID are now much higher,” Li said. “A shipping container from Hong Kong to Los Angeles now costs over $7,600. 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, California, said, "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.

According to Schneider, 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 closure but could quickly return to over 30 ships in wait as almond, walnut and pistachio harvest activities pick up in California.

Many of Schneider’s tree nut customers are getting booked now with existing nut availability. And, 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.

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. Many of these products are perishable and, thus, creates another logistical problem for shippers.

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.

Labor union contracts for the dockworkers are said to expire in mid-2022. 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. The last thing shippers need is a breakdown in port production due to a labor strike.

EDITOR’S TAKE:

Shipping is a huge problem for U.S. agriculture that is not going away soon. We reported on this issue earlier this year and now it appears it is getting worse instead of better with time. Higher costs, delayed delivery times and potential labor contract issues do not bode well for U.S. products, especially those being shipped from the west coast. It would be wise for agricultural groups, in conjunction with major packers and shippers, to put political pressure on the shipping companies and labor unions to spearhead improvements in the system. Time is of the essence, as it does not appear that things will resolve on their own.