Business

Crunch at ports can mean crisis for family farms




It’s just 60 miles from El Dorado Dairy in Ontario, California, to the nation’s largest container port in Los Angeles. But the farm has little luck in getting its products on board a ship on its way to the foreign markets that are crucial to the business.

The farm is part of one of the country’s largest cooperatives, California Dairies Inc., which produces milk powder for factories in Southeast Asia and Mexico that use it to make candy, baby substitutes and other foods. The company usually sends 50 million pounds of its milk powder and butter out of ports every month. However, about 60 percent of the company̵[ads1]7;s orders for outgoing vessels have been canceled or postponed in recent months, resulting in around $ 45 million in lost revenue per month.

“This is not just a problem, it’s not just a disadvantage, it’s catastrophic,” said Brad Anderson, CEO of California Dairies.

A supply chain crisis for imports has caught national headlines and attracted the attention of the Biden administration, as shoppers worry about securing gifts in time for the holidays and as strong consumer demand for sofas, electronics, toys and clothing pushes inflation to its highest level in three decade.

Another crisis is also unfolding for American farm exports.

The same congestion in American ports and the lack of truck drivers who have stopped the flow of some goods, has also made farmers struggle to get their cargo abroad and fulfill contracts before the food supply becomes poor. Ships now take weeks, rather than days, to unload in ports, and shippers with backups are so desperate to return to Asia to pick up more goods that they often leave the United States with empty containers instead of waiting for American farmers to fill. them up.

The National Milk Producers Federation estimates that shipping disruptions have cost the U.S. dairy industry nearly $ 1 billion in the first half of the year in the form of higher shipping and inventory costs, lost export volume and declining prices.

“Exports are a major issue for the United States right now,” said Jason Parker, head of global trucking and intermodal at Flexport, a logistics company. “Getting exports out of the country is actually more difficult than getting imports into the country.”

Agriculture accounts for about one-tenth of U.S. exports, and about 20 percent of what U.S. farmers and ranchers produce is shipped abroad. The industry relies on an intricate choreography of refrigerated trucks, railroad cars, cargo ships and department stores that move fresh produce around the world, often seamlessly and unnoticed.

US farm exports have risen sharply this year, as the industry returns from the pandemic and benefits from a trade agreement with China that required the purchase of US agricultural products. Strong global demand for food and high commodity prices have raised the value of US agricultural exports by more than 20 per cent compared with last year.

Nevertheless, exporters say they are leaving significant amounts of money on the table as a result of supply chain problems. And many farmers are now struggling to keep up with high costs for materials such as fertilizers, air filters, pallets and packaging, as well as finding farm workers and drivers to move their goods.

A survey by the Agriculture Transportation Coalition, which represents exporters, found that 22 percent of foreign agricultural sales were lost on average as a result of transport challenges.

Delays in ports have particularly damaged products that move in corrugated metal containers, such as cheese, butter, meat, walnuts and cotton.

One company, Talmera USA Inc., which exports milk powder, cheese and dairy ingredients such as lactose, had a shipment delayed so many times that the cargo eventually ended up on the original vessel it was assigned after the ship left the port of Seattle, bypassed Asia and returned weeks later.

Mr. Anderson said the company’s customers began looking to suppliers in Europe, New Zealand and other countries for their purchases, even though the US dairy industry has a reputation for high quality. “Honestly, it means nothing to the customer if we can not get it there,” he said.

Part of the problem is that shipping companies can charge much more to ferry goods from Asia to the US than vice versa, so they do not want to waste time waiting for a less lucrative cargo departing from the west coast.

According to data from Freightos, an online freight marketplace, the cost of shipping a 40-foot container from Asia to the US West Coast rose to $ 18,730 in November – more than 17 times what it cost to make the opposite trip.

As a result, more than 80 percent of the 434,000 20-foot containers exported from the Port of Los Angeles in September were empty – up from about two-thirds in September 2020 and September 2019.

Mario Cordero, CEO of Port of Long Beach, said the price difference encouraged shipping companies to get their containers “back to Asia ASAP so you can load it with imported goods.”

“And unfortunately, the US exporter is affected by this approach,” he said.

A supply crisis in the truck industry is also affecting farmers, as truck drivers find better pay and hours delivering Christmas presents than transporting soybeans and pigs.

Tony Clayton, president of Clayton Agri-Marketing Inc., in Jefferson City, Mo., exports live animals around the world for breeding. He said that the company competes in both ports and airports for space for dairy heifers, pigs and goats. And many livestock loaders have found that they can earn more by transporting dry cargo.

“It’s a challenge,” Mr. Clayton said. “We are all fighting and competing for the people who want to sit behind the wheel.”

The Infrastructure Bill passed by Congress on November 5 aims to rectify the supply chain backlog by investing $ 17 billion in US ports, many of which are among the least efficient in the world.

The bill also includes funding to improve railroads, roads and waterways, as well as a provision to fund pop-up container yards outside the Port of Savannah, Georgia, to ease congestion. It will also lower the minimum age for truck drivers who can cross state borders to 18 years, in an effort to attract more workers to a profession that has become a key bottleneck in supply chains.

In September, the US Department of Agriculture also announced that it would distribute $ 500 million to help farmers cope with transportation challenges and rising material costs.

John D. Porcari, the Biden administration’s port envoy, said farm exports are a “primary focus” for the administration, and that the White House was trying to encourage private companies, including seagoing ships, to start the supply chain.

The White House held a round table with agricultural exporters on Friday, and Mr. Porcari plans to visit the Port of Oakland in California, one of the largest export points for agriculture, this week.

“We know that some sectors have had more problems than others, and we are working to eliminate these bottlenecks,” Mr. Porcari said in an interview.

While agricultural exporters have welcomed long-term infrastructure investments, they remain concerned about more immediate losses.

Mr. Anderson – whose company is responsible for nearly 10 percent of America’s milk supply and one-fifth of American butter production – said he was frustrated that much of the public dialogue from the government and the media had focused more on consumer imports.

‘Shall we get toys for Christmas? Shall we get chips for cars? We think these are real concerns and they need to be talked about, he said. “What is not talked about is the long-term damage that is inflicted on exporters on the world market and how it will be devastating for our family farms.”

Agricultural exporters have had to be creative in circumventing congested ports and warehouses. Mr. Anderson said his company was considering redirecting some shipments more than a thousand miles to the port of Vancouver.

Mike Durkin, CEO of Leprino Foods Company, the world’s largest producer of mozzarella cheese, told House lawmakers this month that nearly all of the company’s ocean shipments by 2021 had been canceled and rebooked to a later date. More than 100 of the company’s orders this year had been canceled and rebooked 17 times, said Mr. Durkin, which equates to a five-month delay in the delivery of their cheese.

Meanwhile, Leprino Foods has had to pay to store its cheese in refrigerated containers at transport farms, and has received an additional $ 25 million in taxes this year.



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