Widespread port congestion threatens agricultural exports

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“For lack of a sea container, the television did not arrive” – a relevant line from AFBF’s latest Market Intel, Inflation and the Supply Chain, describing the impacts of global supply chain shocks due to persistent market forces induced by the pandemic.

The global ocean freight network remains strained by a series of market failures linked to changes in consumer behavior and a global economy reluctant to return to normal. A June analysis of conditions at California’s busiest ports, Congestion at West Coast Seaports Hinders Trade Boom, revealed risks to a significant portion of U.S. agricultural exports. In today’s article, we provide an update on conditions at these and other ports subject to a wave of market shortages.

The shift to consuming goods from services spurred by the pandemic restrictions continues to put pressure on markets around the world, creating a record backlog of cargo containers filled with imports at the busiest ports of the world. America. Average monthly import container rates for 2021 are already up 18% in Los Angeles, 17% in Long Beach, 23% in Virginia and 22% at ports in Savannah compared to the average for the previous three years. As the holiday season approaches, consumer purchases of goods are expected to increase significantly and will be reflected, in part, by increased container imports.

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The increased demand for foreign goods translates into a higher frequency of shipments and freight barges at seaports. This increases the workload at ports which are structurally limited in their ability to efficiently sort and load shipments onto outgoing trucks. For example, ports have only a limited number of terminals, cranes and workers to handle cargo. The Port of Los Angeles handles 17% of all inbound containerized cargo into the United States, including 5% of domestic agricultural imports. The number of vessels waiting at anchor off LA terminals was close to zero per day on average between 2019 and 2020, but has since climbed to a daily average of 31 vessels for October 2021, with a peak of 42 vessels. October 21. This does not include ships waiting at Los Angeles’ neighboring sister port, Long Beach, which handles an additional 14% of all U.S. containerized cargo and 6% of domestic agricultural imports.

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A backlog of vessels waiting at anchor creates a ripple effect throughout the supply chain. Late shipments worsen delays on future orders. Another measure of port efficiency is the length of time ships are anchored before docking. Over the past year, wait times at ports on the east and west coasts have increased significantly. Figure 3 shows the evolution of average wait times between the first and second half of the last 52 weeks. Wait times in Seattle and Savannah have more than doubled.

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Increased wait times and delays are also disrupting national surface transportation networks, including the trucking and rail industries. Trucks scheduled to pick up cargo that is not available are directed elsewhere. Reports of an increased reliance on one-off full-load markets to move goods arriving at unknown times are widespread, contributing to rising rates of transportation. In some ports, containers unloaded without trucks to collect the goods are stacked. This complicates the ability of terminal cranes to sort and load orders quickly, further exacerbating delays and overloading the overall supply chain capacity.

On October 13, the Biden administration sought to ease some pressure at US ports by using a series of “public and private commitments to move more cargo faster.” That included a push for the ports of Los Angeles and Long Beach to operate 24/7, adding new off-peak night hours and weekend hours. This almost doubles the number of hours that goods can be processed from port terminals and on highways. As a result, many large companies responsible for a considerable amount of port traffic have responded by expanding their own hours of operation. The ability of businesses to extend hours of operation and increase port efficiency is constrained by persistent labor shortages across the economy.

The combined bottleneck resulting from increased domestic demand for goods, limited port terminals in terms of infrastructure and a shortage of manpower are just a few of the forces threatening capacity. domestic manufacturers and producers to export their products. As discussed in the previous analysis, some consider it more efficient to ship empty containers than to wait for the export goods to be loaded, which has resulted in a significant decrease in the number of containers available to them. agricultural exporters. Figures 4 and 5 illustrate the increased proportion of export containers returning empty from west and east coast ports. In the third quarter of 2021, 71% of containers exported from California were empty. At ports in Georgia and Virginia, empty export containers reached nearly 50% of export container volume – well above the rates of the previous year. Although backlogs and stacking containers were reported at the Port of Savannah, the ports in Virginia have generally remained unaffected. The increased proportions of empty export containers in less affected ports are likely the result of the ripple effect of delays on the efficiency of the domestic supply chain. Trucks that are late due to port delays may not be able to deliver export orders, leaving export containers unfilled.

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Ports scattered across the country are essential to agricultural export earnings. For example, California ports are responsible for transporting over 75% of US exports of prepared nuts, oranges and tomatoes, over 60% of cotton and skins, and over 30% of dairy exports. The Port of Savannah carries 42% of total US containerized poultry exports and an additional 30% cotton, while the ports of Virginia handle over 75% of tobacco exports. Continuous roadblocks to transport and containers available at seaports hamper the ability of farmers and ranchers to send their products to their final destination.

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The complex nexus of supply chain disruptions has not only hampered the ability of producers to physically move produce, soaring freight rates are slashing the bottom line for many who are still recovering from losses in the industry. pandemic era. USDA’s Agricultural Marketing Department tracks average ocean freight rates for 20- and 40-foot containers transported from Los Angeles to Shanghai, China. Average rates between Q3 2020 and Q3 2021 nearly doubled (92% increase) from $ 803 to $ 1,468 per container. With farmers and ranchers already faced with rising freight rates for railways and trucking, the additional costs of moving produce overseas minimize the benefits of accessing foreign markets, a critical outlet for many American farm and ranch products.

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Conclusion

An economy struggling to cope with changes in consumer purchasing behavior has resulted in supply chain delays in the freight transportation industry. The increased demand for imported goods has increased the demand for freight containers. When delays in the transportation system prevent containers from being returned for reloading in a timely manner, the proportion of empty, unfilled exports of U.S. products increases. These inefficiencies, present in some of the most profitable seaports for American agricultural products, threaten the bottom line of farmers and ranchers who depend on foreign outlets to sell their products. The cost of purchased agricultural inputs is also increasing, squeezing already reduced margins at the farm level and endangering the solvency of many operations. Efforts to improve port terminal throughput through optimized management approaches, better access to labor and increased investments in infrastructure are essential to fulfill vital foreign trade obligations for farms and ranches. Across the country.

Contact:

Daniel munch
Associate economist
(202) 406-3669
[email protected]


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