Crunch at ports may mean crisis for American farms

Roughly 20 per cent of what US farmers and ranchers produce is sent abroad.
Roughly 20 per cent of what US farmers and ranchers produce is sent abroad.PHOTO: NYTIMES

NEW YORK (NYTIMES) - It is just 96km from El Dorado Dairy in Ontario, California, to the nation's largest container port in Los Angeles. But the farm is having little luck getting its products onto a ship headed for the foreign markets that are crucial to its business.

The farm is part of one of the nation's largest cooperatives, California Dairies, which manufactures milk powder for factories in South-east Asia and Mexico that use it to make candy, baby formula and other foods.

The company typically ships 22,679 tonnes of its milk powder and butter out of ports each month. But roughly 60 per cent of the company's bookings on outbound vessels have been cancelled or deferred in recent months, resulting in about US$45 million (S$61 million) in missed revenue a month.

"This is not just a problem; it's not just an inconvenience, it's catastrophic," said California Dairies chief executive Brad Anderson.

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

Yet another crisis is also unfolding for American farm exports.

The same congestion at US ports and shortage of truck drivers that have brought the flow of some goods to a halt have also left farmers struggling to get their cargo abroad and fulfil contracts before food supplies go bad. Ships now take weeks, rather than days, to unload at the ports, and backed-up shippers are so desperate to return to Asia to pick up more goods that they often leave the United States with empty containers rather than wait for American farmers to fill them up.

The National Milk Producers Federation estimates that shipping disruptions have cost the US dairy industry nearly US$1 billion in the first half of the year in terms of higher shipping and inventory costs, lost export volume and price deterioration.

"Exports are a huge issue for the US right now," said Mr Jason Parker, head of global trucking and intermodal at Flexport, a logistics company. "Getting exports out of the country is actually harder than getting imports into the country."

Agriculture accounts for about one-tenth of America's goods exports, and roughly 20 per cent of what US farmers and ranchers produce is sent abroad. The industry depends on an intricate choreography of refrigerated trucks, rail cars, cargo ships and warehouses that move fresh products around the globe, often seamlessly and unnoticed.

US farm exports have risen strongly this year, as the industry bounces back from the pandemic and benefits from a trade deal with China that required purchases of American agricultural products. Strong global demand for food and soaring commodities prices have lifted the value of US agricultural exports more than 20 per cent over last year.

Still, 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 soaring costs for materials such as fertiliser, air filters, pallets and packaging, as well as struggling to find farmhands and drivers to move their goods.

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

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

One company, Talmera USA, which exports milk powder, cheese and dairy ingredients such as lactose, had a shipment delayed so many times that its load finally wound up on the original vessel it was assigned to after the ship had left the port in Seattle, circumnavigated Asia and returned weeks later.

Mr Anderson said that his company's customers were beginning to look to suppliers in Europe, New Zealand and other countries for their purchases, even though the US dairy industry has a reputation for high quality.

"Frankly none of that matters to the customer if we can't get it there," he said.

Part of the problem is that shipping companies are able to charge far 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 load departing from the West Coast.

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

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

Mr Mario Cordero, executive director of the Port of Long Beach in California, said that the price differential encouraged shipping companies to get their containers "back to Asia as soon as possible so you can load it with import items".

"And, unfortunately, the American exporter is impacted by this approach," he said.


El Dorado Dairy ships more than a thousand 20-foot containers of dairy products out of the US each month. PHOTOS: NYTIMES

A supply crunch in the trucking industry is also affecting farmers, as truckers find better pay and hours delivering holiday gifts than hauling soya beans and swine.

Mr Tony Clayton, president of Clayton Agri-Marketing in Missouri, exports live animals around the world for breeding. He said the company is competing at ports and airports for space for dairy heifers, swine and goats. Many livestock truckers have found that they can earn more hauling dry freight.

"It is a challenge," Mr Clayton said. "We're all fighting and competing for those people who will sit behind the steering wheel."

The infrastructure Bill that Congress passed on Nov 5 aims to remedy supply chain backlogs by investing US$17 billion in US ports, many of which rank among the least efficient in the world.

The Bill also includes funding to improve railways, roads and waterways, as well as a provision to fund pop-up container yards outside the Port of Savannah in Georgia to ease congestion. It will also lower the minimum age of truckers who can cross state lines to 18, in a bid to attract more workers to a profession that has become a key bottleneck in supply chains.

In September, the United States Department of Agriculture also announced that it would dispense US$500 million to help farmers deal with transport challenges and rising materials costs.

Mr John Porcari, the Biden administration's port envoy, said farm exports are a "primary focus" and that the White House was trying to encourage private sector companies, including ocean carriers, to get the supply chain moving.

The White House held a round-table session with agricultural exporters last Friday (Nov 12), and Mr Porcari plans to visit the Port of Oakland in California, one of the biggest export points for agriculture, this week.

"We know that some sectors have had more trouble than others, and we're working to eliminate those bottlenecks," he said.