David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
American farmers and growers of other agricultural products have had to endure a worldwide pandemic, an economic downturn, and extreme weather this past year. And now on top of all that, they face another growing crisis.
A surging tide of Asian imports is straining capacity at U.S. ports, especially on the West Coast. Import volumes are so high right now that ships remain at anchor in harbors for days waiting to dock and unload their goods. And sitting on those ships are ocean containers that are needed for exports. It’s a situation that has been exacerbated by a worldwide container shortfall. For products with limited shelf lives like agricultural goods, the current state is nothing short of a looming disaster.
Peter Friedmann is the executive director of the Agriculture Transportation Coalition (ATC). This group was formed 30 years ago with the goal of assuring that U.S. agriculture exports remain competitive with products from around the world. ATC members include producers of agriculture and forest products, such as cotton, poultry, beef, milk, dry dairy goods, berries, and lumber and paper products. Friedmann spoke recently to DC Velocity Editorial Director David Maloney about the difficulties that many of these exporters now face.
Q: Can you tell us about the current shortage of containers for agriculture products and why that is a problem for your exporting members?
A: It is not an overstatement to say that the current situation is devastating to all U.S. agriculture exports. This includes products such as soybeans and hay, which are our largest volume exports off of our coast, as well as cotton and manufactured and processed foods, both refrigerated and dry.
The reason it is devastating is twofold. One is ocean carriers are looking at the revenue they can get on that inbound cargo coming from Asia, or what we call the eastbound. Those importers are paying $6,000, $8,000, $10,000, and in some cases up to $14,000 in freight rates for a container coming to the United States.
U.S. agriculture exporters have to compete with producers from all over the world. We cannot afford to pay those kinds of freight rates. The value of the cargo in those export containers is not that high. Therefore, the export revenue that the ocean carriers get for carrying the cargo westbound to Asia is more like $400, $800, or maybe $1,400 to $2,000 on the high end. So, ocean carriers are making an economic decision to forgo carrying cargo outbound across the Pacific and instead are sending the containers back empty.
Q: Why are the carriers returning the containers empty? They obviously won’t make money on containers with no cargo in them.
A: The reason they do this is to get them back to Asia as fast as they can so they can be filled with lucrative consumer goods and immediately sent back to the United States at those higher inbound rates. It has to do with processing time. They make money with containers on the water.
Our agriculture exports originate where crops and livestock are grown and processed. The stockyards are no longer in downtown Chicago. They are in places where there are fewer consumers and thus, fewer import distribution centers. So, for those containers to be loaded with our agriculture exports, they have to travel away from the gateway ports to inland areas. Some are just a couple hours inland, such as almonds from California’s Central Valley or the hay and dairy going out of Washington and Oregon. But many containers have to be hauled 1,500 miles to places like Kansas City, where our dry dairy goods come from; Arkansas, where pork comes from; and Minnesota, where soybeans are grown. So those export containers have to travel quite a distance and are not on the ship, where the revenue is made.
Q: So, that extra time required to send containers to the heartland to be filled with agriculture products and then back to the port is time that they’re not making money for the carriers. As a result, your members are not given an opportunity to fill any of those containers. Is that the basic problem we’re seeing?
A: That is correct. The other aspect is that ocean carriers are imposing penalties on failure of containers to arrive at the terminals in time or for arriving too early, the so-called demurrage and detention charges. The Federal Maritime Commission (FMC) has viewed those penalty fees as unreasonable and spent two years developing guidelines for the ocean carriers on what are reasonable practices. Most of the practices in use today don’t meet those guidelines, yet they continue, and the charges that the carriers are imposing are collectively in the hundreds of millions of dollars for our larger agriculture exporters. In fact, demurrage and detention charges are now more than the basic freight charges for carrying our exports. So, the freight budgets are more than double due to those penalty fees. Those are putting quite a few exporters—and I would also say importers—at financial risk.
Q: What are the long-term ramifications if the current situation does not improve?
A: When it comes to agriculture and forest products, there is nothing we produce in this country that cannot be sourced somewhere else in the world. If we can’t deliver it affordably and dependably to our overseas customers, they will find some other source in some other country, and we could lose that business and those customers forever.
Q: We know there is not a lot of available capacity right now in transportation networks. Even the trucking industry has limited capacity. It is very easy to rack up a lot of those penalty charges simply because there are inherent delays within our freight systems, including getting containers to and from the ports by truck and rail.
A: Yes, and there are delays and difficulties that the ocean carriers themselves face in maintaining their own vessel schedules. They keep changing. It is difficult for exporters to get the cargo to the terminal within a carrier’s time window when the carrier is changing that window constantly to meet sailing schedules that are themselves changing rapidly. That is why the FMC says those are unreasonable charges. Yet those charges continue to be imposed, and if exporters don’t pay them, the carrier won’t carry their cargo, even those export containers that are still being loaded.
Q: What products are the most affected by the lack of containers? Are they the ones that have a limited shelf life and could rot before they get to their destination if delayed too long?
A: We find that, frankly, all agriculture exports should be considered perishable. First of all, you have the obvious products. Those would be the chilled products where you have to monitor temperature. If there is a delay, they can be frozen. However, frozen products have a delivered value of probably 25% of what chilled temperature-controlled beef and pork would.
Then there are crops like soybeans and hay, which are largely exported as animal feed. Those animals can’t wait overseas. If the product doesn’t arrive on time, those animals are in real jeopardy. The last time we had a slowdown at the West Coast ports, the minister of agriculture in Japan wrote to the secretary of the U.S. Department of Agriculture, saying your ports are not working but our cows continue to eat.
So, if we can’t get our hay and soybeans and animal feed over to Asia in a timely way, the animal feed might still be good but those animals that depend on it may not survive. That is why some of those countries have invested considerable effort, time, and money into developing alternative sources for forage and soybeans. When we prove to be undependable, that is what we lose.
Q: So, there are a lot of ripple effects. I understand it is also worse than in the past because of the consolidation of ocean carriers in recent years. There are very few U.S.-owned carriers now. Can the federal government exert leverage over foreign carriers as it might with a U.S.-flagged carrier?
A: Foreign carriers should be subject to the same pressures and regulatory oversight by our Shipping Act as U.S. carriers. They are all subject to Federal Maritime Commission regulation, and they all would comply with regulations and the guidelines if the FMC were aggressive in the enforcement.
Q: But they are not complying right now, so what can be done to alleviate the problem?
A: First, folks are sending complaints to the Federal Maritime Commission in the hope and expectation that the FMC will self-initiate enforcement actions. At the same time, we are going to Capitol Hill. Many members of Congress have written letters to the FMC and to the Department of Agriculture seeking intervention. Over 70 of the largest agriculture trade associations in the U.S. have also written to President Biden and Department of Agriculture Secretary Tom Vilsack seeking intervention. And finally, we are developing legislative remedies, such as amendments to the Shipping Act, to mandate reasonable behavior by the ocean carriers.
Q: Is this a temporary problem or something that will be with us for some time to come?
A: World commerce is in turmoil right now due to the volume of imports coming into the United States and e-commerce globally. The ocean carriers and the ports cannot be blamed for that. That is a situation they are trying to adjust to. Neither the ocean carriers nor anybody else has enough capacity to handle this avalanche of imports into the United States.
What the agriculture exporters, together with all the big importers, retailers, and manufacturers, seek is fair treatment by the ocean carriers. When the ocean carriers change their sailing schedule and thus change the window for cargo to arrive at the terminal and for the ship to be loaded, the exporter should not be held responsible for failing to meet that window because the carrier has changed it at the last minute. The carrier should refrain from imposing these demurrage and detention charges, which depending on the cargo and the container, can run between $175 and $375 a day.
Q: That is quite a lot, and obviously, that drives up the cost of those exports. Are there any alternative markets for these products within North America that can be reached by truck, or is there just too much in the pipeline to be consumed domestically and in neighboring countries?
A: Everything that can be exported to Mexico and Canada goes by truck. In terms of domestic markets, yes, everyone is seeking to find domestic outlets. But there is only so much consumption that we have in this country of animal feed, soybeans, pork and beef, and so on. There is only so much we can eat. Those markets overseas are very valuable. The question is, can we find other markets overseas that are not subject to the trans-Pacific Ocean transportation turmoil? I would say that we are looking for every one of those and, frankly, the lack of capacity by the ocean carriers—not enough containers, not enough chassis, not enough ship space—is now a global challenge. The challenge exists across the Atlantic and across the Indian Ocean. The challenge is global.
Q: What do you foresee for the immediate future?
A: Well, first, this situation will be with us as long as the surge in imports continues—and I guess everyone who orders anything by e-commerce is part of the problem, including myself. We understand that this flood of imports is going to continue into the fall of this year and perhaps well into 2022. That flood will continue.
We do believe that ocean carriers are going to gain additional capacity. We do believe that there will be exports and imports that are going to shift from the most troubled and congested ports primarily on the U.S. West Coast to the Gulf ports, such as Houston, and to the Southeast ports, like Savannah, Charleston, and Norfolk. Those ports have larger terminals, and some of the port authorities themselves are operating more of the functions, rather than the private marine terminals at other ports. Operators at some of the East Coast ports have already endeavored to address some of the problems of demurrage and detention charges in a very constructive way. We will see if they will continue to do so and thus attract more cargo from the most congested West Coast ports.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”