Skip to content
Search AI Powered

Latest Stories

THOUGHT LEADERS

The growing crisis in agriculture exports: interview with Peter Friedmann

A shortage of ocean containers needed for exports is causing a critical situation for U.S. producers of agricultural goods.

20210421profile_opener.jpg

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.

The Latest

More Stories

person using AI at a laptop

Gartner: GenAI set to impact procurement processes

Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.

Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.

Keep ReadingShow less

Featured

Report: SMEs hopeful ahead of holiday peak

Report: SMEs hopeful ahead of holiday peak

Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.

That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.

Keep ReadingShow less
retail store tech AI zebra

Retailers plan tech investments to stop theft and loss

Eight in 10 retail associates are concerned about the lack of technology deployed to spot safety threats or criminal activity on the job, according to a report from Zebra Technologies Corp.

That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.

Keep ReadingShow less
Mobile robots, drones move beyond the hype

Mobile robots, drones move beyond the hype

Supply chains are poised for accelerated adoption of mobile robots and drones as those technologies mature and companies focus on implementing artificial intelligence (AI) and automation across their logistics operations.

That’s according to data from Gartner’s Hype Cycle for Mobile Robots and Drones, released this week. The report shows that several mobile robotics technologies will mature over the next two to five years, and also identifies breakthrough and rising technologies set to have an impact further out.

Keep ReadingShow less
warehouse automation systems

Cimcorp's new CEO sees growth in grocery and tire segments

Logistics automation systems integrator Cimcorp today named company insider Veli-Matti Hakala as its new CEO, saying he will cultivate growth in both the company and its clientele, specifically in the grocery retail and tire plant logistics sectors.

An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.

Keep ReadingShow less