May 4, 2022

Harvest of new crops approaches as port delays worsen

As ongoing port congestion and persistent shipping obstacles continue to block movement of California agricultural goods, farmers and exporters face bulging warehouses and dwindling cash flow that threaten to sink some businesses.

Tree nuts, fresh produce, dairy products and other California farm commodities struggle to find rides on vessels and containers in which to ship them, with ocean carriers rushing to set sail empty rather than hauling agricultural exports.

“We have 50 loads packed and ready to ship, that customers would take tomorrow, that we can’t get on the ship,” said Bill Carriere, a Glenn County walnut grower and handler.

Agricultural exporters say their shipping problems – which trace to pandemic-related supply-chain disruptions that started in 2020 – have only gotten worse. More shipping companies have notified them that they won’t stop at the Port of Oakland to pick up containerized farm products, which account for 60% of total exports through the port. The companies opt instead to return ships directly to Asia following long delays in the ports of Los Angeles and Long Beach.

Only one ocean carrier – Mediterranean Shipping Co. – so far has committed to servicing the Port of Oakland, said Roger Isom, president and CEO of the Western Agricultural Processors Association and California Cotton Ginners and Growers Association.

The Northern California port saw 67,910 empty containers leave its shores during the first two months of this year. That’s compared to 37,263 empties during the same time in 2020, according to a letter that agricultural groups, including the California Farm Bureau, sent to the Biden administration last week. The letter further noted that three out of four containers at U.S. ports return to Asia empty.

Because ships continue to bypass the Oakland port, exporters say the opening in March of a new “pop-up” yard for pickup of empty containers has offered limited relief. The temporary hub, located offsite of the port, allows shippers to stage export loads while avoiding busy marine terminals where most empty containers are stored.

As of last week, there were more than 500 containers in the yard, said port spokesman Robert Bernardo. The port saw 83 ships stopping in Oakland in March, compared to 93 a year ago. Reduced vessel arrivals were due in part to a COVID-related port shutdown in Shanghai, the port said.

Though the port has enough empty containers to cover current demand, Bernardo said supplies remain “in constant flux.” He said he expects inventory to tighten as imports from China begin to resume.

Aside from dealing with a shortage of containers, agricultural shippers say they struggle to secure bookings, which often get canceled or “rolled,” meaning the cargo wasn’t loaded onto the scheduled vessel, usually because there’s no room.

Don Barton, a San Joaquin County tree-nut grower and walnut handler, said his company’s bookings were rolled so many times that product his “loyal customers in Israel” expected in December finally arrived this month.

“It’s inexcusable,” he said, calling the delays “unconscionable.” But he acknowledged “the pure economics of it.” The cost to ship a 40-foot container from China to Los Angeles surged from $2,000 to $15,000 during the past two years. The backhaul from Los Angeles to Shanghai cost $1,400.

“It’s hard to argue,” Barton said. “We’re also businesspeople; we understand the numbers.”

California agricultural exporters are “prepared to accept higher shipping costs,” Barton said, if that would encourage steamship lines to bring their vessels to Oakland. But there are limits. “There’s no way,” he said, that farm companies could match the current $12,000 to $15,000 price for containers going the other direction.

In their letter, farm groups asked the Biden administration to help convene a meeting with ocean carriers “to negotiate a restoration of export services immediately.” The problem is urgent, they said, because in a matter of months, farms will begin harvesting new crops while what’s left of last year’s crop remains in storage due to inability to ship.

Almond shippers would need to move 1.4 billion pounds of the nut across domestic and export markets before August to meet 2021’s leftover crop. Moving such a volume would require 31,000 to 34,000 containers, farm groups said.

To achieve their 10% average annual carryout, walnut marketers would need about 18,000 containers to ship 398 million pounds of product before September. They list projected losses to date at $600 million to $700 million due to shipping problems, not including lost market share, lost contracts and increased costs for freight and other related fees.

Isom of the processors association said he considers ongoing shipping issues a trade barrier that warrants government intervention. Because most ocean carriers are foreign-owned, he acknowledged the U.S. lacks jurisdiction over the companies. But he said the trade imbalance needs to be addressed, perhaps through imposition of tariffs.

“Under President Trump, they did a lot of things on trade; some of it was called unfair,” Isom said. “Maybe it was, but at the same time, this isn’t fair. We have no way to resolve this.”

Barton said the U.S. may not be able to force steamship lines to change their practices through legislation, but he noted the U.S. does control is own ports and the unloading of ships. He suggested the U.S. could use this leverage to require ships to leave with full containers.

Meanwhile, Carriere said the 50 loads of walnuts that sit in his warehouse hurt him and his growers financially, because buyers will not pay until they receive their shipments.

What’s more, he said, California agricultural exporters continue to lose market share. He noted some customers, wanting to ensure they have product in time for Christmas, are already ordering walnuts from Chile, which is harvesting a new crop now.

“We’ve lost our reputation of being this reliable, high-quality supplier because we can’t get (product) there on a timely basis,” Carriere said.

With transit time to Southeast Asia still around five to six weeks from when containers are loaded, shipping fresh fruit overseas remains an ongoing challenge, said David Najarian, vice president of Paramount Export Co. in Alameda County, which exports fresh fruits and vegetables.

Noting the “strained” West Coast port network hasn’t been able to efficiently process the current higher volume of import cargo, he said he sees two solutions: “Import less from overseas or start working on a multi-year project to enlarge the West Coast port operations.”

– Ching Lee, California Farm Bureau Federation