WASHINGTON, Sept. 16, 2015 - The outlook for moving agricultural commodities through West Coast seaports has improved dramatically over the past few months as labor contracts have been settled, but challenges remain in terms getting the products to the ports and onto ships.
Delays of two to four hours are still occurring for trucks to get into some of the ports once they arrive, and that can cost a shipper dearly, said Peter Friedman, executive director of the Agriculture Transportation Coalition. Friedman was a panelist on a breakout session at the U.S. Soy Global Exchange in Minneapolis last week.
“The ATC was founded 27 years ago on the premise that there is nothing we produce that cannot be sourced elsewhere in the world. But when you tell that to some elected officials, it is news to them,” says Friedman. The United States not only needs to be an affordable shipper, but it also needs to be a reliable one, he said.
For instance, Friedman said, when Midwest suppliers couldn’t move chilled pork products out of West Coast ports recently, they lost a huge part of their sales to South Korea. Dave Warner, a spokesman for the National Pork Producers Council, said meat groups, including poultry, lost between $40 million and $50 million a week in sales during the four-month slowdown, primarily to Asian countries.
In June, Republican Senators Cory Gardner of Colorado and Lamar Alexander of Tennessee introduced S.B. 1519 to strengthen the Taft-Hartley Act if protracted labor negotiations were to again snarl traffic at West Coast ports. The aim of the Protecting Orderly and Responsible Transit of Shipments (PORTS) Act is to discourage disruptions and encourage quick resolution of disputes by granting state governors Taft Hartley intervention powers currently reserved for the president when a port labor dispute causes economic harm to an industry.
While labor disputes caused the acute slowdown at West Coast seaports in 2014 and early 2015, exporters face other challenges. For instance, operating margins for commercial container shippers have spiraled downward for the past 15 years, which also adds to port congestion.
“That has put a tremendous strain on the supply chain to the point where it is not only fragile, it is broken,” said Gene Seroka, executive director of the Port of Los Angeles, and another member of the panel.
Since the fourth quarter of 2008, Seroka said, the container industry has lost $30 billion, forcing many container companies to shrink their operations. The result is more congestion at ports as shippers wait for containers.
In addition, trucking costs are up, there is a shortage of truck drivers, and the U.S. trucking industry is not competitive.
“We create our own problems,” said Friedman. “We don’t allow heavy-weight trucks on the roads like they do in Canada.” Trucks in Canada can carry three times the amount of product as trucks in the U.S. due to weight restrictions, he said.
“We let 18-year-olds drive multimillion-dollar tanks in Baghdad, but we won’t let them drive a load of hay from Idaho up the Columbia (Basin),” he said.
World economics are also wreaking havoc on ports in the Pacific Northwest, which due to their proximity to Asia once held a competitive advantage.
“With the price of crude oil down, we have lost our edge, and it is affecting our exports,” said Greg Hoffman, panelist and senior merchant with the United Grain Corporation, in Vancouver, Washington. China has turned to Brazil for soybeans—and is even willing to pay a large premium—because the cost of shipping has plunged.
A stronger U.S. currency is also making American goods more expensive overseas.
“The 800-pound gorilla is the value of the U.S. dollar,” Friedman added. “Every exporter is facing that.”
However, the challenge facing U.S. agriculture moving forward, according to Friedman, will be to focus on fixing those things it can do something about.
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