U.S. exporters of agricultural products are likely to give ocean carriers an earful about the woes they are facing in getting their products to market when they convene this week in San Francisco for the 23rd annual Agriculture Transportation Conference. With a few exceptions, exporters of products ranging from almonds to wheat say they still do not have enough containers or ample space on ships to fill their orders in a timely manner. With competition heating up from suppliers in other countries, it is likely that even those exporters who have yet to lose sales may do so in the future.
"This is maybe the amber light," says Phil Seng, president and CEO of the Meat Exporters Federation, whose members started experiencing shortages in refrigerated containers during the past two to three months as beef exports began to ramp up.
While large meat exporters such as Cargill and Tyson are still able to procure containers, smaller traders have been unable to get adequate equipment to fill burgeoning orders from Asia, he said.
The problem has been exacerbated by the rapid rebound of the Asian economy - where demand for U.S. beef has grown by 11 percent so far this year and by as much as 250 percent in China - combined with a slow rebound in the U.S. economy which is restricting the number of import containers entering the country.
Since agricultural exports usually weigh more than inbound consumer products, ships can accommodate fewer export boxes, further restricting vessel space.
Although Seng said he is not aware of exporters losing business to date, lost sales are likely as exporters find it more difficult to get products overseas.
North Dakota grain farmer Bob Sinner has already lost more than $1 million inbusiness due to lack of containers and lack of vessel space for his soybean and wheat exports.
As president of a family-run business that specializes in non-genetically modified and identity preserved grains, Sinner relies on cargo containers rather than bulk ships to get his products to market. To get those containers, he sends trucks to Minneapolis - four hours away-because carriers will not reposition equipment away from major intermodal ramps.
Although Sinner says the supply of containers has improved slightly since earlier this year, he still does not have enough equipment or vessel space to handle his customers' demands.
"We have one steamship line that is restricting us to three containers a week, and we need to move 25 to 30," he says, adding that some product that customers wanted in May will not arrive until July.
Sinner says that his location in rural America is a detriment to his export operation. Even though regional sales representatives for steamship lines vie for vessel space, corporate offices tend to reduce allotments to smaller cities such as Minneapolis, he says.
Emily Lauzon, international logistics manager for Davisco Foods in Eden Prairie, Minn., agrees.
Davisco, which produces whey products for export to more than 60 countries worldwide, has difficulty obtaining containers in general, and specific problems obtaining clean, dry containers that are adequate for shipping food products, she says.
After making the haul to Minneapolis to obtain containers, truckers often find an inadequate supply or inadequate quality to meet Davisco's needs. Vessel bookings are equally hard to obtain.
"On any given day, we have a plan to ship five containers, and we may get two or three," Lauzon says.
Despite the gradual return of the U.S. economy, Lauzon does not think the problems with equipment or space will be solved anytime soon because "containers stop at the coast."
Yet some shippers that are relatively close to the coast are still having problems. Derco Foods is located in Fresno, less than 200 miles from the Port of Oakland and about 250 miles from the ports of Los Angeles and Long Beach.
Derco is having problems with both vessel space and a shortage of containers for its dried fruit and nut exports. The problems began in late 2009 and have continued this year, says Debbie McMillan, who works in Derco's shipping and logistics department.
Although some of the carriers Derco uses are optimistic that vessel capacity will increase as the year progresses and the U.S. economy rebounds, others expect no major changes in capacity for the second half of 2010, McMillan says.
Yet one shipper representative says he believes the problems are already on the mend.
Hayden Swofford, executive director of the Pacific Northwest Asia Shippers Association, says the forest product exporters he represents are finding more space on ships as the U.S. begins to import more consumer goods again.
"It has improved. It is not great or perfect yet, but it has improved," he says, adding that the turn-around started to become apparent in May.
Even Swofford tempers his optimism. "It's been a long fight, but I don't think it's over," he says.
-- The Cunningham Report
