Ag shippers say containers, timely capacity top issues

Ag shippers say containers, timely capacity top issues Exports might be booming, but agriculture shippers say finding timely carrier capacity for their now-hot export commodities is far and away their sector’s foremost issue.
   Ag shippers suffer the frustrating dichotomy that just as the falling U.S. dollar has made their products extremely attractive to overseas markets, fewer cargo ships calling and shortages in available containers are dampening any celebration.
   Small- and mid-size agriculture shippers are also facing incredibly long waits, sometimes months, just to receive a slot on an outbound vessel.

Friedmann

   'When are the carriers going to realize that the balance of trade has shifted, and exporters are the new revenue drivers for this industry,' said Peter Friedmann, executive director of the Agriculture Transportation Coalition, at the group’s annual conference in San Francisco last week. 'There is a shortage of space in all areas of shipping, including both reefer and dry bulk. This is not a temporary blip in world trade ' it's an ongoing and long-term phenomenon.'
   In his conference opening remarks, AgTC Chairman Leon Dermenjian told the several hundred attendees that they could all commiserate as members of a group on “a quest to find containers.”
   Drewry Supply Chain Advisers’ Analyst Philip Damas told the audience that his firm’s latest research highlights that shippers across the board were caught unaware by the ocean carriers’ redeployment of vessel capacity from the transpacific routes to the Asia/Europe routes.

Damas

   Damas said that because imports have driven the West Coast shipping markets for so long, the entire system was built up around the demands and needs of importers, while the needs of exporters were long ignored.
   'As a consequence, there are a number of mismatches between import delivery locations and outbound depots. And as we all know, that means a substantial reduction in the availability of empty boxes,' Damas said.
   Solutions all entail shippers providing additional incentives to carriers for repositioning containers, he said. And while not impossible to implement, any solution will be painful and expensive.
   Damas also warned that while flat imports and the low dollar have created a “golden time” for ag exporters, the dollar would recoup some of its losses in the future. Damas predicted that by 2010, imports are likely to begin ramping up and agriculture shippers should prepare.
   In the meantime, agriculture shippers are finding themselves more and more frustrated over the lack of capacity.
   “I have been a forwarder in this business for over 30 years and I have never felt less capable of accomplishing my mission,” said Terri Bartle of Pacific northwest forwarder TLR. “Our ability today to service our customers and our partners is being affected by foreign-owned carriers that are extracting U.S. capacity to meet their mission.”
   According to Bartle, who was representing small shippers, the mission of these carriers does not include return on investment, smart or long-term investments for the greater good.
   “Everyone has their own focus,” Bartle said, “but somewhere between here and there we have to land and we have to have some collective agreements to make it work for everybody.”
   She warned that although all shippers are in the same boat when it comes to finding capacity, it means a great deal more to a small or mid-sized shipper, where one container can make or break a firm.
   If the small shipper 'is tipping their toes in the export market, and they are cut off at the beginning, then they are dead in the water,” Bartle said.
   Brian McGuire of cotton-exporter Dunavant Cotton said that in addition to a mounting global pressure on cotton producers from both foreign producers and the explosion of foreign markets as cotton consumers, inadequate domestic infrastructure is hampering the U.S. cotton industry.
   “The bottom line is that the cotton in the U.S. is being produced where the containers are not,” he said. “I think U.S. agriculture shippers, especially this year, need the assistance of the carriers, the ports, and the terminal operators, to bring those efficiencies that they are experiencing in their overseas operations into their U.S. operations.”
   The lack of those efficiencies has led to the shipping industry having to scramble to provide containers to domestic exporters, and the AgTC has urged exporters to book space as far as 12 weeks ahead.
   The reason for the long lead times on bookings is because as falling imports and rising exports have thrown the import-based system on its ear. For example, the Port of Los Angeles reported an inbound increase of 3 percent for May over the same period a year ago. However, while this was a gain on the inbound side of about 9,000 TEUs, exported containers were up 22 percent, or nearly 30,000 TEUs. The number of empties heading back to Asia was also down 18 percent, or nearly 34,000 TEUs.
   The neighboring port of Long Beach reported a nearly 16 percent drop, or nearly 50,000 TEUs, in imported container for May over the year-ago period. At the same time, outbound containers jumped 25 percent, or by more than 30,000 containers. Long Beach also saw a 60,000-TEU, or nearly 37 percent, drop in empties heading back to Asia.
   This imbalance in imports to exports, especially in a system designed to maximize import traffic, has only exacerbated inefficiencies on the export side.
   According to the AgTC’s Friedmann, this is leading to commodities not reaching their markets. 'We could export a good 20 percent more in domestic agricultural products if there was the (ocean carrier) capacity to handle it,” he said.
   He pointed to the same causes as Damas, namely a shifting of transpacific carrier capacity to other areas. Nearly 30 percent of the transpacific vessel capacity, and a corresponding number of containers, have left the Pacific Rim routes. Analysts have tracked the shift of Pacific carrier capacity to the Asia/Europe routes and to inter-Asia lanes that are more robust and reaping more benefit for the carriers.
   For their part, the carriers have said that common export materials such as raw materials and agricultural products typically weigh more than imported consumer goods, and thus restrict a container vessel from carrying a full load — some estimates suggest by as much as 10 percent.
   Others are not too sure. A recent report by the Los Angeles County Economic Development Corporation found that the main exports out of the Long Beach and Los Angeles ports last year were electronics and machinery.
   Another complication is unused space. To assure slots on carriers, some large shippers overbook the amount of space they need, in some cases by as much as 15 percent. These spaces on a vessel cannot be used when they do not turn up because the ship is often only hours from leaving.
   Friedmann said the real solution is for shipping lines to begin talking to their export customers, which may be even more difficult than the existing situation after years of an import-dominant mindset. ' Keith Higginbotham