While U.S. agricultural exports rose in the second half of the year, there is mounting evidence that shipping companies are leaving U.S. ports and returning to Asia with empty cargo containers rather than filling them up with American agricultural products.
As first reported by CNBC, agricultural shippers that rely on a supply of cargo containers have seen orders for hundreds of millions of dollars delayed or outright canceled by shippers. Due to demand for Chinese imports, shippers would rather deliver empty containers back to China where they are quickly loaded with more profitable cargo to send back to the U.S.
Members of the Federal Maritime Commission (FMC) have launched inquiries into practices by shippers at ports in California, New Jersey and New York to determine if shipping companies are refusing to load U.S. export cargo at ports, which would be a violation of the Shipping Act of 1984.
While the fourth quarter of the year is the peak season for U.S. agricultural exports, complaints from agricultural exporters to the FMC state that shippers began aggressively refusing to provide empty containers to agricultural export companies as early as October.
Bob Sinner, president of North Dakota-based SB&B Foods, told DTN in an interview Tuesday that the food exporters such as his company have been struggling since October to get containers. For shippers, the reality is they can get “five to six times more revenue” by bringing Chinese goods to the U.S. than sending agricultural exports to Asia.
Sinner said his company has been requesting bookings on vessels as much as eight weeks in advance, but carriers are saying vessels are full. Carriers also are canceling orders and saying that vessels are overbooked. This is becoming a significant problem exporting to food companies in Asia that are set up for just-in-time shipments.
“It’s very, very painful when you don’t get something shipped on time, or you have a two-, three- or four-week delay,” Sinner said. “I have logistics staff coming in with tears in their eyes because they are just so frustrated right now having to deal with this stuff every single day.”
Data from the U.S. Census Bureau shows carriers rejected as many as 177,938 containers known as TEUs (20-foot equivalent units) in October and November, CNBC reported. The vast majority of the empty containers leaving port were from the ports of Long Beach and Los Angeles, though ports in New Jersey and New York also reported high volumes of empty TEUs leaving ports.
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Data shows a high volume of empty containers leaving U.S. docks as quickly as possible rather than being loaded with U.S. export products.
CNBC stated, “In mid-October, carriers notified agricultural exporters that they would prioritize empty export containers over agricultural exports. They also said they would increase prices on agricultural exports if the commodities were transported.”
The total lost value of agricultural export trade from the empty containers for October through November was $632 million in business. Going back even further, the volume of empty cargo containers leaving port from July through November suggests the container deficit valued $1.1 billion.
Two members of the Federal Maritime Commission — Carl Bentzel and Daniel Maffei — sent a letter to the World Shipping Council in December raising concerns about shippers refusing to carry U.S. exports. The commissioners noted in their letter that, “It is imperative that we strive for a balanced trade to keep our supply chain fully effective and efficient while maintaining vital export opportunities for the U.S. agriculture and manufacturing bases.”
Peter Friedmann, executive director of the Agriculture Transportation Coalition in Washington, D.C., told DTN that problems with shipping agricultural goods began early in the pandemic when Chinese shipping came to a halt and it became hard to get any container ships back across the Pacific for agricultural exports.
Then, China began ramping up again, and U.S. imports of goods started rising over the summer. That started to overwhelm the capacity of shipping vessels. It’s a no-brainer for the shippers because a cargo of Chinese electronics or clothes going to the U.S. could pay as much as $8,000 per container, while an export of agricultural goods leaving the U.S. might pay $300 to $1,000 per container.
“So they just want to take those empty containers back to Asia as fast as they can and fill them up again with import goods, which leaves some of our agricultural exports stranded here,” Friedmann said.
While U.S. agricultural exports are ramping up, the discrimination against farm products is apparent, Friedmann said. An array of agricultural products are affected, including soybeans, forest products ranging from paper to lumber, cotton, almonds and hay, just to name a few.
While a couple of commissioners on the FMC have raised their concerns with inquiries and letters, Friedman said the commission hasn’t launched a full investigation action against the shippers yet with its Bureau of Enforcement. That would translate into enforcement letters and even potential subpoenas to ocean carriers for their records, which would cause the shippers to take some actions to remedy the situation.
Sinner said shippers were initially indicating delays could carry into the Chinese New Year, which is next week, but Sinner said now his company and others are being told these moves by shippers could last much longer. But agricultural companies do not have time for a long delay to get the Federal Maritime Commission or Congress to act.
“At the end of the day, these are food companies that rely on us,” Sinner said. “What happens is you end up being labeled as unreliable. So it’s very concerning.”
Shippers told CNBC that they are continuing to book U.S. agricultural shipments, but port authorities also criticized the tactic of sending hundreds of thousands of empty containers back to China.
“American farmers and agricultural exporters should not have to search for containers to get their goods to market,” Gene Seroka, executive director of the Port of Los Angeles, said to CNBC. “We need a cohesive U.S. export policy that addresses a range of issues, including container accessibility for our agricultural markets throughout the country.”
The Agriculture Transportation Coalition also is collecting reports from export companies and now is reaching out to members of Congress, which includes holding some Zoom briefings with lawmakers to explain the situation.
“We hope that they (lawmakers) can put some pressure on the FMC to aggressively investigate like a prosecutor would do,” Friedmann said.
CNBC report: here.
Chris Clayton can be reached at Chris.Clayton@dtn.com
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