Supply chain disruptions may spell crisis for U.S. farms

It is just 60 miles from El Dorado Dairy in Ontario, California to the nation’s largest container port in Los Angeles. But the farm has...


It is just 60 miles from El Dorado Dairy in Ontario, California to the nation’s largest container port in Los Angeles. But the farm has little chance of getting its produce on a ship to foreign markets that are critical to its business.

The farm is part of one of the largest cooperatives in the country, California Dairies Inc., which makes powdered milk for factories in Southeast Asia and Mexico that use it to make candy, milk infant formula and other foods. The company typically ships 50 million pounds of powdered milk and butter out of ports each month. But around 60% of the company’s bookings on outgoing ships have been canceled or postponed in recent months, resulting in a shortfall of around $ 45 million per month.

“It’s not just a problem, it’s not just a drawback, it’s catastrophic,” said Brad Anderson, general manager of California Dairies.

A supply chain crisis for imports has made national headlines and caught the attention of the Biden administration, as buyers worry about secure gifts in time for the holidays and as strong consumer demand for sofas, electronics, toys and clothing pushes inflation to its highest level in three decades.

Another crisis is also unfolding for American agricultural exports.

The same congestion in American ports and shortage of truck drivers which cut off the flow of some commodities, also left farmers struggling to get their cargo overseas and fulfill contracts before food supplies deteriorated. Ships now take weeks, rather than days, to unload at ports, and relief shippers are so desperate to return to Asia to pick up more cargo that they often leave the United States with empty containers rather than to wait for American farmers to fill them up.

The National Milk Producers Federation estimates that transportation disruptions cost the U.S. dairy industry nearly $ 1 billion in the first half of the year in terms of higher shipping and inventory costs, loss of export volume and price deterioration.

“Exports are a huge issue for the United States right now,” said Jason Parker, head of global trucking and intermodality at Flexport, a logistics company. “Exporting exports from the country is actually more difficult than importing imports into the country. “

Agriculture accounts for about a tenth of U.S. goods exports, and about 20 percent of what U.S. farmers and ranchers produce is sent overseas. The industry depends on a complex choreography of refrigerated trucks, railcars, freighters and warehouses that transport fresh produce around the world, often transparently and unnoticed.

U.S. agricultural exports have risen sharply this year as the industry recovers from the pandemic and benefits from a trade agreement with China that required purchases of American agricultural products. Strong global demand for food and soaring commodity prices have pushed up the value of U.S. agricultural exports by more than 20% from last year.

Yet exporters say they are leaving large sums of money on the table due to supply chain issues. And many farmers are now struggling to cope with soaring costs for materials like fertilizer, air filters, pallets and packaging, as well as finding farm workers and drivers to move their goods.

An investigation by the Agriculture Transportation Coalition, which represents exporters, found that 22 percent of foreign agricultural sales on average were lost due to transportation problems.

Delays at ports particularly affected products transported in corrugated iron containers, such as cheese, butter, meat, nuts and cotton.

One company, Talmera USA Inc., which exports powdered milk, cheese, and dairy ingredients like lactose, has seen a shipment delayed so many times that its shipment ultimately ended up on the original ship it had. was assigned after the ship left the Port of Seattle. , toured Asia and returned weeks later.

Mr Anderson said his company’s customers were starting to turn to suppliers in Europe, New Zealand and other countries for their purchases, even though the US dairy industry is renowned for its high quality. “Frankly, none of that matters to the customer if we can’t get it there,” he said.

Part of the problem is that shipping companies are able to charge a lot more for transporting cargo from Asia to the United States than the other way around, so they don’t want to waste time waiting for a less lucrative shipment to depart from. the West Coast.

According to data from Freightos, an online freight market, the cost of shipping a 40-foot container from Asia to the west coast of the United States climbed to $ 18,730 in November, or more than 17 times what it cost to go back.

As a result, more than 80% of the 434,000 20-foot containers exported from the Port of Los Angeles in September were empty, up from around two-thirds in September 2020 and September 2019.

Mario Cordero, executive director of the Port of Long Beach, said the price difference encouraged shipping companies to bring their containers “back to Asia as soon as possible so you can load them with import items.”

“And unfortunately, the American exporter is impacted by this approach,” he said.

A supply crisis in the trucking industry also affects farmers, as truckers find better pay and hours to deliver holiday gifts than to haul soybeans and pork.

Tony Clayton, president of Clayton Agri-Marketing Inc., in Jefferson City, Mo, exports live animals around the world for breeding. He said the company was competing at ports and airports for space for dairy heifers, pigs and goats. And many cattle truckers have found they can earn more by hauling dry freight.

“It’s a challenge,” Clayton said. “We are all fighting and competing for these people who will be sitting behind the wheel. “

The infrastructure bill that Congress adopted Nov. 5 aims to clear supply chain backlogs by investing $ 17 billion in U.S. ports, many of which rank among the least efficient in the world.

The bill also includes funding to improve railways, roads and waterways, as well as a provision to fund pop-up container yards outside. the port of the savannah, in Georgia, to relieve congestion. It will also lower the minimum age for truckers who can cross state borders to 18, with the aim of attracting more workers to a profession that has become a key bottleneck in supply chains.

In September, the US Department of Agriculture also announcement it would distribute $ 500 million to help farmers cope with transportation problems and rising material costs.

John D. Porcari, the port envoy for the Biden administration, said agricultural exports are a “primary objective” for the administration, and that the White House is trying to encourage private sector companies, including shipping carriers, to move the supply chain forward.

The White House hosted a roundtable with agricultural exporters on Friday, and Porcari plans to visit the Port of Oakland, Calif., One of the biggest export points for agriculture, this week.

“We know that some sectors have had more difficulties than others, and we are working to remove these bottlenecks,” Porcari said in an interview.

While agricultural exporters have welcomed long-term infrastructure investments, they remain concerned about more immediate losses.

Mr Anderson – whose company is responsible for nearly 10 percent of the US milk supply and a fifth of US butter production – said he was frustrated that much of government and media public dialogue has focused more on consumer imports.

“Are we going to have toys for Christmas?” Are we going to have chips for automobiles? We think these are real concerns and we need to talk about them, ”he said. “What we’re not talking about is the long term damage to exporters in the global market and how devastating this is going to be for our family farms.

Agricultural exporters have had to be creative to bypass congested ports and warehouses. Mr Anderson said his company is considering rerouting some shipments over a thousand miles to the Port of Vancouver.

Mike Durkin, Managing Director of Leprino Foods Company, the world’s largest manufacturer of mozzarella cheese, told House lawmakers this month that nearly all of the company’s ocean shipments in 2021 had been canceled and booked at a later date. The company’s more than 100 reservations this year have been canceled and re-let 17 times, Mr. Durkin said, which equates to a five-month delay in the delivery of their cheese.

In the meantime, Leprino Foods has had to pay to keep its cheese in refrigerated containers at transport yards, racking up an additional $ 25 million in fees this year.

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Newsrust - US Top News: Supply chain disruptions may spell crisis for U.S. farms
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