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Farmers call for federal action on shipping bottlenecks

Kern County farmers are calling for federal intervention in an international shipping bottleneck that has dramatically increased their export costs during the pandemic and jeopardized sales contracts with buyers overseas.

Growers whose almonds, pistachios and citrus have too often languished at California docks in the past year are working with federal legislators including Rep. Kevin McCarthy, R-Bakersfield, to pressure the Federal Maritime Commission to take action against shipping companies they say should be doing more to facilitate U.S. ag exports.

The shipping industry says the blame, rooted in COVID-19-related labor shortages, now lies with American consumers eager for Asian imports. They say California's ag shipments are up year over year and the ag industry's accusations are fueled by anti-Asian sentiment.

Kevin Andrew, senior vice president at Bakersfield-based farming company Illume Ag, was in Southern California recently when he looked out over the ocean and saw dozens of ships anchored off the coast waiting to be unloaded at port.

He said it struck him that many of these ships, based on recent experience, would be returning home empty.

If that situation isn't rectified by June, when his company expects to ramp up table-grape exports, fulfilling the company's delivery contracts is going to be challenging.

"That's going to really put a crimp in our style," he said.

GOVERNMENT INTERVENTION

The company has at times turned to air freight during the pandemic to satisfy orders from Asia, Andrew said, but that has gotten pricier now that more travelers are flying. With refrigeration costs exceeding $100 per container daily at the coasts, he's not sure how long the company will be able to hold out.

"When does government step in," he asked, "and start doing something about this?"

The bulk of California's top agricultural product — table grapes and tree nuts — go overseas to places like China, Hong Kong and South Korea. Some ends up in Canada and Mexico, but without the Pacific Rim market prices on these commodities could tumble.

Cal State Bakersfield economist Aaron Hegde said government data shows U.S. ag exports in general declined 4 percent from 2019 to 2020, even as deliveries to several countries were up. Tree nut exports dropped about 8 percent; the only ag export that increased overall in volume was dairy, up about 8 percent.

TRADE PEACE

With more than two-thirds of California pistachios going overseas, along with three-quarters of the state's almonds, Hegde sees wisdom in looking past recent trade disputes and building beneficial trade agreements with Asia.

He said normalizing trade relations would boost a domestic ag industry that is among few sectors in which the United States enjoys a trade surplus.

If the the country were to join a trade pact like the Trans-Pacific Partnership, he asserted, local growers might have an easier time overcoming recent trade obstacles.

"At the end of the day," he said, "they want consistency."

Last month McCarthy joined a bipartisan letter to the chairman of the Federal Maritime Commission expressing concern over reports shipping containers were declining to ship U.S. ag exports.

'ENFORCEMENT OPTIONS'

Noting Asian countries received about $6 billion worth of California-grown ag products, he called on the FMC to look at whether common-carrier shippers are complying with U.S. shipping laws. He said swift action by the commission "is critical for communities in the Central Valley."

“Should the investigation reveal any wrongdoing, we urge the commission to take appropriate enforcement actions to end such practices swiftly and decisively," he wrote. "Time is a critical factor and we urge the commission to expedite its fact finding and consideration of enforcement options.”

Of major concern to Central Valley growers are added costs known as demurrage and detention fees that their shipments accumulate at port waiting to be loaded onto a ship.

Elaine Trevino, president of the Almond Alliance trade group, said many sales have been canceled as a result of shipping delays. While some producers see the situation improving, she said others report it's getting worse and more orders are being cancelled.

"It is a real issue," she said.

PREDICTABILITY

The almond industry wants to see accountability, she said, and a close look at whether shippers are abiding by laws governing trade with regard to how trade disruptions are managed. There needs to be an investigation of how many containers are leaving U.S. ports empty and how congestion planning is done and what happens with shipment cancellations.

Increasing ports' hours of operation might be one solution, she said, or investing in port infrastructure.

Trevino said what the industry really wants is a predictable delivery system.

"We're just hopeful as an industry that we can fulfill our contracts, which has been challenging since people (are) waiting a long time," she said. "If carriers cancel or rebook, there's a cost to that."

The president of an organization that represents ocean carriers and terminal operators, John McLaurin of the Pacific Merchant Shipping Association, said port congestion is a global phenomenon beyond the control of shippers.

'OVERWHELMED'

The problem as he described it is a backlog touching everything from waterfront workers and truckers in short supply during the pandemic to sanitization requirements and "the sheer volume of the cargo that has risen" since last summer.

"Every container that can be put to use is put to use," he said, and all available ships and warehouses are full. "The entire system is overwhelmed at this point."

If there's a problem, the FMC will find it, he said. Meanwhile, recent export data suggest to him California ag exports are already up, he said, referring to a recent report by trade economist Jock O'Connell.

Reached by phone Friday, O'Connell said California exports of almonds, pistachios and walnuts are up year over year so far in 2021. "They're up by substantial numbers: 15 to 20 percent," he said.

Deployment of empty containers quickly back to China is a function of U.S. demand for imported goods, he said, not a result of shipping companies bowing to China's higher shipping payments.

XENOPHOBIA?

He said ag producers are trying to paint the situation as "the farmer in the dell versus the foreign-owned shipping lines," an argument he said speaks to xenophobia and a request for government handouts.

Any federal investigation into alleged violations by international shippers, he said, "is going to go nowhere."

The executive director of the Agriculture Transportation Coalition, Peter Friedmann, dismissed O'Connell's assertion that farmers care about the nationality of the shippers that bring U.S. ag products to market.

As for data showing shipments of some ag products are up by as much as 20 percent year over year, he said export volume was so low a year ago that any improvement would seem dramatic.

"They (international shippers) may not know that commerce ground to a halt, and in fact they may have a short memory but they themselves put lots of ships out of service" a year ago, Friedmann said.

He asserted cargo ships are returning to Asia after making deliveries in California, and not waiting to be loaded with U.S. exports, because shippers can get up to five times more money per container in Asia than in the United States.

"So," he said, "they've made a decision: Let's get those containers back to Asia as fast as possible."

BIGGER DISPUTE

Ian LeMay, president of the California Fresh Fruit Association, said the problem actually originated prior to the pandemic and mostly comes down to international tariff disputes.

He said he's not sure what the solution is but that he hopes it gets resolved within the next two months, when fruit will start coming off trees.

"A fully functioning and health port system is important to our business models," he said.

Editor's note: This story has been edited to clarify refrigeration rates.

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