Ag exporters grapple with containership space crunch

A container and space availability crisis for agricultural exporters is getting worse, and is projected to deteriorate further over the coming months, said Peter Friedmann, executive director of the Agriculture Transportation Coalition.

The free market solution of increasing prices for ocean and transport until demand is reduced to match existing container/vessel space supply, is an answer, he adds. But "the implications for our nation's balance of payments, and our agriculture sector are disastrous, and need to be understood by shippers, carriers and policymakers. 

Friedmann said members of his organization will meet next week in Washington to consider the crisis, and explore approaches to gaining attention of policymakers.

He suggested the Federal Maritime Commission may be interested in the problem, and complained about dramatically increased freight and fuel surcharges. Fuel surcharges are becoming meaningless, as just a conduit to higher revenue for the carriers.

Surcharges stick when demand is great, and they are negotiated away when demand diminishes. In the current high demand-short supply environment, the surcharges and new surcharges are sticking, bearing not much relation to anything other than the historical and unique (and aggravating to the customer) pricing practices of ocean carriers, he added.

He said the agricultural exporter is expressing concern about retaliation, and in any case, is desperate to get the container on the vessel. And afterwards, the higher charges will be instituted legally in the tariff, because demand continues to exceed supply.

Friedman said that while his group has long championed the termination of carrier antitrust immunity, and we are very glad that the European Union has now done so, effective October of this year, he was not sure antitrust immunity is the reason that there are not enough containers available to carry exports.

But he said it exacerbates the surcharge problem for sure.

There is nothing produced in U.S. agriculture that cannot be sourced elsewhere in the world, Friedmann said. If we don't assure a dependable and affordable transportation system to get our products to the foreign markets, those customers will go elsewhere. That is exactly what we are trying to avoid now.

Friedman pointed to a host of factors that have created a boom in agricultural exports and difficulty in shipping them abroad:

The dollar's low value making U.S. exports more affordable.

   Growing wealth of foreign countries, demanding more and better food.

   Diminishing consumption by U.S. consumers, meaning reduced volumes of imports, and fewer inbound containers.

   Ocean carriers trimming capacity on U.S. routes in favor of more profitable trade lanes such as Asia/Europe and intra-Asia.

   Shift of specialty grain from bulk ship to containers.

   Reduced rail service to rural areas and higher rail rates.

   Heavier export containers, which means reduces capacity on outbound ships. 

Source: American Shipper