Executive Briefings

Relief for U.S. Ag Shippers in Sight? Maybe, But They'll Still Take a Backseat to Importers.

U.S. agricultural exporters often complain about being the ugly stepchild among shippers. Although their service expectations are high, some ocean carriers care more about rushing empty containers back to Asia, where they can be filled with high-value imports. What's more, exporters' margins are so thin that a slight increase in freight rates can shut them out of international markets. Not to worry, though, said Albert A. Pierce, executive director of the Westbound Transpacific Stabilization Agreement (WTSA). Addressing the recent annual meeting of the Agriculture Ocean Transportation Coalition (AgOTC) in San Francisco, he predicted that ag exporters will see "some relief" this year and next. Growth in the volume of eastbound goods should begin to slow, and a weakening dollar will help to spark demand for U.S. product overseas. Other positive factors include rising consumer demand in China and Southeast Asia; reopening of the beef and poultry markets for U.S. producers, especially in Korea, and a "steadily rebounding" Japanese economy. As ports and railroads improve their ability to handle international containers, the severe imbalance favoring eastbound over westbound movements should ease somewhat.

But ag shippers still have plenty to complain about. Donna Lemm, director of business development with Mallory Alexander International Logistics, expressed concern that the ongoing consolidation of carriers will severely reduce shippers' service options. At the same time, shippers' logistics costs are rising, driven by soaring fuel prices, equipment shortages, port and rail congestion, and a severe reduction in free-time allowance for shipments sitting at rail ramps and intermodal terminals. Other shipper concerns, as highlighted in a recent survey of AgOTC members, include a shortage of truckers to haul agricultural products to and from ports, poor on-time performance by ocean carriers, and growing delays caused by ever-larger containerships, some of which might spend four to five days in port. Tom VanderWeide of G3 Enterprises, a supplier to the wine and spirits industry, said he used to have seven or eight options for ocean service to Europe; now he has two. "It feels uncomfortable not to have that choice," he said. But Pierce said carriers continue to struggle with rising costs, making it difficult for them to meet ag shippers' exacting service expectations. "When you don't have pricing power in a market, you pursue scale and cost efficiencies," he said. "It's that simple." And Edward Zaninelli, vice president of westbound trans-Pacific trade with ocean carrier OOCL, said growing demand will continue to put pressure on vessel capacity, despite the introduction of larger ships. Railroad problems are causing nearly a quarter of all outbound shipments to miss their scheduled sailings, he claimed. Heavy volumes are also making it difficult for carriers to process documentation efficiently, an especially sore point with ag shippers. Costs will continue to rise in the next year and a half, predicted Zaninelli. "Shipping," he lamented, "is not fun anymore."

Visit www.wtsacarriers.org or www.agotc.org.

U.S. agricultural exporters often complain about being the ugly stepchild among shippers. Although their service expectations are high, some ocean carriers care more about rushing empty containers back to Asia, where they can be filled with high-value imports. What's more, exporters' margins are so thin that a slight increase in freight rates can shut them out of international markets. Not to worry, though, said Albert A. Pierce, executive director of the Westbound Transpacific Stabilization Agreement (WTSA). Addressing the recent annual meeting of the Agriculture Ocean Transportation Coalition (AgOTC) in San Francisco, he predicted that ag exporters will see "some relief" this year and next. Growth in the volume of eastbound goods should begin to slow, and a weakening dollar will help to spark demand for U.S. product overseas. Other positive factors include rising consumer demand in China and Southeast Asia; reopening of the beef and poultry markets for U.S. producers, especially in Korea, and a "steadily rebounding" Japanese economy. As ports and railroads improve their ability to handle international containers, the severe imbalance favoring eastbound over westbound movements should ease somewhat.

But ag shippers still have plenty to complain about. Donna Lemm, director of business development with Mallory Alexander International Logistics, expressed concern that the ongoing consolidation of carriers will severely reduce shippers' service options. At the same time, shippers' logistics costs are rising, driven by soaring fuel prices, equipment shortages, port and rail congestion, and a severe reduction in free-time allowance for shipments sitting at rail ramps and intermodal terminals. Other shipper concerns, as highlighted in a recent survey of AgOTC members, include a shortage of truckers to haul agricultural products to and from ports, poor on-time performance by ocean carriers, and growing delays caused by ever-larger containerships, some of which might spend four to five days in port. Tom VanderWeide of G3 Enterprises, a supplier to the wine and spirits industry, said he used to have seven or eight options for ocean service to Europe; now he has two. "It feels uncomfortable not to have that choice," he said. But Pierce said carriers continue to struggle with rising costs, making it difficult for them to meet ag shippers' exacting service expectations. "When you don't have pricing power in a market, you pursue scale and cost efficiencies," he said. "It's that simple." And Edward Zaninelli, vice president of westbound trans-Pacific trade with ocean carrier OOCL, said growing demand will continue to put pressure on vessel capacity, despite the introduction of larger ships. Railroad problems are causing nearly a quarter of all outbound shipments to miss their scheduled sailings, he claimed. Heavy volumes are also making it difficult for carriers to process documentation efficiently, an especially sore point with ag shippers. Costs will continue to rise in the next year and a half, predicted Zaninelli. "Shipping," he lamented, "is not fun anymore."

Visit www.wtsacarriers.org or www.agotc.org.