Containers, Cargo Space For US Ag Exports In Tight Supply
Posted by Truth About Trade & Technology
Sunday, 16 March 2008
Ellinghuysen & Agriculture Online
Kansas City (Dow Jones) - Tight supplies of shipping containers, railcars and cargo space aboard ships are hurting U.S. meat and poultry companies as well as other industrial sectors with some market participants saying the situation is "in a crisis mode."
Many factors are contributing to the transportation bottleneck, according to market analysts, transportation agents and international marketing managers. One key element is the low value of the U.S. dollar compared with other currencies, which make U.S. goods more competitively priced to the international buyers. In addition, record large U.S. pork and poultry production, relatively low domestic prices, and outbreaks of animal disease in some countries are driving more international sales in these categories than ever before.
Many U.S. companies are reported to be experiencing delays in making overseas shipments. Some meat and poultry companies are turning down orders because they are unable to guarantee delivery within buyers' time requirements, transportation agents and brokers said.
For companies selling products into the international markets, delays in receiving shipping containers can be several days up to a month. The railcars on which the containers are transported can at times be even more difficult to source, they said.
Shipping containers are similar to semi-truck trailers, but without wheels so they can be stacked on top of one another for transporting on railcars and ocean-going vessels.
Peter Friedmann, executive director of the Agriculture Transportation Coalition, confirmed to Dow Jones Newswires the problem of tight supplies of containers, railcars and cargo space. Friedmann said companies seeking these services are "in a crisis mode" and "sales are being lost due to the insufficient carrier capacity and container availability to carry U.S. exports."
The shortages apply to both refrigerated and non-refrigerated containers, and all containerized products are affected by the tight railcar supplies and limited cargo space on the ships.
International sales of meat and poultry products in total have expanded rapidly in recent years. Beef shipments remain well below those of 2003 after the U.S.' first case of bovine spongiform encephalopathy was found in Washington state in December of that year, but pork and chicken exports are up sharply.
The U.S. Department of Agriculture in February projected total meat and poultry exports for 2007 at 11.154 billion pounds and forecasts 2008 sales at 12.020 billion. These compare with 9.758 billion pounds in 2003.
The U.S. also exported 2.3 million tons of distillers grains in 2007, an increase of 83% from the previous year, said Larry Mitchell, CEO of the American Corn Growers Association, in an e-mail reply.
Distillers grain, or DDG, is a byproduct from processing corn into ethanol.
According to a November 2007 report by The Journal of Commerce, shippers and carriers said a growing number of containers are being filled with DDG. The DDGs are used as a food supplement, especially for livestock. The ethanol market has exploded over the past two years, producing large volumes of moderately priced DDG. It appears that the liner industry is just beginning to see the impact of growing DDG exports, the report said.
The rapid rise in export sales among all products is contributing to an imbalance in the outflow and inflow of containers. Part of the problem, analysts and transportation agents said, is a lack of capacity on outbound vessels since the ship lines are experiencing a slowdown in inbound cargo, mainly from Asia.
Growth of the economy in Asia has been fueling expanded sales of U.S. goods to that region, Friedmann said. Consumers there want higher quality foods and have more money with which to buy them. They want the products to be fresh, and importers need just-in-time deliveries and in reasonable and manageable quantities. This means they need to receive the goods in containerized shipments, and there is a lot of new cargo for container carriers, he said.
There are other issues as well, analysts said, that may be affecting the supply of containers. Some speculate that based on the larger number of countries purchasing U.S. meat and poultry products, a portion of the product is being shipped to areas of the world where the turnaround time on containers may be longer. The infrastructure and flow of product in and out of some of these countries may not be developed enough to turn the containers as rapidly as in the longer established markets.
The shipping docks and units that load the containers onto the ocean going vessels are also busier, resulting in more time needed to handle the additional containers.
More Shipping Containers Needed To Fill The Demand
GE SeaCo, the world's largest container lessor according to its Web site, "has witnessed strong demand for their reefers over the past year and predicts continued solid growth," said Vicky Stoakes, spokeswoman with Indigo Cow, a London-based public relations firm for GE SeaCo. She said GE SeaCo invested over $100M in refrigerated containers in 2007.
Demand for shipping containers has been strong, particularly in the Americas due to growing export sales, Stoakes said. Central America countries such as Ecuador and Costa Rica also are experiencing shortages of refrigerated containers used for shipping fresh fruits and vegetables to Europe.
The price of new containers, most of which are built in China, is increasing rapidly due to rising costs for the materials, labor and inflation along with strong demand, Stoakes said.
Growth in the container manufacturing industry is not a new phenomenon as trade continues to expand year-on-year, Stoakes said. "Manufacturing capacity has increased, and we expect it to continue to increase in the future, she said. However, changes in dynamics of trade flow can sometimes affect the efficiency until adjustments are made. "We see this as a temporary blip in the supply and demand cycle and believe that in the long term the industry is positioned to satisfy growth," she said.
Transportation agents and international marketing managers said shipments to or from Canada and Mexico are not a problem because these loads are transported mainly by trucks, therefore containers are not needed.
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