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Port slowdowns are affecting farm shipments

Issue Date: January 14, 2015
By Ching Lee
Tim Merrill, sales and marketing manager of Omega Walnut Inc. in Orland, shows stacks of walnuts awaiting shipment that must be stored because of delays at West Coast ports.
Photo/Kathy Coatney
The warehouse at Omega Walnut, Inc. in Orland is filled with walnuts ready to ship. The building would normally be empty.
Photo/Kathy Coatney

California agricultural exporters say the ongoing labor dispute between West Coast dockworkers and shippers continues to hamper their ability to send products to their overseas customers, resulting in delayed shipments, increased costs and lost sales.

Work slowdowns and other disruptions at West Coast ports hit exporters especially hard during the last several months—the peak of the holiday shipping season. As months-long contract talks between the International Longshore and Warehouse Union and the Pacific Maritime Association dragged on and cargo backups became more severe, exporters say they heard from many frustrated customers who didn't receive their products in time for the holidays.

They say truck drivers trying to deliver products to the ports face long waits and often have to turn back because they are unable to get the cargo onto ships. These delays have resulted in demurrage charges, storage fees and other penalty costs.

Pat Andersen, president and CFO of Andersen and Sons Shelling, a walnut packer in Tehama County who ships to markets in Australia, South Korea, Germany, China and the Middle East, noted one of the trucking companies he uses recently doubled its port-congestion surcharge to $300 per container, on top of the regular cost of $1,000 to deliver a container to the Port of Oakland.

He said if these problems continue, he's concerned there will not be enough truck drivers willing to make trips to ports "and deal with the nightmare that's down there." He noted he's had to pay more overtime and work weekends to load containers so that trucks could be at the gate right when the port opens.

"A lot of drivers are starting to quit because they're just done and tired with it," Andersen said. "Who wants to go and sit in line for eight hours and not get anything done?"

Tim Merrill, sales and marketing manager of Omega Walnut, a processor and packer in Orland, said transportation costs alone to the Port of Oakland have increased 25 percent. The backlog has become so serious that he's had to adjust his production schedule and stop packing because he hasn't been able to ship enough product out and he's run out of room at his facility. He said offsite storage has been cost-prohibitive and problematic, but added, "there will come a point when I will have no choice."

"What that means is our costs go up," Merrill said. "I can't raise those costs this year because I made a commitment to my growers, but I'll have to recover that loss."

Due to the problems at the ports, Andersen said he's shifted more of his business to the domestic market.

"I have to move a certain amount of product every day so I can get paid, so I can turn around and pay my growers," he said. "If I can't ship as much product out because of the slowdown at the port, then that means I don't get as much money in, which means I can't pay my growers on time."

Greg Braun, president of Border Valley Trading, a hay exporter with operations in the Imperial and Central valleys, said finding alternative markets domestically for some of his products would be much more difficult. He noted that while alfalfa hay can be moved to other markets, some specialty products such as straw and grass hay are suited for very specific export markets. He estimated the port slowdowns in Los Angeles, Long Beach and Oakland have cost him more than $4 million in losses in the last two months.

For those trying to ship fresh citrus, port congestion has become "a bigger problem" now that peak export season is ramping up, said Bob Blakely, vice president of California Citrus Mutual. He said he's heard from various shippers who have had orders canceled due to disruptions at West Coast ports.

Citrus usually ships out of the ports of Long Beach and Oakland. The fruit is kept in refrigeration and is typically on the water for two to three weeks; therefore, a delay of an extra week "can make a big difference," Blakely said.

Due to the uncertainty of shipping schedules, Dennis Johnston, a citrus grower and shipper in Kern County, said he has had to slow his harvest. Normally this time of year he would be moving 15 loads a week to Australia, but he's moving only five to six loads now.

Johnston said he's concerned with the long-term impact the port problems could have on trade and potentially losing markets that exporters have worked hard to secure. Even though foreign buyers prefer California navel oranges, he said, they could switch to buying from competitors such as China and Egypt if supplies from the Golden State are made unreliable due to port issues.

Walnut exporter Andersen said port congestion also has had serious financial repercussions for his customers, many of whom have contract obligations to deliver products to retailers. He noted one buyer didn't receive 35 shipping containers of products that he needed for Christmas and, out of desperation, agreed to pay an extra $35,000 to ship the containers by rail from Oakland to Montreal, and then put them on a ship on the East Coast.

Georgia Crain, export manager at Crain Ranch Walnuts in Tehama County, said she is now diverting most of her cargo to ports in Houston and the East Coast because "we can't get anything out unless we go via rail." Although the company hasn't lost any business, she said she's had to give discounts to customers who didn't receive their product on time, to help them compensate for their lost sales.

Brandon Harder, governmental affairs and communications director for Farmers' Rice Cooperative, which ships 5,000 to 6,000 containers a year, said while he is hopeful the conflict between the longshore workers' union and shipping lines and terminal operators will be resolved quickly, the backlog at the ports will "take a while to iron itself out."

The two sides have been in contract negotiations since May and have agreed to federal mediation to help resolve the dispute.

Not all of the state's agricultural exports have been affected by the port disruptions. Dairy exports typically have a longer lead time and have not experienced heavy delays, said Marie teVelde of California Dairies Inc. Extremely perishable items such as fresh strawberries are air freighted, said Carolyn O'Donnell of the California Strawberry Commission.

Fresh fruit such as table grapes, peaches, nectarines and plums had finished or nearly finished their seasons, so avoided the worst of the port slowdowns, said Barry Bedwell, president of California Fresh Fruit Association, who added that "if this had happened during June, July and August, we would have major problems."

He said attention should now be turned to how to prevent future port slowdowns and loss of commerce.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.




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