by Stas Margaronis Oct 11, 2023
California agricultural exporters are facing a tough peak season because of late rains, according to Paul Snell, CEO of British-American Shipping based in Huntington Beach, California.
British-American is a California-based licensed Ocean Transport Intermediary (OTI) / Non-Vessel Operating Common Carrier (NVOCC). It operates as a global specialist in the movement of world-traded commodities by ocean transportation.
In an interview with AJOT, Snell said: “The lead story is that the peak season is heavily delayed … We have a very, very long lead-up to peak season that has been caused by late rains and inclement weather across the year. We have not had the high temperatures that California’s been used to … the crop development has been slower and we are delayed in terms of shipping goods out.”
Deadlines for exporting agricultural products are rapidly approaching:” So, if you have to deliver goods for Christmas, you’ve got to be there before December 1st or if not December 15th. So, exporters have got to ship to Europe in the next three to four weeks. … I see volumes to Europe will be strong for the next four weeks. I see that India and the Middle East will be strong throughout November and December, ahead of their holidays … I think that China will also be busy in November and December of this year … which means probably we are going to have an incredible influx of business over the next … 12 weeks which will make many people happy at the West Coast ports.”
This trend was reflected in an October 5th Beacon Economics Report which found: “California (5.5%) and the United States (4.9%) sustained broadly similar year-over-year declines in their merchandise export trades in the latest numbers. ‘These latest numbers are not surprising,’ said Jock O’Connell, Beacon Economics’ International Trade Adviser. ‘The Commerce Department had been expecting a year-over-year fall-off in U.S. exports, and California’s experience is in line with that forecast, especially with regard to a sharp decline in farm exports.’ 2023 has been particularly tough on California growers with one unprecedented weather event after another, disrupting normal agricultural operations. Torrential rains earlier this year caused havoc for farmers and cattle ranchers as farmlands were flooded. Hurricane Hillary hit in August just when harvests of crops such as almonds were getting underway.”
Snell says that after the “slowing up (of) exports … probably the biggest concern that we’ve had with the slow volumes on export is trucking. The truckers have probably been hit the hardest. It is not uncommon for suppliers to be hit up by 50 truckers a day requesting business. That would not be uncommon, that is the new normal. … We are inundated with truckers, desperately trying to find business, find orders and get work. The trucking community is on its knees with regard to the lack of business. We have seen changes in the trucking platform as a result of the lack of business, with business owners merging and selling a large number of trucks, resulting in the trucking community losing … their jobs. This is because of the reduced volume of imports and exports collectively.”
Credit Crunch Impacting U.S. Exports
High-interest rates and declining trade volumes are adversely impacting exporters “because the money and the credit situation is negatively impacting their ability to purchase. International foreign money is low on cash flow and the …. credit limits internationally … low … The American economy may be doing better than most of the world. And so that is adversely impacting exporters because the money and the credit situation is negatively impacting their ability to buy.”
For exporters there are also quality issues: “When the crop now comes in, buyers are doing two … or three things. They want to see the crops’ quality before they purchase. They have reduced buying down to inventory levels … buying goods as they need them as opposed to buying in bulk. We now know there is going be almond quality issues in terms of the crop, and this is probably going to have an impact on price and potential sales going forward because people are very wary of what they’re buying.”
The problems have been exacerbated by the weather “but also due to lack of money from previous crop sales. This caused growers to cut back on certain practices. They would usually do such practices as pesticide control to produce a higher quality crop. There are quality concerns and there is definitely a problem where the buyer is more nervous to purchase. So, there’s a price issue and there’s a quality issue. And this is more related to almonds. …”
However, the same is not true for pistachios and walnuts: “The quality of the crop for the pistachios and the walnuts is supposed to be very, very high quality.”
Unfortunately, “we have … only about 20% of the harvest … in. So, even though people are complaining of crop quality issues, there hasn’t been enough cargo being harvested to actually give us a good read.”
Snell noted that “dairy exports are down considerably because suppliers are struggling to be able to make money on the product against other global prices. So that means that we’re getting more competition on dairy products … Where’s that coming from? Don’t know.”
As a result, there is pressure on ocean carriers to reduce prices: “What I see coming from both nut growers and dairy producers is that there is an incredible push to get freight prices down without necessary sales being attached. So, they’re trying to create sales by pressuring the carriers to drop shipping and trucking costs. So, we’ve had a lot of negotiations, but the bottom line is a lack of product and a lack of results.”
Snell says that other commodities are facing the following challenges:
Snell says Australia, the Mediterranean, and Northern Europe freight rates have not returned to previous levels before the pandemic. However, “in Asia, India, the Middle East, Latin, and Central America, everything’s back to where it was if not lower.”
The reason why the Mediterranean “hasn’t returned to pre-pandemic levels is that Hapag and Zim pulled out of the U.S. West Coast, leaving MSC (Mediterranean Shipping Company) as a monopoly operator and MSC has upheld most of the freight rates as high as they possibly can … So, lack of competition to MSC is the reason why the Mediterranean freight rates haven’t fallen. And with regards to North Europe freight rates are in decline, but they just have not hit … pre-pandemic levels yet, but are coming down month after month.
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