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Supply crisis delivering load of grief to farmers

by The Washington Post | November 15, 2021 at 4:22 a.m.

A supply chain crisis for imports has grabbed national headlines and attracted the attention of the Biden administration, as shoppers fret about securing gifts in time for the holidays and as strong consumer demand for couches, electronics, toys and clothing pushes inflation to its highest level in three decades. Yet, another crisis is also unfolding for American farm exports.

It's just 60 miles from El Dorado Dairy in Ontario, Calif., to the nation's largest container port in Los Angeles. But the farm is having little luck getting its products onto a ship headed for the foreign markets that are crucial to its business.

The farm is part of one of the nation's largest cooperatives, California Dairies Inc., which manufactures milk powder for factories in Southeast Asia and Mexico that use it to make candy, baby formula and other foods.

The company typically ships 50 million pounds of its milk powder and butter out of ports each month. But roughly 60% of the company's bookings on outbound vessels have been canceled or deferred in recent months, resulting in about $45 million in missed revenue per month.

"This is not just a problem; it's not just an inconvenience; it's catastrophic," said Brad Anderson, CEO of California Dairies.

The same congestion at U.S. ports and shortage of truck drivers that have brought the flow of some goods to a halt have also left farmers struggling to get their cargo abroad and fulfill contracts before food supplies go bad.

Ships now take weeks, rather than days, to unload at the ports. Backed-up shippers are so desperate to return to Asia to pick up more goods that they often leave the United States with empty containers rather than wait for American farmers to fill them up.

The National Milk Producers Federation estimates that shipping disruptions have cost the U.S. dairy industry nearly $1 billion in the first half of the year in terms of higher shipping and inventory costs, lost export volume and price deterioration.

"Exports are a huge issue for the U.S. right now," said Jason Parker, head of global trucking and intermodal at Flexport, a logistics company. "Getting exports out of the country is actually harder than getting imports into the country."

Part of the problem is that shipping companies are able to charge far more to ferry goods from Asia to the United States than vice versa, so they don't want to waste time waiting for a less lucrative load departing from the West Coast.

According to data from Freightos, an online freight marketplace, the cost to ship a 40-foot container from Asia to the U.S. West Coast soared to $18,730 in November -- more than 17 times what it cost to make the reverse trip.

As a result, more than 80% of the 434,000 20-foot containers exported out of the Port of Los Angeles in September were empty -- up from about two-thirds in September 2020 and September 2019.

Mario Cordero, executive director of the Port of Long Beach in California, said that the price differential encouraged shipping companies to get their containers "back to Asia ASAP so you can load it with import items."

"Unfortunately, the American exporter is impacted by this approach," he said.

A supply crunch in the trucking industry is also affecting farmers, as truckers find better pay and hours delivering holiday gifts than hauling soybeans and swine.

Tony Clayton, president of Clayton Agri-Marketing Inc., in Jefferson City, Mo., exports live animals around the world for breeding. He said the company is competing at ports and airports for space for dairy heifers, swine and goats. And many livestock truckers have found that they can earn more hauling dry freight.

"It is a challenge," Clayton said. "We're all fighting and competing for those people who will sit behind the steering wheel."

The infrastructure bill that Congress passed Nov. 5 aims to remedy supply chain backlogs by investing $17 billion in U.S. ports, many of which rank among the least efficient in the world.

The bill also includes funding to improve railways, roads and waterways, as well as a provision to fund pop-up container yards outside the Port of Savannah in Georgia, to ease congestion. It will also lower the minimum age of truckers who can cross state lines to 18, in a bid to attract more workers to a profession that has become a key bottleneck in supply chains.

In September, the U.S. Department of Agriculture also announced it would dispense $500 million to help farmers deal with transportation challenges and rising materials costs.

John D. Porcari, the Biden administration's port envoy, said that farm exports are a "primary focus" for the administration and that the White House was trying to encourage private sector companies, including ocean carriers, to get the supply chain moving.

The White House held a roundtable with agricultural exporters Friday, and Porcari plans to visit the Port of Oakland in California -- one of the biggest export points for agriculture, this week.

"We know that some sectors have had more trouble than others and we're working to eliminate those bottlenecks," Porcari said.

While agricultural exporters have welcomed long-term infrastructure investments, they remain concerned about more immediate losses.

Anderson -- whose company is responsible for nearly 10% of America's milk supply and one-fifth of U.S. butter production -- said he had been frustrated that much of the public dialogue from the government and in the media had focused more on consumer imports.

"Are we going to get toys for Christmas? Are we going to get chips for automobiles? We think those are real concerns, and they need to be talked about," he said. "What's not being talked about is the long-term damage being done to exporters in the world market and how that's going to be devastating to our family farms."

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