May 19, 2008

California agricultural products face shipping squeeze

Big farm products exporters are finding it more difficult and more expensive to ship their products overseas. The problem apparently is a result of high fuel prices a weakening economy- which is buying fewer foreign products resulting in fewer empty containers are heading out of U.S. ports. As reported in Sacramento Bee:

As the weak dollar makes the fruits of California farms ever more attractive to overseas buyers, big exporters like Sacramento’s Blue Diamond Growers are finding it tougher to get their products to far-off customers. The high price of oil and shifts in the global balance of trade have made space on container ships hard to come by. Cargo rates are up sharply. Delays of several months have become routine.

“It’s really put a crunch on U.S. ag exporters,” said Tammy Rossi, Blue Diamond’s manager of logistics and operations, as a forklift driver parked the last of 22 tons of almonds in a shipping container at the company’s

If all goes well, the 40-foot-long box will sail from the Port of Oakland through the Golden Gate on Monday and reach Germany 30 days later. A tangle of economic trends, however, has made the journey from Sacramento to Hamburg far less routine than it was just two years ago. From 2001 through 2006, a growing trade imbalance meant more and more containers reached U.S. ports full but left empty. Cargo carriers hungry to fill their ships offered rock-bottom prices and quick service to exporters.

“If the alternative is to send an empty container back, you put your hands on any customer you can,” said Asaf Ashar, co-director of the University of New Orleans’ National Ports and Waterways Institute. But the tide has shifted. The slumping U.S. economy has lowered demand for imports, while booming global demand for food commodities has boosted exports. The weak dollar, which has lost 24 percent of its value against the euro since early 2006, has made imports more expensive for U.S. buyers and exports cheaper for customers abroad.

As a result, fewer empty containers are heading out of U.S. ports. “The market power is changed,” Ashar said. “Shipping lines are putting the squeeze on (exporters) now.” The base cost of shipping a 20-foot-long container – the industry benchmark – from the Port of Oakland to Europe has risen 25 percent in the past year to around $2,500, according to David Enberg, a manager with the freight-forwarding firm EFI Logistics. He expects prices to rise another 20 percent by year end.

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