WASHINGTON – The Agriculture Transportation Coalition realizes that regardless of the quality of agricultural products produced in the United States, meat products are readily available from many other exporting countries around the world. If companies in the United States cannot deliver pork, beef and chicken affordably and dependably to foreign customers around the globe, those customers will go elsewhere.
“And once they leave, it’s extremely difficult to get those customers back,” said Peter Friedmann, executive director of the Agriculture Transportation Coalition, during an April 13 presentation at the North American Meat Institute’s virtual Meat Industry Summit.
The Agriculture Transportation Coalition helps American agricultural companies, especially meat and poultry companies exporting products to Asian customers, get products to overseas customers.
Due to the recent blockage of the Suez Canal by Evergreen Marine’s container ship, Ever Given, and its popularity on the news, the American public has gotten more familiar with containerized ocean shipping than ever before. To get fresh meat from, for the most part, the center of the United States to a supermarket in Asia, can be logistically challenging.
“If there is any glitch along the way, then you’ve got a real problem,” Friedmann said. “Because what you might have sold to your foreign customer was fresh pork or beef, and the supermarket may have paid for that and is expecting that and has put out advertisements for it. You put it on a train in Kansas say, and it goes to port in Oakland and there’s some congestion or the ship is late. Your only option may be to turn the temperature down and now you’re going to deliver frozen meat. And frozen generates significantly less revenue.”
This puts a strain on international sales when process get cut, or sometimes the customer rejects the shipment, resulting in a no-sale.
Friedmann went on to describe the current situation of what the United States gets from the Asian market, “…basically everything.”
Clothing, electronics, dishes, sporting goods, appliances, etc., come from Asian countries in huge volumes. The volumes coming into the United States are overwhelming. The need for containers, railcars, ships and trucks to provide these goods is overwhelming, but the demand for these goods in the United States continues to spike upward placing a strain on the resources and ports necessary to bring the goods in.
“What happens? The freight rates that the ocean carriers are able to charge go up,” Friedmann said. “So, the ocean carriers are making hundreds of millions of dollars more. This is the most profitable year in history for the ocean carriers.”
But for many of the US protein exporters, it’s one of the most challenging years in history due to increasing freight rates from ocean carriers. In addition, the container rates being paid by companies exporting goods to the United States from Asia are so much higher than the rates US protein companies can pay for the return trip to Asia, many shipping companies will turn around and send the containers back empty rather than wait for goods to come from the middle of the country back to the coast for a fraction of the rate.
Another issue that creates difficulty for US companies trying to export protein is demurrage and detention penalties. Ocean carriers impose these penalties on exporters for not being able to deliver a container in the window a carrier gives the exporter. Sometimes the window comes without enough time for the exporter to put together the difficult schedule necessary to get goods from origin to the port.
“The Federal Maritime Commission has found that those charges are unreasonable, and they violate the Shipping Act,” Friedmann said. “Those charges are mounting to hundreds of millions of dollars – that’s not hyperbole – hundreds of millions of dollars a month. They’re being imposed on exporters and importers.”
Friedmann said the 10 major ocean carriers that travel east/west have somehow, being advised the do not have to follow the Federal Maritime Commission’s order. Some carriers have lifted some of their penalties, but exporters still currently pay almost double what they should through rate increases and demurrage and detention penalties, according to Friedmann.
“That’s a challenge that is being faced now by the protein exporters,” he added.