As the effects of the global pandemic trickle down the supply chain, the agricultural industry continues to feel the impact. Coupling pent-up demand caused by lockdowns, the looming holiday season, and American waterways that do not have the infrastructure to support containerized cargo, U.S. agriculture finds itself faced with huge hurdles.
In recent months, as food growers struggle to find shipping containers, some of the leading global agriculture shippers have made decisions that drastically affect U.S.-based food export. The current state of the American agricultural industry is incredibly fragile. Here’s why:
Suspension by Hapag-Lloyd
Currently running on the reliance of ocean carriers repositioning to support limited waterway access, North American food growers, especially soybean and specialty grain producers in the midwest, need container shippers to make their way down the St. Lawrence Seaway.
Unfortunately, at the end of October 2020, one of the biggest container shipping companies, Hapag-Lloyd, announced the suspension of North American-based containerized agriculture shipments. The suspension was made to free time so that empty containers can make their way back to overstocked Asian ports. Still moving some U.S. containers that come from locations close to gateway ports, the suspension is attributed to economics and a high Asian market price.
Hard Economics
According to an article from the Journal of Commerce, “the spot rate for an eastbound shipment from Shanghai to the West Coast this week was $3,865 per FEU, according to the Shanghai Containerized Freight Index published in the JOC Shipping & Logistics Pricing Hub. The average westbound spot rate from Los Angeles to Shanghai was $518 per FEU.” With rates that are almost 8 times the export price, it is far more compelling for struggling container shipping companies to hustle back to Asia with empty containers than to spend time supplying the U.S.
A huge disruption to the United States’ food supply chain, the future of the agriculture industry lies in limbo. If other container shipping companies follow suit and suspend U.S.-based containers--in addition to soybean, grain, meat, forest products, and more—we will start to see greater impact throughout the new year.
What’s at Stake?
In the long run, as U.S. exports slow, the reputation and reliance on American agriculture is at stake. In the past the United States has always had a timely and cost-effective fulfillment advantage over competing nations. Now, faced with inability to fulfill shipments and higher prices, this advantage is dwindling. The coming months and the decisions of the major shipping companies hold great importance for the U.S. agriculture industry. For information on how ClearFreight can help your business grow, contact one of our logistic experts today.
Comments