USA - California growers facing export troubles

By Emily Hamann

Higher prices and empty shelves have been one of the hallmarks of the shipping crisis, as a historic number of cargo ships wait off the coast of Southern California to bring goods to port and offload them. But the congestion has rippled through the goods movement chain and has also slowed California growers trying to get their products out of the country.

“The biggest frustration for so many of our guys has been there’s no certainty,” said Tracey Chow, federal government affairs specialist with the Western Growers Association, an Irvine-based advocacy group for fresh fruit, nut and vegetable growers in the Western U.S.

She said her members began running into shipping issues more than a year ago. While most of California’s goods move through the ports of Los Angeles and Long Beach, agriculture exports mostly leave through the Port of Oakland. Usually, ships crossing the Pacific Ocean first dock at L.A. or Long Beach, then make their way up the coast and stop at Oakland.

But as Southern California ports got more and more congested and ships were delayed for weeks waiting to unload, some ships tried to make up time by skipping the trip up the West Coast, instead turning around in Southern California, and heading back to Asia loaded with empty shipping containers.

“They were essentially canceling sailings into Oakland altogether,” Chow said.

In September, rates for shipping containers headed from China to the U.S. hit an all-time high. As of Oct. 22, shipping companies were charging a median rate of $16,884 to move a shipping container from China to the West Coast, but only $1,064 to make the reverse trip, according to the Freightos Baltic Daily Index, making empty shipping containers far more valuable on the other side of the ocean.

“The capacity of empties going back is growing exponentially,” said Steve Schult, vice president of global supply chain for Blue Diamond Growers. The Sacramento-based cooperative is the largest supplier of almonds in the world.

Almonds are by far the largest agricultural product exported from California. In 2019, they made up nearly a quarter of the state’s $22 billion worth of ag exports.

“We’ve been in the logistics business for 110 years,” Schult said “We’re used to disruption of some sort, but certainly the pandemic has placed a particular strain on shipping.”

He said Blue Diamond’s longstanding relationships with shippers at the Port of Oakland have helped the company find ships to put its products on, and Blue Diamond has also shifted to long-term planning for its shipments.

“We are able to make our shipments, the question is, when does the customer expect to receive it,” Schult said.

By thinking ahead, Blue Diamond was able to ship all its product to arrive in time for the Lunar New Year in February, a major Chinese holiday when Blue Diamond makes a good portion of its international sales.

“We can no longer be a two-to-three-week company,” Schult said. “We have to be five to six weeks on shipments.”

Around half of the rice from California, primarily grown in the Sacramento Valley, is exported. Farmers grew $897 million worth of rice in 2019, making it one of California’s top crops and top agriculture exports. At least, during a normal year.

“Container traffic going out of California with rice, I would estimate over the last 12 months has decreased probably 50% or more,” said Chris Crutchfield, CEO of American Commodity Co. LLC, a Williams-based rice processor and handler.

American Commodity ships about half of its exported rice out of the Port of Oakland in containers.

These days, containers, Crutchfield said, are “mostly, simply not available, and when they are, they are sometimes at least twice what a normal price would be, or sometimes three or four times.”

The other half of American Commodity’s rice goes out of the ports of West Sacramento or Stockton in breakbulk shipments — where rice is put in bags and loaded into the hold of the ship. Most of the bottleneck with shipping is confined to container ships.

The Port of West Sacramento, which isn’t equipped to handle container ships and primarily exports rice and imports cement, hasn’t seen an impact to its business, Port General Manager Rick Toft said, in an email.

Although American Commodity has switched its shipments from containers to breakbulk when it can, the crisis has still culminated in an overall reduction in rice sales overseas, Crutchfield said. On top of that, Sacramento Valley rice farmers this year only planted about 80% of their typical rice crop, due to the drought.

“The logistical crisis, coupled with the major reduction in our rice crop this year,” he said. “We simply can’t export as much rice.”

Crutchfield is concerned about the long-term impact this will have on overseas markets for American rice.

“I don’t think they’re not eating rice,” he said. “I think they’re finding their product somewhere else, and the longer that goes on, the harder it will be to regain those markets.”

Rice and almonds, however, have a leg up over some of California’s other ag exports. Rice and almonds can go into storage, and ship year-round.

Over the years, growers of citrus, stone fruit and table grapes had also worked to build up a foothold in overseas markets.

“In normal times, it’s cheaper and faster for them to ship something to Asia than it was to the East Coast,” Chow said. Now, with narrow loading windows and shifting loading times, growers are having difficulty timing when to harvest their crop so it is as fresh as possible when it ships.

“For products such as vegetables and fruits, you have a very small window,” she said. Delays are causing that window to close, and Chow said she has heard from citrus growers that are having to make payouts when the fruit arrives and doesn’t meet quality standards.

Chow said she also fears that this crisis will cause buyers to go elsewhere, especially after trade disputes and other roadblocks have kept California agriculture from establishing overseas markets in recent years.

“Our industry has obviously had to deal with several years of volatile export markets and trade negotiations,” Chow said. “Will California agriculture continue to be viewed as a reliable supplier? And the answer is I don’t know.”