The lingering effects of COVID-19’s shock to global trade have resulted in a backlog of container ships waiting to unload outside the West Coast’s most critical shipping ports. Persisting congestion and related logistical obstacles threaten U.S. farmer and rancher ability to meet much-welcome increases in foreign demand.
Imports decreased precipitously in the early months of COVID-19, but they began increasing again during the summer of 2020 and haven’t stopped. Mirroring the relaxation of many pandemic-related restrictions, consumers with money in hand entered 2021 eager to spend on a variety of goods and services. Fueled by near-record personal-savings rates and stimulus checks, retail consumption of goods is outpacing traditional first- and second-quarter levels. Total U.S. imports for first-quarter 2021 increased $138 billion from first-quarter 2020. Typically during the first half of the year, shipping companies and seaports prepare for trade increases that occur in the second and third quarters. Those are increased-consumption months driven by the holiday season and back-to-school shopping.
Los Angeles and its sister port of Long Beach are the two busiest ports in America. Combined with Oakland, those three California seaports are the primary ports for containerized trade with Asian markets. Demand from a country full of pent-up spending energy and money has pushed all three ports to record import levels during the past year. First-quarter 2021 container imports increased 39 percent from year-over-year values.
The crush of imports has been challenging for the three ports. Backlogs of anchored container ships, which could normally be counted on one hand, reached as many as 40 in February at the ports of Los Angeles and Long Beach. Anchored-ship numbers have since decreased to the low-20s and high-teens but still present a major bottleneck to the movement of goods. The Port of Los Angeles reported a 6.1-day waiting period for unloading and docking space during the final week of May 2021; it’s usually within a day at most. Constraints in staffing at trucking terminals contributes to increased unloading times.
California’s seaports in Los Angeles, Oakland and Long Beach are also important export terminals. On the export side those ports have also been extremely busy. First-quarter 2021 container exports increased 36 percent from year-over-year values. Los Angeles, Oakland and Long Beach are the first-, second- and third-largest ports for containerized waterborne U.S. agricultural exports, respectively, in the United States.
Increased imports and exports caused considerable congestion both on the water side and on land as the ports filled with the extra containers. In an effort to avoid congestion and to send containers back to Asia generally and China specifically as quickly as possible so they can be refilled with more import goods, there has been an increase in the shipment of empty containers out of those three ports. Some consider it more efficient to ship empty containers rather than waiting for export goods to be loaded, which has led to a significant decline in the number of containers available to agricultural exporters.
Across California’s three major ports, empty containers in first-quarter 2021 increased from a first-quarter 2018-2020 average of 1.16 million 20-foot-equivalent units to 1.81 million 20-foot-equivalent units, a 56 percent increase. Compared to first-quarter 2020 alone, first-quarter 2021 represents an 80 percent increase in empty export-container units. Accessibility to export containers has been further limited by record shipping costs and harmful surcharges. With those factors combined, the ability for farmers and ranchers to fulfill oversees contracts has been significantly impacted – with some estimations of almost $1.5 billion in lost agricultural exports.
The ports of Los Angeles, Oakland and Long Beach are important for agricultural exports overall, but they’re especially vital to some agricultural commodities. California ports support well more than or about 50 percent of all U.S. exports for numerous agricultural commodities. For example 75 percent or more of U.S. exports of tree nuts, oranges and prepared tomatoes are exported from the combined area of Los Angeles, Oakland, and Long Beach. More than 60 percent of U.S. exports of cotton, and hides and skins; about 50 percent of U.S. meat and wine; and 30 percent of U.S. dairy ship from California ports. Between 2016 and 2020 annual U.S. exports from California ports of just those products averaged almost $22 billion.
Increased foreign demand for U.S. agricultural products exacerbates the need for container access and logistical solutions to Western port delays. Furthermore the seasonal nature of some agricultural products makes finding a resolution to port delays critical. For example oranges and cotton are historically exported at greater rates between January and May, while edible nuts peak between October and December. They’ve all been especially pressured by port delays since October 2020. Hurdles in seller abilities to meet foreign obligations limits future revenue expectations and stresses relations between foreign partners.
Summary
With generally positive signs of growth across markets, a bottleneck of container ships lingers at Western ports as a COVID-19-induced barrier to much-needed revenue relief. Persisting delays at some of the most economically valuable seaports for U.S. agricultural commodities threaten the bottom lines of farmers and ranchers who rely on foreign outlets to sell their products. Those burdensome setbacks have further implications on commodities reliant on seasonal export demand in the affected months. At a time of relatively tight supply and inflated prices, the orderly movement of goods and services is vital to continued recovery from pandemic-related supply-chain shocks.
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June 16, 2021 at 05:00AM
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