Friday, January 21, 2022

‘Containergeddon’ at ports cost California farmers $2.1 billion in exports

New research estimates economic losses due to congestion, inefficiencies

• By Ria DeBiase •

export ship
A shortage of containers has resulted in a 17% decline by value of containerized agricultural exports between May and September 2021 — photo by Vicky Boyd

Between wildfires, drought, a trade war and the COVID-19 pandemic, the last few years have been hard on California farmers. But recent research by agricultural economists from University of California, Davis, and the University of Connecticut suggests that economic losses to California agriculture from recent supply-chain disruptions may have an even greater economic impact.

In an article titled “‘Containergeddon’ and California Agriculture,” researchers estimate  there was a 17% decline in the value of containerized agricultural exports between May and September 2021 due to recent port congestion. This amounts to about $2.1 billion in lost foreign sales, which exceeds losses from the 2018 U.S.-China trade war.

What’s behind the disruption?

By the peak of the disruption in September 2021, nearly 80% of all containers leaving California ports were empty. That’s about 43% fewer filled containers leaving California’s ports than there were prior to the pandemic.

Since 40% of filled shipping containers leaving California’s ports are filled with U.S. agricultural products – around a third of which are from California – farmers in the state experienced significant lost export opportunities.

By September 2021, about 25,000 fewer containers filled with agricultural products left California ports than n May 2021. Processed tomatoes, rice, wine and tree nuts saw the sharpest average trade declines.

“We calculated California tree nut producers lost about $520 million,” said Colin Carter, UC Davis distinguished professor of agricultural and resource economics. “This was followed by wine with a loss of more than $250 million and rice with about $120 million lost.”

This was followed by wine with a loss of more than $250 million and rice with about $120 million lost.

During the pandemic, an increase in household savings led to increases in consumer spending, with many of these additional goods being imported from Asia. California ports were overwhelmed by the added shipping containers coming from Asia. At times, bottlenecks at Southern California ports left more than 80 vessels waiting off the coast to unload. Docks and warehouses ran out of space, and the turnaround time for shipping containers nearly doubled.

Containers in demand

Increased U.S. demand for imported goods from Asia also led to increased demand for empty shipping containers in Asia. Prior to the pandemic, freight rates for shipping containers from Shanghai to Los Angeles were already higher than the return trip from Los Angeles, but this gap widened significantly after COVID-19. By September 2021, the fee to ship a 40-foot container from Shanghai to Los Angeles had increased sixfold to $12,000 – while the return trip from Los Angeles was only $1,400.

The high prices for containers from Asia, coupled with shipping delays from the high volume of imported goods entering California ports, made it more profitable for shippers to return containers to Asia empty, rather than waiting at the ports to have them loaded with U.S. exports for the return trip.

“If port inefficiencies persist, the ramifications for California agriculture will extend beyond the immediate loss of foreign sales, as importers begin to view California as an unreliable supplier of agricultural products,” Carter said.

To learn more about the supply chain disruptions at California ports and their effect on California agriculture, read the full article by Colin Carter, Sandro Steinbach and Xiting Zhuang: “‘Containergeddon’ and California Agriculture.”

Ria DeBiase is communications director, Giannini Foundation of Agricultural Economics.

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