A Brisk Trade in Sour Grapes and Bromides

By Jock O’Connell

There continues to be a surfeit of sorrowful stories in the media about exporters of agricultural goods allegedly being denied access to either shipping containers or space aboard outbound vessels. So disposed are certain journalists to take the side of bedraggled farm exporters that even the customary disclaimer “allegedly” is commonly dropped from the charges being hurled against a presumed cabal of steamship lines and terminal operators.

More and more, this is coming to resemble one of those macro versus micro editorial trade-offs, in which the news value of a single harrowing accident is infinitely higher than an account of all the accidents that did not happen. But in truth not a year passes when someone’s load of apples or oranges or grapes simply misses the boat. It’s just that in most years there’s not a concerted effort by a farm industry lobby to pile up scattered anecdotes of woeful outcomes until bad luck or bad planning or hiring your brother-in-law as your freight-forwarder becomes grist for a federal issue.

The simple fact is that, notwithstanding the few folks currently lurching about the public policy stage, chewing on the scenery while displaying a remarkable waywardness with numbers, there is an abundant harvest of positive agricultural trade news that’s getting the Rodney Dangerfield treatment from headline-seeking editors.

Anyway, here are some numbers worth recalling the next time you see a headline screaming: “The big export backlog: US ag products stack up at Western ports.” Tree nuts are a huge business here in California, the nation’s top farm state (in terms of gross farm receipts) and America’s top agricultural exporting state (with as many exports by dollar value as the next two biggest farm exporting states combined). Almonds, pistachios, and walnuts rank among the state’s top five agricultural exports in value. (Dairy products and wine are the others.)

So what’s been happening with nut exports these past few months when farm exports have reportedly been “stacking up” at the ports and ocean carriers have been “strangling” farm exports.

Foreign shipments of almonds, California’s most valuable farm export commodity, have not exactly been struggling in the current crop year, which began last August. Through March, almond growers shipped 723,476 tons of nuts abroad, up a righteous 23.8% over the 584,539 tons exported during the preceding crop year. For those likely to suggest that the previous year might have been an off year, let the record (provided by the California Almond Board) show that exports during the 2019-2020 crop year were 6.1% higher than in the one before.

Pistachio exports have likewise been ascendant in their current crop year, which began last September, to 139,102 tons from 121,728 tons in the preceding crop year. In this case, a year-over-year comparison may not be entirely fair. For starters, the 2019/2020 crop year was an off-year harvest, and the COVID-19 virus staggered China, the top export market for U.S. pistachios, less than halfway through the crop year. Still, apart from an unusually robust 2018/2019 year, current year pistachio exports are running higher than in any preceding year.

Walnuts are California’s fifth most valuable farm export, and export tonnage is on a pace to top any previous year. Somehow, walnut exporters managed to find enough containers to ship 80,428 more tons this crop year than last, despite having all the stars allegedly lined up against them.

Nuts are one thing. But nothing seems to rile up the out-of-town media more than soybeans traveling in containers. This obsession is a bit hard to figure out. As this newsletter has persistently pointed out, less than 10% of America’s soybean exports move in containers. Still, I’m happy to report that, year-over-year, overall soybean export tonnage has been up 84.5% in the six months from last September through this February, when the press was rife with stories of chaos on the docks. And, despite the fact that containerized soybean export tonnage over the past six months has been up 56.6% over the same period last year, reporters commenting on the soybean trade often sound as though they’ve been hired on as keeners at an old-fashioned Irish wake.

Admittedly, not every farm exporter is having a good year. Word out of the Pacific Northwest is that apple exports have been way down. Washington State exported 18.8 million 18-kilogram boxes of apples in the 2020-21 crop as of the end of March. That is down 20.5% from this time last year and down 16.4% compared to the 2018-19 shipping season, according to data from the Washington Apple Commission. Those would be the lowest export numbers since the 2003-04 crop season, when they were down 21.7%, as the Yakima Herald-Republic has reported.

The alleged reason for the export shortfall, as some kvetchers spin the yarn, is that apple shipments abroad are being throttled by shipping lines unwilling to accept containers of their produce.

There is another narrative, however. As an April 5 report in the Seattle Times notes: “In 2018, then-President Donald Trump imposed tariffs on steel and aluminum from several countries, including Canada, Mexico and China. Several countries then imposed retaliatory tariffs on U.S. products, including apples and cherries in Washington State.”

While U.S. trade officials have since resolved the disputes with some countries — including Canada and Mexico — they have not with others. In 2019, India imposed an additional 20% tariff on apples, which brought the total duty to 70%. The Washington state apple industry had relied heavily on India as a destination for Red Delicious apples. Likewise, apples and cherries to China now face a 50% tariff. Just four years ago, Washington State growers shipped 3.3 million 20-pound boxes of cherries to China. Since the tariffs were implemented in 2018, shipments have declined to 2.2 million in 2018, 1.9 million in 2019, and to just over 1 million last year.

The Washington Apple Commission also takes note of a more natural cause for reduced exports: a smaller crop. In early August, the first estimate for the state’s apple crop predicted a crop volume of 134 million boxes, on par with the previous season of 133 million boxes. But, over the Labor Day weekend, “a strong windstorm” resulted in apples being knocked off the tree and some growers sustaining damage to their “trellis systems.” At about the same time, wildfires burning in Washington and other West Coast states delayed harvesting and affected fruit quality. Expectations are now for a 5%-10% reduction in crop volume as a result of the adverse climate events.

But enough about farm exports. Let’s talk imports. For in addition to all of the other calamities facing supply chains, this season is yielding an especially ripe crop of bromides and nostrums intended to enhance the efficiency of America’s seaports and avoid future bottlenecks.

Clearly, the ports are congested by an unprecedented surge of imports which most think has something to do with the plague. Maybe because we couldn’t or didn’t want to expose ourselves to a lethal virus by going out to restaurants or bars or movies or stage plays or ball games, we’ve been cloistered at home spending way too much time perusing the offerings of Amazon.com or the L.L Bean catalog. Too often, we’re buying things we don’t really need but are simply too bored not to order. And the decision to hand out $1400 to most everyone to spend on products that will likely have to be sourced from Asia won’t help alleviate the crush at the ports. Still, everyone likes receiving presents, and the pandemic has been giving us the opportunity to celebrate Christmas every day. (Although some issues could eventually arise: Daddy, why does Santa wear a brown UPS shirt?)

Anyway, we’ve got ports that are currently in worse condition than Fibber McGee’s closet. (Younger readers might want to think of the waiting areas at the DMV.) What, then, to do?

One bit of wisdom may be to not assume the current crisis constitutes a new normal. Clearly, while it’s not at all clear how long the current levels of congestion will last, it is clear that the Port of Los Angeles will not be seeing a half million inbound loaded TEUs continue to show up every month. Are we clear on this? Taxpayers?

Still, some pundits have decided it’s time to resurrect the notion that U.S. ports, like ports in China, should operate on a 24/7/365 basis. Apart from implicitly recommending we let the Chinese dictate American working conditions at ports such as Los Angeles and Long Beach, the proposal fails to address who pays for a third shift. Importers? Farm exporters?

The 24/7/365 gambit also focuses too narrowly on the ports. Other elements of the supply chains would have to buy in to make such a scheme work. Even if (very tall order) port authorities, labor unions, and terminal operators all agreed to stay open all the time, would truckers show up at 2am? Would warehouses staff up to handle higher volumes of deliveries at 4am?

The “hoot owl” shift can be very lonely down on the waterfront.

Disclaimer: The views expressed in Jock’s commentaries are his own and may not reflect the positions of the Pacific Merchant Shipping Association.