‘We need action now’: Ag exporters seek remedy for shipping crisis

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300 ag groups, companies sign letter to transportation secretary

As the container shipping crisis continues its crippling effect on U.S. exporters, the Specialty Soya and Grains Alliance (SSGA) joined nearly 300 agricultural and forest product associations and companies – including several SSGA members – this week in signing on to a letter to Transportation Secretary Pete Buttigieg, urging immediate intervention to remedy the situation.

“We need action now,” the letter states, “not additional studies.”

SSGA agrees, as U.S. exporters and their access to foreign markets must be protected.

The letter requests that the Department of Transportation assist the Federal Maritime Commission (FMC) “in expediting its enforcement options” and “consider its existing authorities” to determine how it can assist U.S. exporters and the ag producers they serve in their transportation needs.

For more than six months, U.S. ag exporters, including SSGA members who supply Identity Preserved (IP) soya and specialty grains for food manufacture, have suffered under unreasonable practices by ocean carriers. These practices include the declining of U.S. agricultural and other exports in favor of sending empty containers back overseas in order to keep up with the massive demand for consumer imports.

The imbalance has caused congestion, delays and even cancelation at the ports, and carriers have failed to provide accurate notice of arrival, departure and loading times. Carriers have also imposed unreasonable, punitive financial penalties on exporters, who, through no fault of their own, have missed loading windows. This is in violation of detention and demurrage guidelines set forth by the FMC. SSGA and other associations have previously supported FMC’s investigation into these practices.

It has been estimated that $1.5 billion in ag exports has been lost during this crisis, which has come on the heels of a pandemic that has also severely injured the market.

With no sign of the crisis letting up in the immediate future, SSGA is hopeful that Secretary Buttigieg will act upon this increasingly dire situation. Our members, allies and partners at the Agriculture Transportation Coalition have specific measures to propose and are requesting the opportunity to present them.

Copies of the letter were also sent to Agriculture Secretary Tom Vilsack and leadership of the Senate and House transportation committees. The letter can be found here.

Competitive Shipping: Container, booking problems persist

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Compiled by Bruce Abbe, SSGA Strategic Adviser for Trade and Transportation 

There seems to be little, if any, let-up in the extraordinary imbalance of global container flow and supply chain congestion. The crisis, which is more than six months long and running, has constricted the export capabilities of U.S. agriculture container shippers to a trickle. In fact, some market analysts saying “the worst may yet be to come.” 

Here is a roundup of the latest transportation news: 

The maritime ocean carriers control and govern the flow of containers. Ever–increasing demand for durable goods made in Asia and imported to North America keeps driving up rates for the eastbound Trans Pacific. The shortage of available containers in Asia is driving carriers to continue to ship empties back “neglecting (the needs) of U.S. exporters.” 

Maritime Market Expert Henry Byers was quoted about the surge in empties and what it signals for shippers, “It’s time to sound the alarms,” maritime market expert Henry Byers said in the story. “The shortage of container capacity is already affecting many supply chains, but almost no company will be spared from what lies ahead.” 

  • Asian container availability is tightening, and the purchase and rental costs of the steep shipping boxes are soaring, according to the ContainerXChange online data platform, the Journal of Commerce reported last week. The container ocean lines “warn that equipment will become even scarcer in the eastbound Trans Pacific as demand builds through May.” Delayed impact of the Suez Canal closure is apparently still affecting the system, causing experts to predict transportation markets and equipment availability will tighten further in the coming weeks. 
  • Import retailers and ocean carriers are beginning to shift some of their import volumes to ports than the congested southern California ports of Los Angeles and Long Beach. Oakland, the Northwest Seaport Alliance, New York/New Jersey and Savannah are seeing some gains. Yet all of the major ports are experiencing some degree of operational issues, JOC reported. Maersk and Mediterranean Shipping Company (MSC) are among carriers making shifts in their service routings.  

Blockbuster ocean carrier earnings, contract rate increases getting reported 

  • While their customers are facing unprecedented equipment shortages and high rates, the ocean carriers are reporting unprecedented profits, after years of losing money due to what until recently was over-capacity. 

Hong Kong-headquartered carrier OOCL reported “spectacular” increases in volume and revenue last week for the first quarter 2021, according to Loadstar. Average revenue per container increased 58.3% year-over-year. A 28.3% increase in volumes led to a provisional first–quarter revenue total of $3 billion, up 96% from the same period in 2020, which, it should be noted, was the start of the pandemic and a series of reduced sailings by the carriers. Revenue from the Trans Pacific rose 84.9%, just topping $1 billion. 

  • It should not go unnoticed that the tightening container availability and capacity forecast for May are happening at the key time when beneficial cargo owning shippers and freight forwarders are renegotiating contracts for the coming year. Container-News.com reports some shippers are paying double and up to three times as much as last year in rate increases on major trade lanes. 

CN takes on CP in competition to acquire KCS 

Canadian Pacific Railway’s recent surprise announcement of a public offer to buy fellow class one railroad Kansas City Southern (KCS), and expand its network connections to take advantage of the U.S./Canada/Mexico trade agreement certainly caught the eye of CP’s erstwhile northern competitor Canadian National Railway Company (CN). 

Last week, CN President and CEO J.J. Ruest sent a public offer to KCS President and CEO Pat Ottensmeyer and the KCS board offering to match the CP offer “Letter for Letter,” according to Railway Age.  CN has also submitted a “pre-file” of its offer with the U.S. Surface Transportation Board (STB) for consideration. The STB will be examining the proposed acquisition for anti-competitive and service consideration for the market. 

No let-up in container import demand surge

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Stress to transportation supply chains through end of summer

Compiled by Bruce Abbe, SSGA Strategic Advisor for Trade and Transportation

Inland U.S. ag container exporters are anxiously waiting for a breather from the disruptions caused by the demand surge for container–shipped import products that has led to limited access to containers for shipping food products to locations other than China. Indications now are signaling no let–up in the foreseeable future.    

According to research by Panjiva, U.S. seaborne imports of containerized freight increased by 50.5% year over year in March and by 36.9% when compared to March 2019, resulting in a record 3.02 million TEUs (20-foot-equivalent units) shipped, or 97,300 per day. Consumer demand continues to be the main driver of this growth. For instance, Panjiva reports leisure products and home furnishings climbed 94.9% and 91.4% this March compared to March 2019. 

Also: 

  • In March, the always busy Port of Long Beach set an all–time record for the number of containers handled at its terminals. Long Beach reported 840,387 TEUs were handled in March, up from the previous record of 815,885 set in December. March is normally a slower month. For the first quarter of 2021, the Port of Long Beach handled 2.4 million TEUs. The total number of empty containers, including outbound empty containers (270,016 TEUs) also were all-time highs for the port, according to Freightwaves. On the east coast, the Port of Charleston, S.C., also reported record volume of containers in March.    
  • Further, the National Retail Federation told the Journal of Commerce that its member retailers see no let-up in their ordering surge through the end of the summer. NRF projected imports to remain at record or near record levels through August.  That demand is reportedly being driven by the need to restore their inventories-to-sales ratio level that is near a 30-year low. The fall back-to-school and late fall/early winter holiday high demand seasons follow right behind. 
  • The container shortages felt throughout the global system took a further jolt from the recent six-day blockage of the Suez Canal. Ocean carriers reportedly warned that there will be a deeper shortage of containers available in China, particularly 40-foot units, in the coming weeks. Those shortages could further spike spot rates in China for its export manufactured goods heading to the West.  

Industry experts, including SSGA logistics members, say these projected trends, coupled with current pandemic-driven constraints and backlogs on the ocean/ports/rail systems, could last throughout much of the rest of the year. Exporters will need to continue to explore all creative options for accessing containers and ship space. 

STB adopts final rule on Class 1 rail demurrage billing

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Compiled by Bruce Abbe, SSGA Strategic Advisor for Trade and Transportation

While many Specialty Soya and Grains Alliance (SSGA) member shippers would like to see stronger federal regulation of the ocean container carriers and terminals to prevent abuses when it comes to demurrage and detention penalties, they may find a small bit of encouragement from a new federal rail regulation step. 

Last week the U.S. Surface Transportation Board (STB) adopted a final rule that requires Class I railroads to include certain minimum information on or with demurrage invoices and provide machine-readable access to that information. The minimum information includes such things as billing cycle, shipment, care placement, credit and debit information and more. The STB announcement said the aim is to improve “the ability of rail users to review and verify the accuracy of demurrage changes and facilitate the resolution of disputes between railroads and their customers.” 

It’s hardly a revolutionary change, and Class II and Class III rail carriers are not subject to the rule.    

When announcing the rule, the STB stated that demurrage, if properly handled, serves as an incentive to prevent undue rail car detention and thereby encourages efficient use of rail cars in the rail network. 

The National Grain and Feed Association and other associations pushed the STB to create guidelines that ensure such rail penalty charges are commercially fair, practical and commercially reciprocal in nature. The STB, however, did not include guidelines for demurrage and accessorial charges and practices in the final rule. It only addressed minimum information requirements. 

Click here for the announcement from the STB, and here for coverage in Railway Age. 

The Federal Maritime Commission (FMC), which regulates ocean shipping practices at ports and terminals in the U.S., adopted and released “interpretive rule” guidelines for detention and demurrage last summer after a year-and-a-half long study that sought input from all parties. The interpretive rule basically lays out how the FMC will look at disputed detention and demurrage charges applied to shippers and truckers. FMC will look at the appropriateness of such per diem charges based on if they are appropriate to make the transportation flow more efficient.     

Shipper groups and some policy makers, however, have been disappointed that over the past year during the disruptive pandemic-driven congestion crisis and the ensuing import surge that the FMC’s interpretive guidelines have shown minimal results in reforming ocean carrier behavior. SSGA and other ag shipper groups would like to see stronger enforcement steps on ocean carrier and terminal practices to prevent unfair or misapplied per diem penalties on shippers for delays they had no control over. 

Maffei designated FMC chair

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The Specialty Soya and Grains Alliance congratulates Daniel Maffei, who was designated chair of the Federal Maritime Commission by President Biden on Monday.

Maffei, a native New Yorker who served two terms in the U.S. House of Representative as well as in the Department of Commerce for the Obama Administration, has served on the FMC as a commissioner since 2016.

“We commend the appointment of Daniel Maffei to FMC chair,” said SSGA Executive Director Eric Wenberg. “He is excellently suited for this position. He understands the trade issues we are facing amid the current container shipping crisis and the regulatory response needed to reduce the shocks to the supply system.”

Maffei co-authored a letter to the World Shipping Council regarding U.S. exporters concerns about cargo being refused by major ocean carriers and how that could be a violation of the Shipping Act. Those discriminatory practices were first brought to the public’s attention in October. Maffei has also supported the FMC’s investigation into detention and demurrage practices by ocean carriers.

In a statement released Tuesday, Maffei said this is a “critical time for our nation’s supply chain. Due to the effects of COVID-19 and an unprecedented import boom, we are dealing with serious challenges to America’s international ocean transportation system – challenges that the FMC has a vital role in addressing, both on its own as an independent agency and in cooperation with other agencies.”

Maffei replaces Michael Khouri as FMC chair.

SSGA comments on the Suez Canal situation

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Our group of companies has been vocal in recent months about the logistical problems besetting our field crop container exports. We have been adversely affected and sorely mistreated by international carriers and an intermodal system that decided to maximize profitable traffic at the expense of U.S. ag exporters and our customers abroad.   

Eric Wenberg, SSGA Executive Director

I will hit the pause button and support them, as an example of the problems they face themselves were overcome by Evergreen shipping, the Suez Canal Authority and the Government of the Arab Republic of Egypt. Thank you for freeing the Ever Given. To these groups, SSGA extends its support and gratitude for resolving the difficulties in the Suez Canal. 

If critics of globalization or trade see what happened in the Suez as an opportunity for a cheap shot or as an argument that even the mighty corporation can be punished, then they make a mistake.  

U.S. barges get caught in the Missouri. Trucks get stuck in the mud in prairie states. I know of two rail links here that have such hairpin turns that trains must slow to 20 mph. And, as we know all too well lately, our ports are congested, if not clogged. Our shortfalls are many.  

When a bipartisan U.S. Congress takes an infrastructure bill seriously, when the Biden administration acts to help our shipping slowdown at home through the Federal Maritime Commission, and when you can finally ride a fast train in the United States, then I’ll be interested in those criticisms.  

Today, my business associates and I offer our thanks to the striving tug, dredge and ship crews who risked their lives to unclog the Suez Canal and return normal shipping to the Mediterranean and the Gulf – and around the world.  

You will have only had to a visit a port once to understand the dangers. The scale at which global trade works delivers cost benefits and efficiency. The intermodal system is run by people and those workers deserve our respect.  

Thank you. We are proud of you. Struggle on. 

Eric Wenberg
Executive Director, Specialty Soya and Grains Alliance 

Shipping Roundup: CP to acquire Kansas City Southern

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Will create single north-south railroad line serving North American market 

The biggest news on the shipping front over the past week occurred Sunday with the announcement that Canadian Pacific Railroad is acquiring Kansas City Southern, the smallest of the U.S. Class 1 railroads, in a deal that will create the first single railroad network serving all three North American nations. 

News reports put the cost the merger at $25 billion, while others reported it at $29 billion, including stock transfers. KCS shareholders are projected to own about 25% of CP stock if and when the transaction is completed. The new merged railroad will be called Canadian Pacific Kansas City. The deal still needs approval by the U.S. Surface Transportation Board (STB) and Mexico’s national rail regulatory body, which may be completed in mid-2022.     

CP President and CEO Keith Creel will serve as the head of the new railroad. Creel told listeners on a shareholders and media call that the merger is “not about cuts, line rationalizations … it’s about growing the network” to serve a growing market buoyed by the new U.S.-Canada-Mexico Trade Agreement. 

The two railroads share a rail yard in Kansas City. A connected single railroad could be expected to offer more efficient service for grain and soy commodity bulk movements from Canada and the northern Midwest states deeper into Mexico. Both railroads have substantial intermodal container shipping operations. Although the merger will not bring about more direct new east to West Coast service, KCS does connect to the southern Mexico west coast port of Lazaro Cardenas and to U.S. ports on the Gulf of Mexico. The line can be expected to provide intermodal service from Mexico’s growing manufacturing centers to Chicago and the Upper Midwest. 

Go here for more detailed coverage in Freightwaves, and here for more coverage by Bloomberg News via Chicago Business. 

Shippers monitoring Montreal dockworkers stalemate
A long-brewing dispute between the dockworkers union at the Port of Montreal and the Maritime Employers Association took a turn for the worse Sunday.    

The union’s 1,125 dockworker members voted by an overwhelming 99.71 percent to reject the latest offer that the employers said was their “final offer.” The union has not yet voted to strike and plans to go back to mediators.    

Earlier recent news reports said some ocean container carriers had begun diverting container cargo to other eastern Canadian ports including Halifax and Saint John’s in anticipation that there might be a strike. 

Canadian Pacific and Canadian National railroads provide intermodal container service from U.S. Midwest and Upper Midwest states to Montreal port that runs around Chicago and across Michigan and does not require shippers to use two railroads, as they often do to reach East Coast U.S. ports. 

Go here for coverage in the Montreal Gazette. 

CNBC: Ocean carriers rejected $1.3 billion in U.S. ag exports
CNBC released more follow-up research last week on ag export container rejection by ocean container carriers during the second half of last year. The business news network found the carriers rejected or avoided handling a potential $1.3 billion in U.S. ag exports from July through December. 

“Carrier practices are not only inflicting significant financial damage to U.S. exporters and importers, but are extremely short-sighted,” Peter Friedmann, executive director of the Agriculture Transportation Coalition, told CNBC. “Those practices are causing U.S. exporters to lose foreign customers and setting the stage for the ocean carriers themselves to lose significant business in the future.” 

SSGA members have found that containers became much less available for exporters at the end of October, November and December during that period, and for some carriers up through the first quarter of 2021. 

While the congestion at the ports of Los Angeles and Long Beach gets much of the attention for the current container shipping woes, the Northwest Seaport Alliance, comprised of the ports of Seattle and Tacoma, which serve many SSGA members, told CNBC it also suffered a large loss in exports. In 2019, the ports shipped 913,332 containers of full exports. In 2020, that number dropped to 790,620 containers. 

“Our exporters are suffering,” John Wolfe, CEO of The Northwest Seaport Alliance, told CNBC. “We have spoken with our terminal operators and carriers about this issue and there is more work to be done by all in order to address the extreme challenges faced by our export community.” 

Federal Maritime Commission chairman Louis Sola told CNBC, “I can say for a fact that some carriers have decreased their exports in return for empties (mainly the European lines)  while other have made a conscious effort to pick up the slack and increases their exports in 2020 (mostly the Asian lines),” said Sola. “I do find this most interesting and warrant that it requires further discussion.”   

Go here for more detailed coverage by CNBC. 

Compiled by Bruce Abbe, SSGA adviser for trade and transportation

Shipping News: Congress, media take notice of crisis

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The container shipping crisis continues to garner attention from government officials and the mainstream media alike. 

Last week, 24 U.S. senators, led by Amy Klobuchar (D-Minn.) and John Thune (R-S.D.) signed onto a letter to the Federal Maritime Commission (FMC), expressing bipartisan support for the FMC’s investigation into reports of unreasonable practices by ocean carriers that are posing challenges for ag exporters. 

On Tuesday, a similar letter from 111 members of the U.S. House of Representatives was delivered to the FMC. As well, a letter from senior Democrats and Republicans of the House Transportation Committee and the Coast Guard and Maritime Subcommittee was sent to FMC asking that immediate action take place “to ensure that ocean carriers are abiding by” the Shipping Act.   

Those actions came on the heels of a letter to President Joe Biden from SSGA and 70 other agriculture associations, urging intervention into the crisis. The letter was also sent to USDA Secretary Tom Vilsack, Transportation Secretary Pete Buttigieg, Council of Economic Advisors Chair Cecilia Rouse and FMC Commissioner Michael Khouri. 

SSGA’s announcement about the letter to the president with 70 other ag associations received coverage in Progressive Farmer/DTN, Red River Farm Network, FarmProgress and High Plains Journal, among others. 

Meanwhile, the New York Times picked up on the container crisis story over the weekend, illustrating how global disruptions of the container shipping system and shortage of containers and capacity are impacting supply chains in both directions – westbound and eastbound – in an article headlined ‘I’ve Never Seen Anything Like This’: Chaos Strikes Global Shipping. 

According to a Freightwaves story, the American Society of Civil Engineers gave U.S. infrastructure, which includes roads, highways, bridges, waterways, ports and rail system, an improved grade from four years ago, moving it up to a C- from a D+. The report card’s individual grades included a B- for ports (up from C+), D for roads (D), C for bridges (C+), B for rail (B) and D+ for inland waterways (D).

SSGA issues transportation advisory

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On Monday, the Specialty Soya and Grains Alliance issued to its members its second Global Markets Transportation Advisory in the last 11 months to provide an update about the current state of containerized soya and grain shipping and the impact the crisis is having on U.S. exporters, along with SSGA’s efforts and appeals for action and change.    

This advisory was written on behalf of SSGA’s Competitive Shipping Action Team as a resource for members to better understand the situation and to communicate to their overseas customers what is happening. We encouraged them to pass this message along to others, and you can do the same by downloading the advisory here. 

SSGA joins ag associations in plea to President Biden

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The Specialty Soya and Grains Alliance joined 70 other agriculture associations this week in an urgent plea to President Biden for intervention into the container shipping crisis that has severely injured food and other U.S. ag and forestry exports that our international customers are depending on. 

In the letter sent Wednesday, the group requested that provisions available to the Federal Maritime Commission (FMC) via the Shipping Act and other government tools “be immediately applied to stem the current ocean carrier practices that are so damaging to our agricultural products.” 

U.S. agricultural exporters’ access to international markets is being jeopardized by this unprecedented dysfunction and cost of ocean transportation services, which includes unreasonable and unjust practices such as the rejection of U.S. agricultural cargo by ocean carriers who are shipping empty containers back overseas to keep up with the high demand for U.S.-bound imported goods. 

“The only way to get out of this is for ocean carriers to return to previous levels of taking containerized exports out of the U.S. instead of such a high percentage of empty containers,” said Darwin Rader, SSGA’s secretary/treasurer and competitive shipping action team chair. “There’s a lot of frustration among U.S. exporters. We have to keep pushing as hard as we can for carriers to treat U.S. exporters fairly to help restore the balance of trade.” 

In October, SSGA was one of the first national agricultural associations to shine a light on the disruption of the food supply chain and other critical problems facing containerized ag exports after members began to be informed that some ocean carriers were suspending containerized and other overseas ag shipments. 

Earlier this month, SSGA representatives had the opportunity to give testimony to the FMC, along with other national ag organizations. And last week, FMC announced it had issued an information demand to ocean carriers and marine terminal operators to answer questions about policies and practices that have contributed to this crisis. 

The letter to President Biden, organized by the Agriculture Transportation Coalition (AgTC), points out that ocean carriers are enjoying their most profitable period in decades, “charging unprecedented freight rates (and) imposing draconian fees on our exporters and importers,” while potentially irreversible damage is being done to the U.S. companies that ship containerized agricultural products. 

The letter was also sent to USDA Secretary Tom Vilsack, who was confirmed on Wednesday, along with Transportation Secretary Pete Buttigieg, Council of Economic Advisors Chair Cecilia Rouse and Federal Maritime Commissioner Michael Khouri. 

To read a copy of the letter, go here.. AgTC has an overview of the current export crisis here.