In Wenatchee, tens of thousands of boxes of apples that should be on their way to the Middle East and Asia are piling up instead in warehouses.
In Ellensburg, it’s a similar story for mountains of hay bales that would otherwise be on container ships bound for Japan and South Korea.
The problem isn’t a lack of demand: Foreign buyers are eager for farm goods from Washington and other states. But thanks to the strange effects of COVID-19 on global shipping, U.S. farm exports are barely moving.
In normal times, “We ship 10 to 15 containers of fruit every week into Taiwan,” says Dave Martin, export sales manager for Stemilt Growers in Wenatchee, one of Washington’s biggest tree-fruit exporters. “This week, we will not have a ship.”
The shortage of cargo space has backed up Stemilt’s huge packing operations and idled dozens of truckers who normally haul the 40-foot-long containers to the ports of Seattle and Tacoma. It has also prompted Stemilt’s foreign buyers to look to competitors in countries such as Chile, where the apple harvest is just starting. “Those sales are lost,” Martin says of the numerous foreign shipments Stemilt has forgone since November, when the shipping crisis became severe.
The cargo-space crunch is the latest symptom of a global trade system that was unbalanced even before the pandemic, but is now so lopsided that entire sectors are at a virtual standstill.
Since the start of the pandemic last spring, Americans have spent far less on services, such as dining out, and far more with Amazon and other online retailers. That in turn has sparked a surge in imports from Asia.
The wave of mainly Chinese goods has overwhelmed some West Coast ports, especially in Los Angeles, where ships often sit for days waiting to unload. And because some of those ships, once they unload in Los Angeles, go pick up cargo at other West Coast ports, bottlenecks in Southern California have meant major delays for exporters waiting to load their goods in Seattle and Tacoma.
“We are now experiencing unprecedented eastbound cargo volumes coming out of Asia to the U.S., and it’s creating huge disruptions within the supply chain,” says John Wolfe, chief executive officer of the Northwest Seaport Alliance, which manages marine cargo operations in the ports of Seattle and Tacoma.
But the surge in Asian imports has had another effect on Northwest farmers. Because U.S. demand for Asian products is so high, shipping companies can now make far more money sending empty containers back to China as soon as possible, rather than take the time to refill them with American farm products.
It’s simple economics: Because a container of Chinese electronics, apparel and other exports is generally worth more than one filled with American farm products, shippers can charge more per eastbound container load, says Peter Friedmann with the Agriculture Transportation Coalition in Washington, D.C. For that reason, it’s more profitable for carriers to speed that container back to Asia for another high-value load than it is to wait for several days while a U.S. exporter fills the container with hay or apples or some other low-value product. Pound for pound, the value of American apples or potatoes or “is a mere fraction of the value of a container load of, say, Adidas running shoes,” Friedmann says.
That imbalance has meant more empty cargo containers leaving the ports of Seattle and Tacoma: In January 2020, just 37% of the containers exported from Seattle and Tacoma were empty, according to NW Seaport Alliance figures. This January, just over half went back empty. (Due to the greater weight of American exports, outbound ships always carry some empty containers.)
In fact, eastbound cargo is now so much more profitable — around $6,000 per container on average, versus $3,500 or so for westbound containers — that some cargo ships that unload their Asian goods in Southern California now skip scheduled calls at Seattle or Tacoma and head straight back to Asia.
That has meant fewer vessels calling in Seattle and Tacoma during the pandemic: Vessel calls in January 2021 were down nearly 20%, to 125, from a year earlier, according to alliance figures. “The shipping lines are in a rush to get their vessels and [container] equipment back to Asia to capitalize on those high-value cargo shipments out of Asia to the U.S.,” says Wolfe.
For exporters in Washington and elsewhere in the U.S., that east-west imbalance has created massive ripples up and down the exporters’ supply chain.
Ships are routinely delayed or canceled outright, often with little time for exporters to make alternative arrangements.
Before the pandemic, truckers could pick up an newly emptied container at the port in a few hours and drive it back to Eastern Washington to fill with produce, says Bryan Gonzalez, with Washington agricultural exporting firm FC Bloxom & Co. These days, Gonzalez says, drivers can wait all day for a container — and in a few cases, they were told to “come back to tomorrow.”
Those delays create additional and expensive backlogs at processing plants and packing sheds. And things are about to get worse as exporters who haven’t sold all of last year’s crop now brace for this year’s harvest.
In a few months, for example, hay farmers in the Pacific Northwest will start cutting the first crops of 2021, “and we’ve still got a lot of last year’s crop that needs to be moving,” says Ellensburg hay exporter Mark Anderson. His,company, Anderson Hay, normally sells 90% of its product to foreign buyers, but now struggles to find cargo space.
“It’s become, really, a complete supply chain meltdown on the Pacific Ocean,” Anderson says, who worries that some customers may switch to Australian hay.
Trade economists and policymakers expect the capacity shortages to fade as the pandemic ends and normal consumer patterns return. But many exporters fear that by then, they may have permanently lost some market share.
“My biggest worry is that suddenly what seemed like a blip in exports and a temporary problem becomes, well, now China is going elsewhere for their apples and their cherries and their hay,” says Rep. Kim Schrier, D-Sammamish.
Schrier knows farmers and exporters have little leverage in a shipping business that is now dominated by just a handful of massive, foreign-owned firms, whom exporters can’t afford to offend. “Their hands are tied,” she says.
Instead, she wants the federal government to pressure shipping companies to make more room for American exports on westbound ships by minimizing the empties they take back to Asia.
Schrier says that the Federal Maritime Commission is already exploring whether shipping companies’ practices violate U.S. shipping law — and thinks the threat of federal action or a congressional inquiry could induce shippers to “think twice” and stay in U.S. ports long enough to load more full cargo containers. Two of the ports’ biggest carriers — MSC and Maersk — did not respond to requests for comment.
“Sometimes, just pushing into investigating an issue is enough to make things happen,” Schrier says. “But if not, we are prepared to work … with the federal Maritime Commission to make sure we have fair agreements” for shipping.