(Feb. 13, 1:25 p.m.) TULARE, Calif. — The 2009 outlook for U.S. exporters and importers who depend on ocean shipments is bleak, experts told a seminar at the World Ag Expo, Tulare, Calif.
“It’s going to be survival of the leanest,” said Margaret Staub, market manager for Orient Overseas Container Line, a subsidiary of Hong Kong-based Orient Overseas International Ltd.
The shipping industry posted solid numbers through July, she said, but the last five months of 2008 were a disaster.
“Compared to 2007, November was down 24%, and December is projected to finish off 28%,” Staub told attendees at the Feb. 10 seminar.
The growing strength of the U.S. dollar among the world’s currencies will further suffocate fresh produce exporting. Shipping companies have taken steps to cut their losses.
“The industry has more than 300 ships with a collective capacity of 350,000 20-foot equivalents, or TEUs, at anchor,” said Abbe Kantor, director of import-export corporate logistics for Safeway Inc., Pleasanton, Calif. “There’s just not enough cargo out there.”
The effects of the recession are being felt at California’s Port of Oakland, the nation’s fifth-largest port, said Ron Brown, the port’s manager of business development and marketing.
“Carrier companies are consolidating, and profitability is going to be a moving target this year,” he said.
The global slowdown will translate to volatile marketing conditions into the third quarter of 2009, Staub said. Rates are expected to continue to fall, she said, but at a slower pace than the decline of recent months.
What it means for the U.S. fresh produce industry is that grower-shippers will have difficulty exporting, while retailers and foodservice operators will see fewer imports, they said.
Hard times are not new to the shipping industry, Brown said.
“Individual segments of the industry have been hit in the past,” he said. “The difference this time is that all segments are being hit simultaneously.”
Clean trucks at California ports
As the shipping industry struggles, California’s Air Resources Board has put an additional burden on the state’s ports, Brown said. The ports were ordered to implement clean truck programs to reduce diesel particulate emissions. Trucks that load and unload at the ports must meet stricter new standards, which Brown said usually require truckers to purchase new $150,000 tractors.
Because most truckers are single-rig operators, he said, the ports have begun setting aside funds to provide financial assistance to the truckers. Those funds are coming from increased fees, he said. Some of those fees could be up to $70 per container, and that could drive business away.
“Safeway will abandon California ports when a $70-per-container fee is imposed,” Kantor said.
Safeway operates 1,774 stores across the U.S. and Canada, she said, and escalating fees will force the company to use ports in Mexico, Canada or elsewhere in the U.S.
Operators of those ports are already taking advantage of the California dilemma, Brown said. Mexican and Canadian ports are aggressively trying to attract U.S. business, he said.
Though the global shipping industry struggled through the final months of 2008, it was a fairly good year at the Port of Oakland for exporting agricultural products, Brown said. The reason is the port’s proximity to California’s major growing regions, he said.