Headline on repeat: The U.S. is (still) facing a bit of a container conundrum.
Too many imports, not enough exports, and as a result, the country is in a real container shortage.
How we got here: Early in the pandemic, when demand for goods dropped, shipping lines canceled many of their routes between Asia and the U.S. When demand picked up in summer 2020, thousands of containers were trapped in the U.S., while exporters in China waited for them.
But that was just the beginning: It’s hard to forget the ship that blocked the Suez Canal in March, for example, that delayed the transport of 20,000 shipping containers. May brought the shutdown of a port in Southern China that left 350,000 empty containers stranded in U.S. and European ports.
Plus this: Railyards and truck terminals are backed up, so boxes take longer to make it to the coasts. And there’s a shortage of labor to handle the boxes.
The cluster of issues nationwide has impaired food, ag, and forestry exports the rest of the world needs: “We’ve had customers in Asia that have had to stop their operations waiting for supply,” Bob Sinner, a specialty soybean producer in North Dakota, said.
And you may remember… More than 70 agricultural associations wrote a joint letter to President Biden on February 24, 2021, with a critical plea for assistance.
In the near term, the outlook isn’t exactly sunny: Union Pacific and BNSF railroads announced they were temporarily suspending intermodal train service between their respective container railyards in Chicago and the West Coast.
Supply chain challenges like this one are likely to last through 2021.
The pandemic might be winding down, but its effects on the ag supply chain are still ramping up.
Herbicides and fungicides are the latest to face supply constraints due to pandemic production delays, shipping bottlenecks, and increased demand.
While the popular glyphosate and glufosinate herbicides are getting the most attention, several fungicides are facing shortages as well.
The backstory: Abrupt, emergency shutdowns in China at the beginning of the pandemic kicked off supply issues. Glufosinate and glyphosate, among other chemistries, are produced in China or have ingredient sources overseas.
And China is looking out for #1…China. This means American farmers are put last in line for the much-needed inputs. Not a great scenario with expanding acres and sky-high commodity prices fueling demand.
In some instances in the U.S., where producers didn’t prepay, RaboResearch notes that prices are up 50%.
Crunch time: In response to the glufosinate shortage, BASF noted they were even beginning to expedite shipping using air freight rather than traditional ocean-bound containers.
Where this goes: Some farmers may have to use unfamiliar alternatives to their preferred chemistry, including generics. And farmers may have to phone-a-friend, or several, to find supply before this all gets resolved. Experts are projecting issues to be sorted out by Q2 of 2022.
Farm equipment makers have whiplash trying to scale production back up from pandemic cuts and supply chain disruptions to meet seasonably high sales spikes.
Rewind: This time last year, the havoc COVID-19 would wreak on the global economy and supply chains everywhere was just beginning.
Were you thinking about purchasing farm equipment amidst all that chaos? Many equipment makers didn’t think so, leading to production slowdowns.
However, epic commodity prices and better financial outlooks have farmers wanting to soup up their aging fleets with improved technology.
By the numbers:
- Tractor sales shot up 81% in March compared to the same time last year
- More than 62,000 tractors from all categories have sold in 2021, a 52% increase
- Combine sales increased 17% in the first three months of 2021
So what exactly is the holdup?
Farm equipment companies are at full throttle to keep up with demand but are cinched by the tightest supply in North America in 18 years.
AGCO, one of the largest farm machinery makers, has their procurement team pulling a Dave Ramsey to get their 30-week emergency supply of semiconductor chips, steel and plastics stocked. All to keep tractors and other heavy equipment rolling off the lot.
Their version of beans and rice. Equipment makers are moving production away from some U.S. locations due to headcount restrictions and shipping supplies to plants that are normally sourced locally (ex: sending tires to Brazil because of their rubber shortage).
In a nutshell, COVID-19 and export issues are putting a lot of pressure on the nut industry. Almonds and pistachios and walnuts, oh my, farmers in the nut industry are worried.
What’s COVID doing now? Some operations simply had fewer workers because of outbreaks while others had to shut down at the busiest time of the year, resulting in a loss of crop and revenue.
And it’s not just the pandemic. Exports also matter. With the retaliatory tariffs from China in 2018 and 2019, the nut industry was hit hard. One grower said China isn’t importing at the same levels as previous years.
Add in a top-notch harvest, and one grower summed it up by saying, “Record crops and poor economic conditions in importing countries are depressing prices.”
The big concern: 94 percent of nut growers are worried about where prices are headed.
The writing’s on the walnut. California ranks first in the production of almonds, walnuts, and pistachios in the U.S. Plus, California almond exports make up the majority of the world’s supply. All in, the California nut industry could lose between $486 million to $728 million.
Last week, the USDA peeled back its report on the latest forecast for the 2020-2021 Florida citrus crop. And well…it’s worse than they thought.
The January outlook dropped by 2 million boxes from last month’s forecast, resulting in a projected 20% decrease from the 2019-2020 growing season.
By the numbers:
- 90 pounds, the industry standard for a “box” of oranges
- 67.3 million boxes, the final yield from the ‘19-’20 season
- 54 million boxes, the projected crop for this growing season
How we got here: Since it was first detected in 2005, citrus greening disease has caused a +75% decline in Florida’s production of oranges. The disease results in bitter fruit, and eventually…a dead tree. Plant breeders are working around the world and around the clock to develop resistant varieties of orange trees.
Citrus processors are also feeling the squeeze. Most of the Florida orange crop goes to filling your orange juice jugs. And although the pandemic has resulted in a slight uptick in OJ consumption, a long term downtrend paired with greening disease uncertainty has stressed the capital-intensive industry.
Glass half full: Even with the projected yield decline, the Florida Department of Citrus is staying positive: “Grapefruit production is up, growers continue to make great strides against citrus greening, and consumers are more focused on health and wellness than ever before.”