Ports are back in business
February 26, 2015
What goes well with certain cuts of beef? Port. And in this case that doesn't mean wine.
After months of turmoil – shipment of many products, including beef from West Coast ports had come nearly to a standstill around Christmas time – sea shipments are returning to normal this week.
A tentative five year contract between dockworkers union and a group of shippers, has, at least temporarily, re-established trans-Pacific shipments at near normal levels for the first time in months. The backlog of unperishable items is a top priority, news reports say.
In 2014, West Coast ports accounted for 38.5 percent of beef and veal export volume, said Stephen Sothmann, President of the U.S. Hide, Skin and Leather Association.
But some beef exporters might be looking for alternate methods of shipment from now on, said Chandler Keys, meat industry consultant and lobbyist and spokesman for the world's largest beef producing company, JBS.
Imported lean beef from Australia, New Zealand and other countries, destined for U.S. packing plants to be turned into ground beef, waited, frozen, on ships. With the system back in full swing, the waiting beef should be reaching its destination soon. Keys said some imported product was re-routed to East Coast ports like Charleston or Philadelphia, then trucked across the country.
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Ports in Canada, Mexico and the gulf all enjoyed more business due to the labor dispute, and could become permanent solutions to the union control on the West Coast.
"The mother of all creativity is necessity, so I think the industry will be looking for other opportunities." In order to tap in to what he called "the Asian miracle," the government needs to "pay more attention to this," Keys said.
"You've got to be able to have the infrastructure and willing partners to make it work, you can't have this labor dispute often."
Keys said some meat and by-products that would have been bound for Asian markets were re-absorbed by the U.S. market.
Cattle feeder and independent processor Mike Callicrate of Ranch Foods Direct, Colorado Springs, Colorado, said he did not notice extra beef on the national scene. "But it's important to note there is no market anymore. Whatever these companies want the market to be, that's what it is."
Fresh (unfrozen) meat is sold for a premium but companies were forced to freeze some product to prevent spoilage, Keys said.
Some product was shipped out using alternate methods. "A lot got taken to east coast ports or taken to the gulf ports. You lose a lot of money when you do that." Other product was shipped by air, increasing transportation costs by ten times the accepted 9 to ten cents per pound using traditional West Coast sea shipment, Keys said.
Sothmann added that air-freighting meat was done purely to maintain good relations and contracts and did not leave a profit margin for the exporting companies.
Sothmann said that adding more storage for beef is not in the works because exporters have developed markets for fresh product. Storing and freezing meat would be a step back in time – and profits.
"From an industry standpoint, I think it is inevitable that companies are going to look at adding additional options, especially for fresh product, to avoid the situation in the future," Sothmann said. "This will include rerouting product to Canada and Mexico ports, or through the Panama canal once it is upgraded to handle larger ships. There are only so many options though. Air lifting product, even for high value cuts, isn't really a long-term viable option because of the extremely high prices which add $1 per pound of product. This is really only an emergency measure used to meet customer needs in a pinch."
Short ribs, skirt meat, offal and hides are some of the items shipped from the U.S. to China and Vietnam, according to Keys. Percentagewise, a very small amount of U.S. beef goes to European countries, and even then it generally leaves from the eastern side of the U.S.
Global competitors like Australia and New Zealand could fill the Asian demand for beef, Keys said.
And in some cases those countries along with Brazil and others did capitalize on the opportunity to fill the need, Sothmann said.
The ripple effect of undelivered beef product is that Asian traders' buying capital is tied up in the stalled product, lowering their purchasing power for other items, he added.
The West Coast ports, responsible for 43.5 percent of U.S. trade, have been operating at reduced capacity since late October as dockworkers slowed cargo and employers cut shifts.
News reports said unshipped citrus spoiled on docks and, for ten times more expense, cars were transported via air rather than boat.
Industry reports show that 29 percent less product was handled in January 2015 as compared to one year ago.
Disagreements about labor arbitration procedures, ownership of chassis maintenance – the trucks used to transport containers around the docks – automation, pay, healthcare expenses, contributed to the labor dispute and port closure, Sothmann said.
The industry is looking ahead with hopes of avoiding a repeat of the shut-down in 2017 and 2019 when the new contracts will expire.
But for now exporters and their trading partners are likely celebrating. Maybe even with a glass of wine.