NCC Co-Signed Letter to Congress Regarding West Coast Ports Shutdown

NCC co-signed a letter with other ag and agribusiness organizations to Congress conveying concerns about the prolonged shutdown of the West Coast ports.

Published: February 27, 2002
Updated: October 8, 2002

VIA FACSIMILE (Sent to the Full House and Senate)

«Fax»

October 8, 1002

On behalf of the U.S. food and agriculture industry, we are writing to express our serious concern about the damaging impact of the continuing shutdown of West Coast ports on U.S. exports of food and fiber. The impact is growing daily and threatens to jeopardize the livelihood of American farmers and ranchers who rely on exports for a major source of their income. Many U.S. producers are experiencing financial distress, and loss of export sales from West Coast ports will inflict severe economic harm on an already weak farm economy.

American agriculture has worked hard to build foreign markets for their production and does not want to lose our exports markets. Harvest is in full swing, processing plants are operating and grain is moving through its distribution channels. Perishable farm goods, such as fruits and vegetables, and other exports, such as grains and livestock, are ready for export. As a result of the continuing West Coast port shutdown, our trading partners are already looking to foreign competitors to provide a reliable supply of high quality agricultural products. Once lost, these export customers will be hard to recapture.

Farm exports from the West Coast are sold to Asia, South and Central America, the Caribbean and elsewhere. The Pacific Rim is the top market for U.S. farm exports, accounting for about a third of our shipments abroad. Five of our top 10 customers, countries such as Japan, Korea, Taiwan, are in Asia.

If agricultural exports from the West Coast cannot resume as soon as possible, agricultural commodities and products meant for export must be absorbed into our domestic market, having a dramatic negative impact on U.S. farm prices. We have attached some information about the current effects on agriculture. We strongly urge to work for the resumption of shipping while encouraging labor and management to negotiate in earnest toward an acceptable solution for both sides.

Sincerely,

AgriBank, FCB

Agribusiness Association of Indiana

Agricultural Retailers Association

Agricultural Council of California

American Cotton Shippers Association

American Farm Bureau Federation

American Feed Industry Association

American Food Groups

American Frozen Food Institute

American Meat Institute

American Potato Trade Alliance

American Seed Trade Association

American Soybean Association

Archer Daniels Midland

Biotechnology Industry Organization

Blue Diamond Growers

California Association of Wheat Growers

California Wheat Commission

Central Soya Company, Inc.

CHS Cooperatives

CoBank

Colorado Grain and Feed

Corn Refiners Association

CropLife America

Diamond of California

Farmland Industries, Inc.

Food Distributors International

Grain and Feed Association of Ilinois

Grocery Manufacturers of America

Kansas Agribusiness Retailers Association

Kansas Cooperative Council

Kansas Grain & Feed Association

Land O’ Lakes

Louis Dreyfus Corporation

MBG Marketing

Michigan Agri-Business

Minnesota Association of Wheat Growers

National Association of Wheat Growers

National Barley Growers Association

National Cattlemen’s Beef Association

National Chicken Council

National Corn Growers Association

National Cotton Council

National Council of Farmer Cooperatives

National Grain Trade Council

National Grange

National Grape Cooperative Association

National Meat Canners Association

National Oilseed Processors Association

National Milk Producers Federation

National Pork Producers Council

National Potato Council

National Renderers Association

National Sunflower Association

National Turkey Federation

Nebraska Co-operative Council

Nebraska Grain & Feed Association

Nestle Purina PetCare Co.

Nestle USA

North American Export Grain Association

North American Millers’ Association

North Dakota Grain Dealers Association

Northwest Horticultural Council

Ohio Agribusiness Association

Pacific Grain Export Association

Pacific Northwest Grain & Feed Association

Pro-Fac Cooperative, Inc.

Rice Millers’ Association

Sunkist Growers

Tennessee Farmers Cooperatives

Texas Grain & Feed Association

The Fertilizer Institute

Transportation, Elevator and Grain Merchants Associations

Tyson Foods, Inc.

United Egg Association

United Egg Producers

United Fresh Fruit and Vegetable

USA Dry Bean And Lentil Council

USA Rice Federation

U.S. Apple Association

U.S. Canola Association

U.S. Dairy Export Council

U.S. Rice Producers Association

U.S. Wheat Associates

WAL-MART Stores

Welch’s

Western Pistachio Association

Wheat Export Trade Education Committee

ATTACHMENT

 

FACT SHEET

Effects On Agriculture From The Closure Of The West Coast Ports

America’s food and agriculture industry is extremely concerned about the protracted negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA).

Along the West Coast, 268 ships are either idle at the docks or have dropped anchor, waiting to unload cargo. Businesses across the country were hit by the closings, which last year handled more than $320 billion worth of imports and exports.

The food and agriculture industry is very concerned about not only the short-term impact of the shutdown, but the long term impact on our reputation as a reliable supplier. The ports of Los Angeles, Long Beach and Oakland handle nearly 50 percent of all agricultural exports shipped by container from the United States.

The closure of the 29 West Coast ports is having a severe impact on the agricultural economy -- an effect that is growing exponentially with each passing day. We have attempted to help quantify that impact via the following examples. This data portray the effects of the closures from Sunday, September 27 through Monday, October 7, 2002. Because many individual companies are concerned about their stock value, we have largely omitted company names.

From a beef processor:

At current prices of $64/hundredweight, cattle feeders are entering the 15th straight month of substantial losses. At $64/hundredweight, feeder producers are suffering losses of $40-50 per head. Slowing the kill because of loss of overseas demand will only compound the cattle feeder problem and extend losses further.

The price for live cattle is down $2.00/hundredweight from last week’s level. This is attributable to the uncertainty surrounding the West Coast situation. Last Saturday’s kill was 18,000 head -- which is down from 38,000 head one week earlier. Packers do not want to put more boxes in the market even with cheaper raw material! We've ceased production of chilled product for export to Japan and have taken steps to cut prices on frozen product in order to clear out space in freezers for product that must be frozen. Our biggest future concern remains freezer storage capacity. At some point this week, our storage capacity will be full and we will be forced to either render product that typically goes to the freezer or cut back production.

From a pork processor:

One of our plants killed 40,000 head last Saturday compared to 113,000 the previous Saturday. We expect the " real pain" to hit this week as packers switch from exports to the domestic market.

The other major concern is freezer space. With container availability already stretched and this week's inventory in shipping-limbo, freezers could conceivably fill up this week and packers will begin to render offals and then cuts, thus driving operating hours down. We are also very concerned about the aftermath of the port closures. Our logistical personnel tell us that for every day the ports are closed, seven days will be required to clean out the backlog of containers, railroad cars and shipping vessels. The timing is crucial as the pork processors are two to three weeks away from our seasonal peak run periods.

From a major feed manufacturer in the Pacific Northwest:

We have a real problem brewing with this situation. We have a number of rail destinations in the states of Washington and Oregon, and rail congestion is starting to build. We already have had some reports of service problems. There is developing a very real threat of feed ingredient pipeline disruptions, which could result in feedstuff outages and livestock being out of feed. This will only get worse as time passes.

From a South Dakota shipper of wheat:

The spring wheat basis (the difference between local cash and futures price) is easily ten cents weaker since the work stoppage started. While we had no direct sales to the Pacific Northwest, the price drop has been market wide. The biggest unknown and potential risk for us is how long the strike will last. If harvest-time weather becomes warmer and drier, then we could see pressure on our ability to handle incoming grain. We have two loaded multi-car trains of grain waiting on the port to reopen. If we miss moving this grain and have to pile the grain on the ground, the handling cost alone is another ten cents per bushel plus the risk of quality deterioration.

From Sunkist (a large citrus producer and exporter):

Last week’s delays cost us about $2.1 million in sales. A similar loss is expected this week, as we export about 35% of our fresh citrus volume. All of our exports move through West Coast ports. We have about 150,000 cartons of export citrus stranded. Our charter ship sails weekly to Japan. This week it has been diverted due to the disruption and will not be available to handle our citrus. Containers bound for other Pacific Rim markets (China, Taiwan, Hong Kong, Korea, etc.) are stranded. It is important to point out that this is currently a low period for shipping citrus. Beginning in mid-November, our exports increase significantly to approximately $9 million per week.

Foreign competitors will move aggressively to fill the void left by our absence from these export markets. Additionally, the cargo originally bound for export will eventually have to move into the domestic market and its presence will depress prices.

From a grain shipper in the Pacific Northwest:

The West Coast situation has primarily caused logistical delays to our business, however we are beginning to feel the financial impact as well. Delayed shipments to the ports total 500,000 bushels for our company alone. As we purchase grain from our customers for prompt payment, we must sell it for deferred months, affecting our cash flow. Because of the lack of deferred business at the ports, due to unpredictability of the work stoppage, we have exceeded our credit line by several million dollars. In the event of an extended lockout, it would be difficult to recover logistically. If the work stoppage is continued for several more weeks, some local cooperatives and private buyers may run into credit limits that make it impossible to pay farmers for cash grain deliveries.

From the cotton industry:

On average, 70,000 bales of U.S. cotton move through ports located on the West Coast. Based on current market prices, those bales represent a commercial value of $18.5 million. Each week of delayed shipment represents additional costs of $130,000 in interest and storage charges, which must be borne by U.S. shippers. With each passing day, the work stoppage hampers the ability to move U.S. cotton into the world market. There are ample supplies of foreign growths that are making their way onto the world market. In the stoppage persists, buyers will increasingly look to foreign suppliers and away from the U.S. in order to meet their demand.

From Tanimura & Antle Inc. (a vegetable grower):

Last week, we shipped 20 truckloads of broccoli to the Port of Oakland to be exported to Japan and Taiwan. We are very concerned the broccoli, worth $320,000, will spoil if the ports are not opened soon. We normally export half of our produce, and we have a lot of acres of broccoli and celery still to harvest. We don’t know what to do with all that fast-ripening produce.

From a flower grower:

We are waiting for overdue bulb shipments from Holland. This could lead to lost planting and lost markets a few months from now, especially for tulips and daffodils. In addition, we believe these bulbs are likely deteriorating since they are likely sprouting (after they are taken out of cold storage in Holland).

From Sierra Hills Packing (an apple exporter):

Some export orders have been cancelled. We sell anywhere from 33 to 60 percent of our Fuji apples to Taiwan. The shutdown couldn’t have come at a worse time for California Fuji apples. We send them to market earlier than other areas, but the port shutdown will cost us our "headstart".

From Minturn Nut Company:

Seven cargo containers full of almonds are sitting in a parking lot. They should have been shipped seven days ago.

From a Texas-based rice mill and exporter:

We have already had to lay-off 60 employees. Our current orders call for movement of 30 containers per day (600 metric tons of rice) and 20 trucks containing bagged rice per day to West Coast ports five days per week. The firm's mill in California will close tomorrow (October 8) and will not run again until the ports reopen. Initially, an additional 6 rice mill employees will be laid off, and if the port situation is not resolved soon, an additional 10 people will be laid off.

Longer term, shipments to Korea and Taiwan will be delayed and depending on resolution of the problem, there will be problems shipping to Japan as previous contracts must be completed. Korea and Japan have consistently fought importing U.S. rice. A prolonged shutdown gives these countries a very compelling trade policy reason to back away from U.S. rice.

From a grape producer:

We are running out of storage. The price is dropping sharply for some grape varieties.

From a meat processor:

We have nearly $20 million in beef and pork stuck at the West Coast docks, in nearby cold storage, or already fully or partially loaded in ships that cannot leave the ports. We plan to halt export production this week. If the product already at the port doesn’t move in the next few days, we will not likely be able to ship it at all due to its perishable nature. There is also a question about whether we will be able to retrieve product at the terminals so it can be put into the domestic market for re-distribution.

From an apple exporter:

50 containers of California apples are stranded at the ports and about 60,000 boxes of California apples are sold and in storage in California shipper’s coolers without containers or the ability to export this product. Since the coolers are filled with product that is sold but not shipped, workers are being laid off (pickers, sorters, packers, sales agents, truckers) because there is no where to put additional product. The ripple effect is tremendous and we are losing sales that quite possibly will never be regained.

From J. Marchini and Son (a vegetable producer):

We have laid off about 60 workers because of the port closures. The company exports about 300,000 pounds of radicchio per week to Taiwan and Japan. That costs us $20,000 per day.

From Pandol Brothers (a grape producer):

We have laid off farmworkers and slowed harvest. Pandol has 200 tons of table grapes stuck in port and another 600 tons in warehouses.

From a rice miller and exporter:

We expect loss of a new business in Scandinavia for Calrose rice, a variety specific to California. The volume is small, less than 1000 tons over four months, but this represents a new market and business taken away from European Union suppliers.

From Paramount Export Company:

We estimate that $7 million in grapes, pears and other producer – in about 350 refrigerated containers – are stranded and inaccessible at the docks. If the ports reopen soon, that aging produce may be sent quickly to the domestic market and sold at a fraction of its normal value. Unless the ports reopen soon, the produce will be good for nothing. We are also concerned that if Asian grocers cannot stock American produce for several weeks, they may turn to growers in Europe or elsewhere, perhaps causing a long-term market loss for American agriculture.

The North American Export Grain Association (NAEGA):

NAEGA has estimated costs associated with the current inability to load grains and oilseeds at impacted member owned facilities on the West Coast. After reviewing the vessel line up, delays in rail and barge shipments, costs of elevator labor and future overtime costs to mitigate delays, we estimate a direct costs to the grain export industry of no less than $4 million to date.   

If we were to measure the impact more broadly to include those entities supplying or providing service to the grain and oilseed exporters we represent, the costs incurred in these few days would exceed $ 6 million.

We also are estimating at least $0.5 million of costs direct to the grain export industry for each additional day of lockout for the next few days.  By next week we would estimate this number to be in the range of $1 to $2 million per day as more ships, rail, barges etc., continue to accumulate.

Perhaps even more troublesome is our estimate of cost due to lost market opportunity. In just a few days, we think the US market may have lost over $120 million in merchandising opportunity as we believe we have already experienced a loss in market value of $.20 per bushel times 600 million bushels. This estimate, while difficult to assess and perhaps small in comparison to the entire market for the wheat, corn and soybeans is real and mostly for the account of producers of wheat, corn and oilseeds in areas tributary to Pacific Northwest Export points.

Further, our ability to recover any of these losses with new sales opportunity is significantly reduced. At those facilities subject to this dispute, we can not enter into new contracts with exact specifications for delivery time. Everyday the problem goes on, our ability to mitigate loses is reduced more.

Of course most of these costs are tied to the exports of US wheat that are very much dependent upon the grain export capacity in Oregon and Washington. However, they also include costs and market opportunity losses for bulk corn and soybeans.

Many of our top markets--Japan, South Korea, the Philippines, Taiwan, Indonesia, Hong Kong and many of our International Food Aid recipients--are served by the facilities that are shut down by this action. All of these markets have considerable food security concerns. In order for US agriculture to maintain our successful relationship with them and participate in their future economic growth, they need to have confidence that the US is a reliable as well as competitive source of supply.

West Coast data for cotton show annual shipments at 3.62 million bales. This is 70,000 bales a week and that number of bales at today's value is $18.7 million. 70,000 bales held for one additional week cost the shipper $1.87 per bale in extra interest and storage. That is $131,250 in loss to cotton shippers compounded each week of the delay.

US exports must also deal with a devalued dollar that depresses prices for US products in overseas markets. Now US shippers face losses (storage, interest and even cancelled sales) from products not moving at already depressed prices.

From Western Growers Association (an ag trade association representing growers, packers and shippers of fresh fruits, vegetables, and nuts):

Our members grow, pack and ship 90 percent of the fresh vegetables and 70 percent of the fresh fruits grown in California and Arizona. Perishable commodities make up 30 percent of the top refrigerated commodities being shipped from the ports of Los Angeles, Long Beach, and Oakland. Fruits, vegetables and nuts account for more than 130,000 TEUs on an annual basis. This equates to over 1,000 forty –foot containers of produce moving through California ports on a weekly basis. Perishable commodities cannot withstand any significant delay and unless the lockout is resolved within the next few days, growers will be forced to curtail harvesting a significant portion of their crop. For vegetables, this could be disastrous, with limited cooling capacity and crops subject to specific harvest windows, losses in the fields will mount very quickly.

From an exporter of soy products:

The port closures impact export of our value-added soybean products, such as soy proteins and soy lecithin. We have about $ 1 million of product stranded at the port and in the rail system trying to get to port. We will continue to produce at normal rates this week, pushing shipments into the warehouses of trucking companies who will ultimately deliver the products to railroads for transcontinental shipment to the western ports. By this time next week, the trucking companies will be choked, and some of our plants will likely need to cease production two days per week. Our primary business concern is that if our food manufacturing customers, in Asia, cannot be supplied, they will reformulate their products to eliminate our soy proteins and lecithins. This is worse than a competitor supplying, because now they are not even interested in that product for years. With Chinese New Year coming, food manufacturers are gearing up for the same type peak US food companies experience around Christmas. This increases our customer’s vulnerability to late shipments, during their peak time, and thus their haste in replacing our product if contracts are not met in a timely manner. We have new Southeast Asian business that is particularly harmed. Not reliably supplying a customer at the beginning of a brand new contract means that business is lost for good. Reputation is far too important in Asia for this to be overlooked.

From the beef Industry:

The labor dispute shut down at all west coast docks was a major contributing factor to lower prices last week (week of September 30, 2002.) During 2001, 55 percent of the tonnage and 63 percent of the value of beef and beef variety meat exports totaling more than $2.4 billion were sold in Asian markets.

Fed cattle prices moved lower last week with the weekly average price for market steers at $63.93/cwt on a live weight basis—approximately $2/cwt lower than the average price for the prior week. A $2/cwt decrease in price for market cattle directly reduces incomes of cattlemen by $17.5 million per week and will be passed back as lower prices for calves and feeder cattle.

The number of cattle processed on Saturday, October 5, 2002, more than a week after the labor lockout began was almost half the prior week’s production. One small pork processing facility reduced two-thirds of its production last week and laid off its entire labor force last Thursday, October 3rd. Other processors report having at least 20 million pounds of meat products stranded at west coast ports awaiting shipment. Many processors have stopped fabricating product to Asian specifications and will divert additional product to the domestic market or to other export markets.

The timing of this labor stoppage is critical for U.S. beef producers. Beef demand in Japan declined as much as 60 percent after cases of BSE were identified in the Japanese herd during 2001. The U.S. government and industry jointly invested more than $9 million to restore confidence about the safety of U.S. beef among Japanese consumers. Exports of U.S. beef recently recovered to 90 percent of historical levels, only to be disrupted by this labor action.

Over the last 25 years, the United States has worked established a reputation as a reliable supplier to international markets but this reputation is now in jeopardy. Chilled U.S. beef and pork now make up more than half of U.S. exports to Asia, and our customers in Japan — our No. 1 export market — South Korea, China and other Pacific countries will be forced to look for alternative chilled supplies very quickly since the dispute has cut the U.S. industry off from its best export markets. The Australian beef industry has already stated its intent to increase sales to Asian markets to replace U.S. product.

In 2001, the United States exported 1,026,695 metric tons of beef and pork — 1,140 containers per week — valued at more than $3.3 billion to Japan, South Korea, China, Hong Kong and the Association of South-East Asian Nations (ASEAN). The dispute will therefore cost the American industry as much as $9 million per day and will affect cattle and hog prices all the way down the chain to the American producer.

Heavy cattle weights continue with the average steer carcass weight for the week ending on September 14 a record 841 pounds—20 pounds heavier than at the same time last year. Thus far, 2002 steer carcass weights have consistently averaged 20-30 pounds heavier than at the same time last year. Year-to-date cattle slaughter has increased only 0.6 percent, but because of heavier weights, year-to-date beef production has increased 3.7 percent.

Last year, the U.S. exported 12 percent of our beef production. If this trade dispute is not settled soon, a lot of beef and other meats that were planned for export will get dumped back on the U.S. market, contributing to additional price pressure.