Air, sea-air and rail freight demand is expected to rise significantly on Asia-Europe lanes as shippers try to avoid the chaos from the blocking of the Suez Canal by the Ever Given.
“Increased air freight demand is almost unavoidable,” said one European forwarder. “Even if the vessel was salvaged today there would be consequences and impact – air and sea-air will become more prevalent.”
But, he added: “Shippers will try to use rail to catch up time – but this is already oversubscribed.”
One Chinese forwarder explained: “Rail express has been overbooked so far on both eastbound and westbound. It’s very difficult to find space and severe delays happen quite often.”
So forwarders are expecting air – which traditionally thrives on chaos in supply chains – to take the brunt of the demand.
“If this goes on for another week, air freight, and fast-transit products for substitute and alternative products, components, raw materials, etc will be unavoidable, and, inevitably, the air freight market will go wild.
“If the big tub is not removed by this time next week, bedlam will be upon us,” said one. “Chaos, turmoil, challenges, mayhem, pandemonium and disruption are all words we will be using over the next two to three weeks, I suspect.”
Sea-air via Singapore is also expected to grow in response to the crisis. While rates have not recently been conducive for shippers, with sea and air on a similar level, forwarders are looking at developing a “better pricing” structure.
The forwarder said: “There will be growth in sea-air for sure. How much depends on the length of the closure, but the trauma afterwards will be significant in ports and there will be congestion. Three days’ closure will mean seven days to rectify.
“Watch the impact on European ports when the vessels start queuing, and how many berthing times will be missed? The impact is huge.”
The forwarder said it could be a “big opportunity” if the Suez canal was closed for a long period.
“From disaster and chaos comes opportunity in logistics – it’s where we deliver value. But customers will only start picking up on this from the middle of next week, I suspect.”
One source noted that the disruption began just before the start of Ramadan, “a real problem” as many Muslim countries begin to stock up with supplies.
Airlines however, were cautious over predicting greater demand. A spokesperson for Lufthansa Cargo said: “At the moment there are no side effects showing that freight will be shipped by air instead of sea. That might happen if the situation remains critical for the next weeks.”
A spokesperson for a Japanese airline also said it had yet to see any direct impact, but the number of inquiries was rising.
“If parts or materials supposed to be arriving in Europe are delayed, then production lines will be delayed. In that case, I would expect shippers to try to source material from elsewhere in the world, so we may see air cargo demand into Europe.”
Konstantin Vekshin, group commercial director for Volga-Dnepr Group, agreed the situation “may end up in some extra demand”, but he added: “We all know – air freight capacity is already fairly limited.”
Airlines are currently busy, transporting Covid-19 testing kits into Europe, as well as handling a booming e-commerce market; capacity is certainly an issue. Covid-related products flying into the UK have meant no more direct capacity into the country until 4 April, according to the Chinese forwarder, who added that “all rates to Heathrow have further increased”.
But charter brokers said they were expecting to see a rise in business. Steve Manser, director of Xpress-Logistix, said it had already started.
“Demand has increased even further from what we saw at this time last week. Rates are rising by the minute, and availability is disappearing; [this year] we’ve fixed several long-term programmes for customers through to the end of January in order that they have the required lift for their customers.”
Mike Hill, director at Air Partner, however, said it was too early to tell what the impact would be.
“It’s unclear how long it will take to remove the blockage. Sea freight, as you know, is suffering significant delays as a norm at the moment, so what’s a few more days?”
One UK forwarder said: “There will be lots of air freight, loads of the stuff.” But when asked if the grounding of the Ever Given had sent his office into chaos, he said: “No, it’s just another industry f*ck up sent to try us – or an attempt to keep the rates buoyant, unlike the Evergreen ship.”
Attempts to re-float Ever Given, rapidly renamed Ever Stuck by many in the industry, will continue over the weekend, but several experts have suggested the ship could clog the canal for some time.
Shipping lines have started to re-route vessels around the Cape of Good Hope, a journey which adds an extra week for ships coming directly from Asia, but two weeks for ships re-routing from the canal.
The Netherlands: Grape market is under pressure due to large supply in a short period of time. The large supply of grapes on the European market at the moment is making their sales difficult. “South Africa shipped large volumes of white seedless grapes quite late. Normally, late varieties such as the Regal and Sundance arrive in February, but this time they arrived in March. Also, South Africa has planted a lot of new varieties, such as the Sweet Globe and Autumn Crisp, which also arrive later,” says a Dutch importer. “Besides, India is also supplying large volumes, although cumulatively, those shipped to Europe are slightly smaller than last year’s. The key thing to note is that the supply will peak in a few weeks’ time, which will put additional pressure on the market. Therefore, we will all have to do our best this month and the next.”
“The prices of punnets (10×500 grams) are under pressure, especially those of seedless white grapes. Also, a lot of seedless blue grapes are arriving and their prices are also under pressure. The arrival of red seedless grapes has slowed down a bit, so their prices are recovering. Red Globe prices have been under considerable pressure, but that market seems to be recovering a bit,” says the importer. “Right now, it seems clear that supermarket programs are not going to stop, but there are quite a few difficulties selling in the open market. The wholesale markets are not really at a standstill, but because of the health crisis they no longer have the capacity to sell the volumes they used to.”
Australia: Shortage of pickers and difficult market conditions Australia is currently in the second half of the grape season, and labor shortages continue to hamper the industry. However, the Australian Table Grape Association, which brings the sector together, remains hopeful that growers will soon begin to feel the effects of the government measures implemented to counter the shortage. A second flight carrying seasonal workers from the Oceanic islands arrived in Tasmania this week.
It appears that several large growers have been unable to market some of their crops due to a shortage of pickers and the difficult market conditions. Although the borders will reopen in October, these events will have an impact on the coming seasons. In any case, the quality of Australian grapes remains high.
North America: Rains affect the price and supply For North America, the supply from Chile has become even more important, as export volumes have shifted significantly to other destinations. At the same time, the quality and supply of Chilean white grapes have suffered considerably due to the rainfall recorded at the beginning of the year. Red grapes have not been affected to the same extent. Current market conditions are resulting in considerable price differences between white and red grapes. “Due to their scarcity, white grapes are marketed at extremely high prices. Red grapes, on the other hand, are being sold at very low prices.”
The Peruvian volumes are declining sharply across the board, while South Africa is gaining ground, partly also because of the situation in Chile. Mexico is also in the market with some small volumes of Cotton Candy. Export volumes are expected to increase towards the end of April or early May.
Latin America: Mexican season starts early Chilean exporters are trying to get foreign retailers to organize promotional campaigns in order to deal with the oversupply of red grapes. In Mexico, the Jalisco growing region is now on the market. Thanks to the crops in this relatively new region, the Mexican season now starts 1 to 1.5 months earlier than it used to; however, the sales peak will be reached in mid-May, as usual.
Germany: South Africa dominates the market South African varieties – particularly the Crimson, Flame and Thompson Seedless, dominate the market, with the Ben Hannah, Prime Seedless, Barlinka and La Rochelle rounding out the wholesale supply. The Peruvian supply is quickly diminishing and will soon be gone from the market altogether. Meanwhile, the Thompson Seedless and Sugraone from India are gaining ground. The Chilean Flame Seedless and Sugraone are attracting eager buyers, especially because of their thick sizes. Prices are stable across the board, but clearly lower than around this time last year.
Italy: Still too early for Italian grapes Wholesale markets in northern Italy currently offer white Waltham/Cros and Prime grapes, black Dan Ben Hannah and Rosata from South Africa. Prices typically range between €2.10 and €3.10, depending on the variety. There are also black grapes and Red Globe from Peru, which cost between €2.10 and €2.60, depending on the variety. The Peruvian Red Globe has actually seen its price drop since mid-March (from €3.30 to €2.60). At the Rome wholesale market, the white Thompson from South Africa and Timpson from Peru are available at a price of €2.70, which is higher than two weeks ago. There is also Peruvian Red Globe at a price of €2.50.
It is still early for Italian grapes. The first batches of Victoria and Black Magic grapes from Sicily will be harvested in the last ten days of May. Thanks to the earliness of some areas, the seedless grapes from the Gulf of Gela play with the advantage of not having any competition in the northern hemisphere for 20 days. The Sicilian season is preceded only by that of Egypt, whose seedless grape campaign ends in late May or early June. Only later do the Apulian grapes arrive.
South Africa: Record harvests in different regions The grape season started late, but it has been catching up and the lower limit of the harvest estimate (67 million 4.5 kg boxes) has already been reached, with about three weeks of packing time left in the Berg and Hex River regions. “The rain two weeks ago in Hex River had a minimal impact,” said the grape growers association. “Partly because what’s left to be harvested is mainly Crimson.”
Several regions had record harvests. By the end of week 10, 32 million 4.5 kg cartons had been exported to the EU (more than last year), about 13 million to the UK, 3.5 million to Canada, 2.7 million to the Middle East and 2.8 million to Southeast Asia. Grape exports to the US have increased to fill the gap left by Chile.
There is a lot of pressure on the shipping routes to the Middle and the Far East and this is taking a toll on the transport of grapes for special markets (China, Vietnam, India, Israel). Also, the cold storage facilities are sometimes overloaded and have limited the amount of grapes that growers can deliver (a limit being imposed had never happened before).
After a year of high demand for oranges, fueled by the coronavirus, 2021 has started with slightly less positive market conditions. Prices are under pressure due to the high volumes on the market. Besides Spanish, there are also Turkish, Egyptian and Moroccan oranges on the market. The first oranges have been harvested in the Southern Hemisphere and larger volumes are expected in the coming months. In South Africa there have been some problems with the weather, but in general, normal volumes of good quality oranges are expected.
Netherlands: Difficult orange market; suppliers want more money than the market is willing to pay The sale of oranges is not easy at the moment. While last year everyone was buying citrus after the coronavirus arrived, that enthusiasm is now much more limited,” says an importer. “Also, we are really missing our sales to the catering industry, which normally absorbs a lot of oranges. Simply put, fewer oranges are consumed and squeezed than are available. Prices are therefore under pressure. Spanish growers want a lot more money than the market is willing to pay and Egypt seems to have infinite volumes. All in all, a very difficult market.”
Belgium: Extra volumes put pressure on the market The conditions in Belgium’s orange market have been positive throughout the season. December was a very busy month, but after the turn of the year, the demand has gone back to somewhat normal levels. “Sales went smoothly and the quality of the Spanish citrus has been very good,” says a Belgian trader. Besides the Spanish supply, there is currently also fruit from Turkey, Morocco and Egypt on the market. The arrival of these extra volumes is putting some pressure on the market, which is detrimental to prices.
Germany: Spain and Egypt dominate In Germany, the supply currently comes mainly from Spain and Egypt. Spain dominates in the table orange segment with the late varieties Lane Late, Navelate and Salustiana. Egypt is currently the main supplier of juicing oranges, especially Valencia Late. Turkey also has some presence here and there with the Washington Navel. For blood oranges, Italy is now alone on the market with the Moro.
The prices of blood oranges are significantly higher than at this same time last year. Egypt’s, however, have fallen below last year’s. For the time being, the Spanish season is having a satisfactory development. The demand has declined somewhat in the second half of the season, while thicker sizes are relatively scarce. In the long run, Egypt continues gaining ground, especially in the discount segment. At the same time, there is less and less room in the market for Turkish and Moroccan oranges. There is still room for new, innovative varieties, especially in the table orange segment. The Cara Cara and the Powell, among others, are in great demand in the German wholesale trade.
Italy: Orange crisis in Sicily and Ionian part of Italy The Sicilian orange season has never been more controversial than this year. Prices are changing very quickly. One day, they stand at 0.25 Euro; the next day, at between 0.30 and 0.50 Euro. As a result, proper planning isn’t possible. The growing season was severely affected by 55 days of winter rain, causing the production to drop by 30%. Despite this, the volumes on the market are very high and some even talk of oversupply. Given the lack of market balance, a lot of fruit is sold to the processing industry.
Not only Sicilian companies seem to be affected by the orange crisis, but also those in the Ionian part of Italy. “The demand for oranges has fallen dramatically in both the domestic and the European market and the prices of Navel oranges reach 0.15 € / kg at most. Albania may be the only country where Italian oranges are in demand, given the unsuitability of Greek oranges following the frosts in recent weeks,” says a trader from the province of Taranto, in Apulia.
A trader from the north of Italy reports that orange prices stand at below average levels. This situation has lasted since the beginning of the season and is the result of various factors. First of all, the sizes available are on the small side. In the north of the country, the wholesale prices of the largest sizes range between 1.20 and 1.40 € / kg. However, most lots consist of smaller sizes that do not reach these prices. Organic oranges are an exception. According to the trader, there is a high demand for organic oranges and the prices are at a good level.
Spain: Fierce competition from Egypt and Turkey Spain is currently supplying Lane Late oranges, and in April it will start shipping Barfield, Powel and Chislett Navel oranges, which will be followed by Valencia oranges at the end of May and June. Spanish orange sales are said to be generally quiet at the moment due to skyrocketing prices at origin and fierce competition from Egypt and Turkey. “The price of Egyptian oranges in the markets is the same as that of Spanish oranges at origin. Our margins are now so tight that we barely make a profit,” says a Spanish exporter.
This year, due to the frost, there has been a drop in the production of late varieties in Andalusia. The production of these varieties has also dropped to a lesser extent in the Region of Valencia, where the showers and frosts in January reduced the volumes a little more in some specific growing areas. Speculation in the field is a source of stress for traders, as marketing companies want to be assured of an adequate supply. Some exporters also fear that the oranges whose quality has been affected by the frost could have been put on the market, as that would have a negative impact on sales.
The Egyptian and Turkish orange season is expected to end around May / June, but citrus consumption will be lower due to the start of the summer fruit season. In the second phase of their campaign, Egypt is becoming an increasingly fierce competitor for Spanish oranges. “In addition to competitive prices, Egypt is managing to extend its season and gradually improve its cultivation methods and the quality of its oranges. Competition from third countries is becoming dangerously stronger every year. Challenging times are coming for Spanish oranges,” says the exporter.
Egypt: Demand for Valencia oranges has risen to good levels The season for Valencia oranges in Egypt is well underway. The demand was very low two months ago, but it has now risen to a good level. Prices are slightly lower compared to a month ago, as the supply is growing. The exported volumes are already 30% higher than they were around this time last year. India and China are particularly interesting markets and the demand is also increasing in Europe, now that the Spanish season has come to an end. Since it will still take at least two months before South Africa starts its Navel season, Egyptian oranges will have the largest market share in the world in the coming months.
US: Strong demand for oranges is expected to continue “The demand is probably better than usual because of COVID-19,” said a California trader. The supply of Navel oranges has been good. Currently, the trader is working with its spring and Washington variety. Orange prices have been strong and, looking ahead, the trader expects strong demand to continue due to the warmer weather.
Meanwhile, there is also strong demand for oranges from Florida. “There is a spike in the demand for Florida oranges and retail sales seem very good and stable,” said a Florida trader. In terms of supply, the Florida Classic Valencia harvest should be available until May / June. The trader says that although the season started a few weeks later this year, the end of the campaign should be normal.
South Africa: Navel volumes will be in line with last year’s The harvest of the early Navel oranges has started in Letsitele. The average domestic price is R9.34 / kg. According to a trader, the harvest started later this year and the volumes have fallen below last year’s level. The volumes of Navel oranges in the Limpopo Senwes area (Marble Hall / Groblersdal) have recovered to normal levels and a good harvest is expected. In the Eastern Cape Sundays River Valley (Kirkwood, Addo), the production is also looking good and a slight increase is expected, but in the Gamtoos Valley (Patensie, Hankey) the ongoing dry weather is expected to have a considerable impact on volumes and sizes. A fairly normal harvest is also expected in the Western Cape, although 10% smaller than last year’s. Across the country, Navel volumes are expected to be mostly in line with last year’s (Navel exports in 2020 stood at 25.2 million 15kg boxes). The early Navel export starts at around week 16 or 17.
The Valencia oranges in Letsitele and Hoedspruit (province of Limpopo) have recovered well thanks to the beneficial summer rains and good harvests are expected. Lower Valencia volumes are expected in the Eastern and Western Cape, although still above the five-year average. In total, an increase of approximately 7% is estimated, compared to the 46.9 million 15 kg boxes of 2020. There’s a normal distribution of sizes.
Exporters expect good sales for oranges due to the coronavirus and the extra demand for vitamin C. The export of Valencia oranges starts around week 20.
Chile: First Navels expected at the beginning of June The Navel orange season kicks off around early June, in week 23 and lasts until week 35. The volumes from Chile are expected to be similar to those of previous years. The oranges from Chile are mainly shipped to the US and Asia.
Argentina: Larger volumes are expected next season The orange season in Argentina starts in May, around week 20, with the Navel oranges. The Salustianas arrive in week 26 and are followed closely by the Valencia oranges in week 27. The quality and sizes of these oranges are expected to be good, and larger volumes are also expected this season. Dry weather in the spring and summer ensure that the quality will be good this season. Although the sizes may be slightly smaller, acceptable sizes are still expected. Argentina’s oranges mainly go to Europe, the Middle East, Russia and Canada.
Uruguay: First oranges expected in May The prospects for the Uruguayan orange season are similar to Argentina’s. The campaign starts in May, around week 20, and good quality and sizes are expected as a result of the dry weather, and the total volume has slightly increased. The markets for Uruguay are also in Europe, the Middle East, Russia and Canada. The season runs up to and including week 45 with the Valencia oranges. The supply of Navels finishes already in week 34.
China: Market open to Spanish oranges In the previous citrus season, many large production areas in the south of the country suffered the impact of hail and rain. As a result, a large part of the citrus production has had quality problems, which has an impact on the entire citrus market. Since November last year, the citrus market has been very unpredictable, which has created major challenges for growers and traders. Some of the bad batches have now disappeared from the market and are being replaced by good ones. Oranges from Wogan and Wuxiangan are sold at good prices.
This year, Spanish oranges have been allowed to be imported, but many Chinese importers will not import oranges this season. Egyptian and American oranges are currently on the market. The volumes available are limited and this is putting some pressure on prices. The demand, on the other hand, is good. Last year, the Chinese market also opened to Chilean oranges. Various importers have announced that they want to import the first volumes in the coming season.
Australia: Navels account for 87% of the production Australia is getting ready for the Navel orange season and, according to the latest Hort Innovation statistics, 511,345 tons of oranges were produced in the year ending in June 2020; a 3% drop compared to the previous year. However, the value of that production increased by 4%, to $ 414.7 million. About 38% of the total orange production went to the processing industry, mainly for juice manufacturing. Fresh orange exports also increased by 7% in terms of volume, to 201,268 tons worth $ 310.1 million.
Navel oranges accounted for 87% of the production shipped to the fresh market and Valencia oranges for 13%. The small remaining volumes correspond to other varieties, such as blood oranges and Cara Cara oranges. 62% of Australian households bought fresh oranges during the year.
Latest crisis both lengthier and more extreme than prior congestion
Labor unrest at West Coast ports in 2015 was a landmark event for U.S. importers. Massive congestion amid contentious contract negotiations with the dockworkers union convinced some importers to shift business to East and Gulf Coast ports and diversify supply chains.
Data on the number of ships at anchor in San Pedro Bay is compiled by the Marine Exchange of Southern California. American Shipper compared the Marine Exchange’s 2015 numbers to congestion figures for 2020-21, measuring from the time anchorages started to fill in each case.
The difference turns out to be enormous — and growing by the day.
The congestion in 2015 was largely in the first quarter, peaking in mid-March with a high of 28 container ships at anchor.
Capt. Kip Louttit, executive director of the Marine Exchange, noted that the anchorages were cleared just six weeks later. “There was a very quick decline once everyone started working normally again, when the [labor] contract was agreed to,” he told American Shipper.
“This time, the cause [of congestion] is different, so it looks like clearing the backlog will be different,” said Louttit.
Much larger ships at anchor
The change in consumer spending caused by COVID — more goods bought to compensate for less services — began pushing up the number of ships at anchorage in the fourth quarter of 2020. This year, the number of ships at anchor has consistently hovered around 30, reaching a high of 40 on Feb. 1.
It’s not just that the numbers are higher this time around. It’s also about duration. The current congestion crisis is already longer than the 2015 incident, with no end in sight.
Even more importantly, the number of container ships at anchor doesn’t tell the whole story.
“The ships were much smaller [in 2015],” said Louttit. Marine Exchange data shows that the vast majority of arriving vessels in 2015 had capacity of under 10,000 twenty-foot equivalent units (TEUs).
Not so in the current crisis. As of Sunday, there were 29 container ships at anchor. Eleven were over 10,000 TEUs. Five of those boasted capacity of 14,000-15,000 TEU. One, the CMA CGM Marco Polo, topped 16,000 TEU.
If congestion was calculated in terms of TEUs at anchor, not ships, the already wide disparity between the 2015 incident and today’s would be far greater. The same number of ships are carrying far more TEUs now versus then.
The earlier congestion record set in March 2015 may have actually been broken, in terms of TEUs, as far back as mid-December. (No records exist on another West Coast congestion event that occurred in 2004, when box vessels were much smaller than those sailing in 2015 or 2021.)
When will congestion end?
There are at least some signs that the container-shipping capacity crunch may be easing, at least temporarily.
The Container Availability Index produced by Container xChange shows a marked improvement in container-equipment availability in Shanghai. An industry source confirmed to American Shipper that box availability has improved.
Meanwhile, ocean spot rates have stopped climbing, and in some cases, pulled back. According to the Freightos Baltic Daily Index, the Asia-West Coast spot rate (SONAR: FBXD.CNAW) was $4,709 per forty-foot equivalent unit (FEU) on Friday. That’s still astronomically high, but down 4% from $4,922 per FEU in late February.
There are also reports that carriers are not hitting shippers with as much premium charges above the base rate. During a webinar in late January, Nerijus Poskus, a vice-president at Flexport, predicted that the first visible improvement would be “you won’t need to pay thousands of dollars in premiums,” after which the base spot rate would start to pull back.
For the first time in months, Flexport reported last week that “space and equipment is opening up at FAK [base rate] levels” on sailings from China to Los Angeles/Long Beach.
More stimulus around the corner
But these positive developments do not necessarily equate to falling cargo demand and lower port congestion.
The House will soon vote on the latest stimulus package. A fresh round of $1,400 checks could go to Americans next week. In the past, stimulus funding has increased inbound container volumes to Los Angeles and Long Beach and pushed more ships to anchorages.
A California technology company promises increased production, better safety and labor savings with its driverless tractor technology.
Bear Flag Robotics, based in Newark, CA, created the autonomous technology that allows growers to operate tractors without drivers.
One customer, Church Brothers, LLC, BB #:161800 Salinas, CA, has been using the technology for two years and is looking forward to the benefits, savings and efficiency to start applying.
Church Brothers’ Josh Ruiz said the company uses the technology on one tractor for cultivating and ground prep, but because of the rules of Cal/OSHA, the division of the state’s occupational safety, it can’t yet go driverless in the field.
He said their goal is to run three or four autonomous tractors at a time and have one person monitor them.
“I believe their product is better than people (drivers) simply because they’re human,” Ruiz said. “It does the job to the specifications. My vision is for them to run all night.”
Bear Flag cofounder/CEO Igino Caferio said the technology can cut the time between crops, which makes growers more efficient.
He said the two biggest opportunities are offering safe, reliable technology that performs better than humans; and working with growers on specifically what they want to accomplish using technology.
“We can get to more acres with repeatability and consistency, in addition to reliability,” Caferio said. “This is important when you can basically multiply the best work of your best workers.”
He said Bear Flag has other customers in the fresh produce industry that will begin working with the autonomous technology when the seasons in Salinas start up this spring.
Ruiz said Bear Flag has told him they’re working with Cal/OSHA and are optimistic driverless tractors will be allowed in the field some time this year.
In addition to fresh produce, Bear Flag has customers in the wheat and cotton industries.
The melon supply is currently shifting from Brazil to Senegal. The Central American melon season has started much too late. Normally, the first volumes arrive in early to mid-February, but this year no significant volumes have arrived on the European market until this week. The first Sicilian melons are also expected this month. So far, the growing season is looking very good. In China, production is underway in the Hainan province. Volumes are lower than normal, but prices are strong for the time of year.
Netherlands: Good watermelon prices, but short window for Central America Despite the fact that the watermelon sector is missing a good part of its sales to the catering industry, the price is at a high level. “For weeks now, they have been sold for between 1.30 and 1.40 Euro; and that is in winter time,” said a Dutch importer. Unlike in the case of watermelons, the market situation for Galia, yellow and Cantaloupe melons is normal, he says. “And it is exciting to see how that market is going to develop. The Central American melon season has started much too late. Normally we receive the first volumes after the fair in Berlin, but this year no significant volumes will arrive until this week, so we’ve missed a month. At the beginning of April, the first watermelons from Morocco will also arrive, soon followed by Spain. It will therefore be quite a challenge to get the melons from Central America sold in four weeks, although necessary, especially now that the catering industry is not yet open!”
Germany: Good demand for first Senegalese watermelons The first Senegalese watermelons of the season were traded in the German wholesale market this week. At the same time, the Brazilian season is slowly coming to an end.
“Senegalese watermelons are slightly more expensive than Brazil’s, but their high sugar content makes them very popular. The demand for the first Senegalese watermelons is therefore very high, which is quite surprising, considering the current cold weather in many parts of Germany,” reports an importer. The first black, seedless watermelons from Senegal are also expected this weekend.
Italy: First Sicilian melons on the market this month When it comes to melon consumption, Italy is divided in two. In the north of the country, consumers prefer melons with a smooth skin, while in the south, the preference is for a melon with a rough skin.
The melon season in Sicily kicks off with the harvest in tunnels. The harvest of these melons starts in March and continues until June. The growing conditions for Sicilian melons have been excellent this year. The harvest of the yellow melons, which are cultivated in tunnels and in the open ground, starts in May and ends in October.
According to a trader, the import of melons lasts until the beginning of May, when the Sicilian melons hit the market. Then it is the turn of the Italian production grown in the rest of the peninsula. The Sicilian melon will be back on the market in November.
More and more seedless watermelon varieties are becoming available in Italian supermarkets. There have also been changes in format preferences, with mini sizes currently accounting for 50% of the market. The Sicilian mini watermelon is cultivated both in tunnels and in the open ground and the season lasts from May to September, similarly to normal watermelons, which, however, are only grown in the open ground.
Spain: Lower volumes of melons from Senegal expected The Brazilian melon and watermelon season is coming to an end in Spain and the first seedless watermelons from Senegal arrived this week. The volumes of Brazilian Piel de Sapo melons were about 10% lower and Senegal is also expected to supply fewer melons this season.
From mid-February, it rains a lot in Brazil, so the quality decreases at this time of the year and other origins take over on the Spanish market, mainly Senegal. The Brazilian melon season was quite satisfactory for Piel de Sapo melons, with stable and acceptable prices thanks to the lower volumes (-10%). The Brazilian trade in Piel de Sapo melons is becoming more and more specialized, increasingly coming into the hands of highly professional companies and prestigious brands. Not everyone can grow in Brazil; the investments and risks are high. Brazilian yellow melons have done quite well this year, but the Galia have had a hard time due to unstable prices. Competition from other Central American origins was limited due to the heavy rainfall.
The first watermelons from Senegal have arrived in Spain and the first Piel de Sapo melons are expected in a week. Climate conditions have been ideal for melon cultivation in this African country, so the quality is expected to be excellent. However, volumes will be lower, as one of the largest Spanish companies involved in the fruit’s cultivation decided to cut back on investments due to the uncertainty generated by the pandemic. Last year, tons of melons were left unsold. In any case, Senegal is a good strategic option for those wishing to grow and supply Piel de Sapo melons all year round.
The Senegalese melons will be followed in May by the Spanish melons, starting in Almeria. Growers in Almeria are busy planting the melons and watermelons. Seed companies said that the demand has been more contained this year. The sector is becoming more professional and growers are increasingly planting based on predetermined supply schedules, fueled by fears sparked by the pandemic.
North America: Prices of honeydew melons are at a low level The melon trade is somewhat inconsistent in the North American market at the moment. Honeydew melons currently come from southern Mexico and their market is somewhat saturated, which makes trade difficult. “There is less production available at the moment, but that won’t necessarily make the market stronger,” said an Arizona trader. The prices of honeydew melons are low and currently stand below $ 10.
The cantaloupe melons come mainly from Honduras, Guatemala and Costa Rica. “Earlier in the winter, the supply had come under pressure due to the two hurricanes in November,” says the trader. “Since Mexico doesn’t really play a big role in the melon market, there was no other region to compensate.” Overall, the market conditions have been quite solid. Prices have stood at high levels and importers have worked hard to ensure that retailers had sufficient stocks.
The watermelons now available come from the Mexican regions of Nayarit, Jalisco, Colima and Michoacán and compete with other growing regions, including Honduras and Guatemala. Mini watermelons have had good sales and a consistent price level. Domestic production in Florida kicks off in April.
Guatemala: Good volumes and high prices expected Spring cultivation is now starting in Guatemala for the honeydew and cantaloupe melons. There are usually two production cycles, with the spring cycle being the second. The first production cycle of this season was badly disrupted by hurricanes Eta and Iota in November, which left hardly any volumes available. Fortunately, the newly started second cycle seems to be running smoothly and volumes are expected to be good, with high prices due to shortages earlier in the season.
Honduras: Melon prices have been breaking records since December Honduras suffered the same problems as Guatemala, as the country was also hit by hurricanes. Their first cycle was also badly affected, but there appears to have been a full recovery for the second cycle, which will start in mid-March. The melons from both Guatemala and Honduras have been reaching record high prices since December, but these are expected to level off to normal levels as soon as Honduras enters the market in mid-March.
China: Melon prices have doubled compared to last year The melon season is underway in Hainan; however, the low temperatures have resulted in low sugar contents, so the sweetness and taste of the melons is generally not as good as in previous years. The current market price remains at a high level and has almost doubled compared to last year. On the one hand, due to the extreme weather in the country, production has dropped sharply, and on the other, the corona crisis has been a hurdle for the exports from Southeast Asia to China, leading to a further decline in the volume of melons on the market. The shortage of melons has led to price increases.
The Hainan season usually has two harvests in one campaign. Production in the early part of the season was extremely low and the supply / demand ratio was unbalanced. As a result, some growers considered planting again to extend the season. The Hainan melon peak season lasts from July to August.
The melons in Anhui, Henan and Shandong are mainly grown in plastic greenhouses, with small planting areas and short production periods. The sales season peaks from March to May. This fruit fills the gap between the Hainan and the Xinjiang season. The high prices are expected to continue until April. In June, large volumes of Xinjiang melons hit the market and the price then is expected to fall sharply.
Australia: Melon sector investing in traceability The Australian melon industry has recently invested in strengthening the traceability of its fruit, with a Victorian cantaloupe melon grower successfully completing the initial stages of a pilot program. Dawson Melon Co, in partnership with FreshChain Systems, NSW DPI and in-store support of specialty food stores, has tracked whole and sliced cantaloupe melons from field to the consumer. The program aims to improve the trust of customers and consumers in both the safety and the quality of its cantaloupe melons, especially after the health issue reported in 2018.
According to Hort Innovation’s latest statistics, 190,024 tons of melons worth $ 152.1 million were produced in the year ending June 2020. The value was five percent higher than in the previous year, despite a 13 percent drop in the volume. Out of the total, 58,136 tons corresponded to melons (cantaloupe and honeydew melons worth $ 68.4 million) and 131,889 tons to watermelons (worth $ 83.7 million). There was a one percent increase in the total export volume, which amounted to 21,772 tons, while the value increased by six percent, to $ 39.3 million.
Container ships try to make up time in Seattle-Tacoma and leave exports behind
The waterfall effect from Southern California port congestion has caused an ebb of exports in the Pacific Northwest.
Northwest Seaport Alliance (NWSA) CEO John Wolfe reported Wednesday that full exports in January were down 13.4% year-over-year, from 66,410 twenty-foot equivalent units (TEUs) in 2020 to 57,517 TEUs this year.
“When … there is congestion at those other gateways, the vessel schedules are so far off that when they get to Seattle-Tacoma, the window of time for them to work the vessel and get back to Asia has been [significantly reduced]. They’re in a rush to turn that vessel around to try and get that vessel back on schedule. It has created problems for us,” Wolfe said in response to a question from American Shipper regarding the reason for the export drop.
“The exporters have a very difficult time planning to get their exports into the terminal in time to meet that vessel. The windows for delivery for these vessels are so tight oftentimes they miss that window,” he said during a videoconference Wednesday. “That’s the primary reason for the drop, the vessel schedules being so far off. We’re trying to address that issue because … we really value the exports that move through our gateway.
“So we’re working with the terminal operators to see if they can do a better job of forecasting when those vessels are going to call their terminal and open up a broader window for delivery of the exports for those vessels when they are at berth,” Wolfe said.
The NWSA ports of Seattle and Tacoma, Washington, do not have the congestion issues plaguing Los Angeles and Long Beach. And Wolfe pointed out the Southern California ports have more than double the weekly service calls NWSA has.
“On an annualized basis, LA and Long Beach combined handle upwards of 19 million twenty-foot equivalent containers as compared to our Seattle-Tacoma gateway, which handles about … 3.7, 3.8 [million TEUs],” he said, adding the vessels calling the San Pedro Bay ports also tend to be larger than those in the Pacific Northwest and thus take longer to discharge cargo.
And so those delays experienced at other West Coast ports are passed on to Seattle-Tacoma.
“Of the roughly 20 or so services that call our gateway on a weekly basis, only a handful of those services call Seattle-Tacoma as the first port of call on the West Coast. So they’re first calling Southern California and then coming up the coast to Seattle-Tacoma or, alternatively, calling a Canadian port and swinging down to Seattle-Tacoma,” Wolfe explained.
The situation is further complicated by equipment availability — or the lack thereof.
“Because of the significant demand in imports into the country from Asia, the vessel operators are increasing the eastbound rates that they charge to the cargo owners for the movement of goods from Asia into the U.S., and that is creating greater profitability for the carriers,” Wolfe said. “And as a result of that, they are anxious to get those vessels with the equipment, whether it’s a load or an empty, back to Asia so they can take advantage of the higher rates that they’re enjoying today in the marketplace.
“So it’s simple economics. That also is part of the challenge,” he said. “It’s a really important issue to tackle. Exports are very important to help drive the health of our economy. We have a very strong export market in this gateway. Part of the challenge has been with all of the congestion problems … that has had a negative effect on the export opportunities.”
Meanwhile, full imports remain strong, up nearly 11% year-over-year in January, from 102,878 TEUs in 2020 to 114,083 TEUs this year.
“We’re well positioned in the marketplace. We have excess capacity to accept additional cargo and we are a less congested gateway than many of the other gateways,” Wolfe said.
Port of Seattle Commission President Fred Felleman noted the NWSA gateway is a “discretionary port,” meaning it’s usually not the first U.S. call and about three-fourths of imported goods are then transported east rather than remain in the Pacific Northwest.
“It also means that we have a much more competitive situation because if your goal is to just get to Chicago, you can do that from any number of ports, and therefore we have to be scrappy and continue to invest in our infrastructure to be able to provide the quality of service that would make us a priority,” Felleman said.
Congestion in Southern California causes ripples in the north as Oakland volumes fall in January.
Both import and export volumes at the Port of Oakland have fallen by more than 11% as the Covid-19 crisis induced congestion has impacted on the Southern Californian ports, with the shockwave spreading both north and east.
According to the Port of Oakland the delays to vessels at both Los Angeles and Long Beach, which now stands at 60 ships at anchorage outside the ports, means they miss their scheduled arrivals in Oakland. In addition Oakland currently has a reduced berthing capacity while new, larger, cranes are being assembled. What is more, the port says its space for exports has decreased as carriers look to return empty boxes to Asia.
Import volumes dropped 11.9%, while exports fell 11.3% in January this year, but in a statement, Oakland said this was an “anomaly” when import volumes in the California region were increasing due to consumer demand. As a result, the port authority expects volumes to increase in the coming months as vessel logjams ease.
“There’s a lot of cargo trapped on ships just waiting to get to here after departing Southern California,” said Port of Oakland Maritime Director Bryan Brandes. “Our concern is getting shipments to our customers as quickly as we can.”
As congestion levels in Southern California increased French line CMA CGM remedied the problem this month by introducing a service to Oakland.
“The ships in CMA’s weekly service make Oakland their first US call, bypassing Southern California,” said the port, adding that other ocean carriers are contemplating Oakland first-calls by mid-year.
A decline in Oakland’s imports and exports in January, however, only led to an overall volume decrease of 5.8%, due to the 15.6% increase in the shipment of empty containers.
It’s annual-contract negotiation season for U.S. importers — and the hand they’ve been dealt couldn’t be worse. The deck is heavily stacked in ocean carriers’ favor.
Incredibly, Asia-West Coast spot rates are now nearing a base rate of $5,000 per forty-foot equivalent unit (FEU), not including a few thousand dollars of extra charges slapped on top. There’s talk that spot rates could stay strong until Q4, if not 2022.
Now is the time U.S. shippers negotiate annual contracts, which are usually finalized by May or June. The risk to shippers: If they don’t agree to much higher long-term rates than they’re used to, they could be even more exposed to spot rates, which would cost them even more.
The market “is beyond good for shipping lines and equally so on the other side, painful for shippers,” said Patrik Berglund, CEO of Xeneta, during a presentation on Tuesday. Xeneta collects data from forwarders and shippers on short- and long-term ocean contract rates.
“The carriers are seeing a substantial uptick in their long-term contract [rates] as we speak,” reported Berglund. “This has led to a situation where even a lot of big-volume players [on the shipper side] have seen increased spend. Some of them have not been able to conclude their RFQs [request for quotations] and have pushed them back because the spend increase they’ve seen has been too significant.”
What’s particularly unusual is that rate increases are not just high for average long-term rates. They’re also high at the bottom end of the range — i.e., rates paid by the largest shippers.
“Everybody is facing a significant cost increase,” Berglund said. “That’s different than anything I’ve seen in my 15 years in the industry.”
Conundrum for import managers
“The problem is that you have procurement and logistics people responsible for these contracts internally who are facing 40%-70% cost increases,” Berglund continued. “They have a huge conundrum in justifying that. Because the traditional challenge to a logistics department is a 5% reduction year-over-year.
“We’re at such a high historical level that it’s the worst possible time to go to market [negotiate a contract]. There is such a seller’s market that the carriers can basically do as they please.”
He advised shippers to “position themselves so they can go back and renegotiate later in the year. Make sure you’ve negotiated a validity period that allows you to go back and drive some of those costs down to a bit more normalized level.”
He also pointed out that carriers “are trying to drive volumes over to the short-term markets because of the profits there and the yields that are so attractive.”
“There is now a massive delta between your contracted rates and your transportation budget,” explained Berglund. “Because in order to get stuff moved, you can end up being pushed into the short-term market.” Furthermore, “there’s an additional $1,500-$2,500 [per FEU] surcharge in many cases in order to get things moved.”
No light at end of tunnel yet
The hope was that container shipping would see a volume and rate dip due to the Chinese New Year holiday. It didn’t happen. “For months we have been waiting for the extreme conditions in container freight to let up. But they simply have not,” said Stifel shipping analyst Ben Nolan.
As of Tuesday, the Asia-West Coast spot rate (SONAR: FBXD.CNAW) was at a new all-time high of $4,922 per FEU, according to Freightos Baltic Daily Index data. Rates remained around $3,800 per FEU for a long stretch between mid-September and mid-January, then jumped another 30% since then.
“It is clear that the first half of this year and most likely also Q3 will be a very strong seller’s market,” affirmed Berglund.
Matt Cox, CEO of Matson (NYSE: MATX), said on a conference call with analysts on Tuesday, “We think the current conditions, where there’s 30 ships at anchor off Los Angeles/Long Beach, and the sort of really frothy and difficult environment … [will last] through the middle of the year.”
Relief in the second half?
More consumer spending on services versus goods in the wake of vaccines should offer some relief.
“Hopefully we’ll see more money funneled to travel and services so less cargo is moved,” Berglund said. Yet even when that happens, he added, “I don’t think we’ll see any pre-COVID rates in the short term. Nor the midterm.”
According to Cox, “At some point it’s going to unwind, which is likely to be connected in some way to the post-pandemic world when we emerge from our caves and start venturing out. As to when that new normal will be, we don’t have any better insight than anybody else.”
The bullish argument is that cargo demand will remain very high into the second half as well. Retail inventories remain very low and retailers will likely want higher inventories than in the past. First, because of the shift to e-commerce. And second, because of extreme delays in ocean transport, as exemplified by the container-ship traffic jam in Los Angeles and Long Beach.
Importers could accept higher inventory costs to protect against lost sales due to shipping delays. If so, they will bring even more imports forward and create even more inbound volume.
According to Sea-Intelligence CEO Alan Murphy, “We have never seen the relative inventory levels for retailers as low as they are now. Despite six months of a demand boom, there is still quite a distance to go. A normal development of sales in the U.S. could — through inventory replenishment — sustain strong U.S. import container growth through all of 2021.”
Spending on goods could remain strong
There is also a counterargument to the idea that vaccines will spur higher spending on services and thus lower spending on goods. Government stimulus and a drawdown of savings could keep goods spending elevated even as services spending rebounds.
According to new research by Jefferies Chief Economist Aneta Markowska, “The January stimulus checks were partially saved and continue to fuel activity in February. We expect growth momentum to increase further in March after the next round of stimulus checks hit bank accounts. Stimulus payments will cause disposable income to rise 65% quarter-on-quarter [Q1 2021 versus Q4 2020], creating a massive tailwind for consumer demand in the spring.”
If stimulus and savings drawdowns push up spending in the first half, the retail inventory replenishment cycle would be pushed further out into the second.
All of which further complicates the contract strategy for shippers, who will have to decide whether to accept very high contract rates between now and May — or wager that they can wait for lower rates later. If the bullish demand scenario plays out, “later” may be too late.
Deteriorating shipper-carrier relations
Today’s historically strong negotiating position for carriers could further worsen their relations with shippers.
During this week’s Xeneta webinar, Berglund reported, “I can already hear a lot of our customers saying — and this is almost bizarre — but they’re saying, ‘The market will cool down sometime and I’m just waiting to get back at them [carriers].’ When it comes to the trust between buyers and suppliers in this industry, this is making it even worse.”
One of the shippers watching the presentation commented, “It’s painful that the liners are not adhering to their long-term contracts and not accepting bookings, while we, as shippers, could not do this.”
Berglund responded, “I think that’s right. But I would mention that for years, shippers have overbooked. They’ve placed a booking for 40 containers for the next week and only delivered 20 without any consequence. That’s possible in a buyer’s market.
“I’m not saying anybody’s right or wrong. On the contrary, I think it’s one of the fundamental issues in the industry. But now it’s a seller’s market. Carriers can do whatever they please and buyers will take it. And that’s super-painful. But it seems to go both ways — depending on the state of the market.” Click for more FreightWaves/American Shipper articles by Greg Miller
MORE ON CONTAINERS: Chinese factories won’t build enough boxes to save U.S. shippers: see story here. Container giant Maersk sees no letup yet in COVID-fueled cargo boom: see story here. Trans-Pacific trade crashes into ceiling: see story here.
How congested is San Pedro Bay off the ports of Los Angeles and Long Beach? See the aerial video of container ships stuck at anchor by U.S. Coast Guard Petty Officer First Class Richard Brahm.
According to the latest Sea-Intelligence data, US inventory levels are at the lowest in the 28 years of data collection, even after an extended period where demand in the US has outstripped all expectations.
According to Alan Murphy, CEO at Sea-Intelligence, if inventories were to return to pre-pandemic levels, and growth were to return to ‘normal trends’ then the effect on the container shipping industry would be that the whole of 2021 would see growth in the industry compared to 2019 levels.
“By early 2022, we might then see year-on-year growth temporarily approach zero, but this is a short-term phenomenon, associated with the excess inventory build-up seen in 2021. Overall, what this means is that a normal development in sales in the US, could – through inventory replenishment – sustain a strong US import container growth through all of 2021,” explained Murphy.
If this is the case then the ports and logistics industry in the US is in for a tough year, with trucking and rail already hit by huge delays through weather events delaying road and rail deliveries, to add to the shortages of chassis across the US and congestions stifling cargo movements in key ports in Southern California and New York.
In addition to these challenges the Federal Maritime Commission (FMC) through Commissioner Rebecca Dye, issued information demand orders, on 17 February, to terminal operators and container shipping lines, “to determine if legal obligations related to detention and demurrage practices are being met,” said the FMC.
In particular the orders will require terminal and vessel operators calling at Long Beach and Los Angeles ports on the west coast and New York & New Jersey on the east coast to divulge information on their policies regarding container returns and the availability of boxes to US exporters.
While the investigation by the FMC will be welcomed by US traders into and out of the US alike, the situation that has created the massive backlog of containers and ships, around 40 ships at anchorage with a week’s delay in berthing and unloading in southern California, will remain for the foreseeable future.
US regulators under pressure to intervene on behalf of exporters
A war of words is heating up over U.S. exports, particularly food exports — and the outcome of that clash could affect U.S. containerized imports as well.
Reports first surfaced in late October that carriers were rushing containers back empty from California to Asia to serve lucrative headhaul trades instead of loading U.S. export cargoes.
Federal Maritime Commission (FMC) Chairman Michael Khouri warned in December: “We are looking into all potential responsive actions, including a review of whether ocean carriers’ actions are in full compliance with the Shipping Act.”
California government officials informed the FMC last Thursday that “the operations of our agricultural sector, which relies heavily on export markets, are being heavily affected.” They blamed carrier practices “related to detention and demurrage charges, export container availability and container-return practices.”
California officials asked the FMC to compel carriers to suspend or reduce detention and demurrage charges, cancel congestion surcharges, and enhance notifications on empty-container receiving locations.
The World Shipping Council (WSC) and the Pacific Merchant Shipping Association (PMSA) countered that the proposed cure is worse than the disease.
In response to California’s letter to the FMC, the shipping groups responded on Tuesday that “the adoption of these proposals would make congestion and intermodal equipment availability worse, not better.”
Exporters face ‘terrible’ situation
“Imports into the U.S. are at an all-time high but exports are dropping like a rock,” said Flexport Vice President Anders Schulze during a webinar last week. “The ratio of U.S. imports to exports is increasing to a level we’ve never seen before — it’s now more than 3 to 1.”
Consultant John McCown recently analyzed import and export flows through the top 10 U.S. ports. He found that the year-on-year change in the three-month trailing average as of December was up 22% for imports and down 4% for exports. The divergence is “striking,” said McCown.
It said that the competition for scarce containers is not only impairing food exports from America, but also from Thailand, Canada, India and Vietnam.
American Shipper asked Agriculture Transportation Coalition (AgTC) Executive Director Peter Friedmann about the current situation for exporters during an interview on Wednesday. “It’s terrible,” he responded. “Terrible as in losing sales, losing customers and losing profits after you pay significant penalties when you don’t deliver on time.
“A number of members [of Congress] are set to take action,” asserted Friedmann, who said that the crisis has led to “upset [FMC] commissioners, upset exporters, upset governors and upset congressmen.”
Carriers: Cutting fees equals more congestion
According to the WSC, which represents carriers, and PMSA, which represents terminal operators, congestion and equipment shortfalls are driven by COVID changes to consumer behavior, not carrier and terminal practices.
“Everyone experiencing these unprecedented conditions has been impacted by the business challenges, costs and delays resulting from the pandemic and its demand surge,” they said. “It is simply not the case that agricultural exporters in California are being singled out for disparate treatment in the intermodal supply chain.”
The groups also cited statistics showing that December exports of California almonds, walnuts and pistachios actually increased substantially year-on-year.
Regarding California officials’ proposal to suspend or reduce detention and demurrage and other charges, the groups maintained that “this would create a disincentive for cargo interests to move import cargo off of marine terminals or to promptly … unload cargo from containers and return those containers for further use.”
Friedmann lambasted the WSC and PMSA rebuttal as “old and tired.”
“It’s a little easy for ocean carriers and terminals to blame everything on COVID,” he said, adding, “This notion that carriers need to charge fees as an incentive is an old song you’ve heard for decades.”
California data on imports, exports, empties
To gauge changes in container flows, American Shipper analyzed the combined monthly throughput at the ports of Los Angeles and Long Beach during the past two years.
The data shows a surge in outbound empty containers as well as loaded import boxes. It does not show a precipitous decline in export volumes, which appear relatively steady over time despite the recent outcry over lack of container availability.
In July-December, loaded inbound containers to Los Angeles/Long Beach jumped, as did empties going westbound, while loaded outbound boxes were down only marginally. Over the past two years, combined exports volumes through the ports have been relatively flat.
During H2 2020, monthly loaded inbound containers to Los Angeles/Long Beach averaged 869,130 twenty-foot equivalent units (TEUs), 3.4 times average monthly loaded outbound volumes of 254,161 TEUs. Outbound empties averaged 544,833 TEUs, 2.1 times exports.
In July-December, combined Los Angeles/Long Beach loaded inbound TEUs rose 19% versus the same period in 2019. Empty outbound container volumes rose in parallel, by 23%. Outbound loaded volumes fell 4% year-on-year.
The global onion market is stable at the moment. Last year’s harvest was good in Europe and North America, but disappointing in India and China. This resulted in a new export ban on Indian onions until January 1 and on China’s shipments falling significantly because of reduced planting and bad weather. There was a shift in the demand from large sizes, mainly demanded by the food service, to the small and medium sizes that are usually demanded by retailers. This often prevented a small supply of large onions from being sold at high prices.
The Netherlands: Not all onions are suitable for export to distant destinations After a busy period in the first half of the season, things are again quiet for Dutch onion traders. The prices at origin are at a similar level to the bale prices, and it is very quiet for the packers. Also, in January and February, quite a few onions had to be sold for qualitative reasons. Insiders estimate that at least 30% of the current stock isn’t suitable for export to distant destinations. Considering the situation of exports, traders are confident in a revival of trade from March.
Germany: Good, stable sales The German onion market is currently extremely stable, with good prices and ditto sales levels. During the Christmas period, onions are traditionally promoted and large volumes were also sold this season. Sales are more stable over the rest of the year, a trader reports. Prices currently range between 200 and 240 Euro per ton for sizes 40-70. It is hoped that last year’s harvest will last until May. “For the time being, storage onions are doing well, but the question is, of course, how the quality in storage will develop in the coming months.”
Austria: Stable demand Domestic product sales are stable and satisfactory. The same goes for onion exports. The prices at origin haven’t changed and fluctuate around 12 to 15 Euro / 100 kg for clean, sorted goods.
France: Many large sizes, earlier demand from abroad The situation in the French market is fairly normal at the moment. The season has been marked by an abundance of large-sized onions. This means that the price differences between large and small sizes are sometimes significant. The quality is good and, in general, prices have remained stable throughout the season. This year there was also earlier demand from other countries, such as Spain, with orders arriving in January, instead of February / March.
Spain: Lower supply of large sizes, but also less demand The onion market in Spain is marked by stagnant demand and prices that do not reflect the low volumes available, as crop yields fell by more than 40% in 2020.
Exports have fallen sharply since the start of the corona crisis. Spanish onions stand out in the export markets with the large sizes, which are mainly intended for restaurants, hotels and the catering industry. Despite the clear decline in the supply, not much has changed due to the low demand, although the price has increased a little compared to the summer months. In a normal situation, without the coronavirus, the prices of large onions would now be very high, because they are quite scarce. Increased sales to the retail did not offset these losses.
Another obstacle that Spanish onions have faced is the strong competition from the Netherlands, especially with the medium sizes, which are more abundant in Spain this year. The Netherlands seems to have had a huge harvest. Dutch onions have flooded the markets and put pressure almost everywhere, despite the fact that India did not export. Countries in Africa and the Far East are well-supplied with Dutch onions. Normally, Spanish onions always find new markets, as has been the trend in recent years.
Although there aren’t yet accurate figures about the onion acreage for this year’s harvest, which starts in April in the earliest areas of Andalusia, the prospect is that there will be a slight decline. Also, there have been some small delays in the planting of early onions in some areas due to the passing of storm Filomena in early January. In September and October the weather was very dry and producers in Andalusia feared that they wouldn’t have enough water for their plantations. To this we must add the fact that, at the time of planting, the demand was not very good, and that the situation in this regard remains uncertain due to the impact of the pandemic.
Italy: Less sown for the upcoming season In Northern Italy, the first onions are currently being sown for the next summer season; however, it seems that less than usual will be planted this year. The manager of a major seed company says there will be an average fall of 20%, with peaks of 50% in certain areas of Emilia-Romagna. A trader says that sales have been hurt by the lack of demand from the catering channel. It isn’t strange that the acreage is being reduced. A grower in Emilia-Romagna with about 80 hectares has reduced his acreage by 15% because the market conditions haven’t been good for the past 3 years. Onion prices have been low in recent days, ranging between 0.20 and 0.30 € / kg. In many cases, the selected products have a good quality.
A grower from Piedmont reports that the demand for onions is currently stable. “White onions have a more dynamic market, but in general, the demand is low. Red and golden onions have kept prices at average levels, and sales are more or less static. From October onwards we have been paying with interest what we had sold in the two months of high demand during the first lockdown.”
Sales have finished for a trader from Piedmont. The reality is there are still many volumes, especially of white onions, but these will remain unsold due to the difficult market conditions. For refrigerated goods stored and ready to be loaded, the last quoted prices were the following: 0.20-0.23 € / kg for white onions, 0.20-0.22 € / kg for yellow onions, 0.30 € / kg for red onions and € 0.35 / kg for copper-colored onions, a niche product on the Italian market.
South Africa: New harvest puts pressure on market prices The average price on the South African market is around 3.84 ZAR (0.20 Euro) per kilo. The price is slightly down due to the incoming harvests from the provinces of Western Cape and Northern Cape. It is therefore expected that there will be sufficient stocks for the coming months. In the north of the country, there has been a lot of rainfall, which has given some relief to the irrigation systems set up by the growers. The demand for onions is good in the domestic market.
India: Exports rebounded after ban ended India exported onions worth $ 198 million. Exports generated a total of $ 440 million up to 2019-2020. The country had exported about 1 million tons in the 2019-2020 campaign. Bangladesh, Malaysia, the UAE and Sri Lanka are the main importers of Indian onions. The export ban on onions, set on September 14, was lifted on January 1.
Nearly a month after the federal government lifted the export ban on onions, India has managed to export 40,000-50,000 tons thanks to a lukewarm response from the international market, say senior people in the industry.
Peru: Turbulent season coming to an end The onion season in Peru will end in mid-February and volumes are currently low, as the campaign is almost over. It has been a pretty turbulent season, with labor challenges as a result of the coronavirus which have taken a toll on overall yields and protests and roadblocks causing delays and product losses. Still, overall, the season has been good. There has been a strong market throughout the season, partly because of generally lower yields, and partly because the pandemic has given a boost to the demand for onions. Prices have remained stable throughout the season (their main export market is the US). The new campaign will start between June and July and the planting for that season is currently underway. They hope to have similar volumes next year to ensure the market remains strong.
United States: Inconsistent market demand, Mexico on the way American growers have no reason to complain about the onion supply, especially given this year’s abnormal circumstances as a result of the coronavirus. The stocks currently available come from the Northwest, Midwest, Eastern States and Eastern Canada. Meanwhile, Mexico is also underway with the prospect of a good harvest. This country could become a remarkable competitor for American growers. This week, Mexico already started supplying the first red and yellow onions.
Due to the lower demand from the food service, the focus has shifted to the retail, where there is more demand for smaller sizes. There is also a higher demand for small packages. Meanwhile, the demand is quite volatile. All of this is resulting in low and fluctuating prices. However, as stocks decrease, the price is also expected to pick up somewhat.
China: Rising price due to declining acreage and bad weather Most exports of Chinese red onions go to South Korea and Japan. Prices are 70-80% higher than normal and amount to around USD 4,500 per ton. Prices have increased further in recent days, ahead of the Chinese New Year on February 12. A small volume of peeled onions is intended for the European market, but high transport costs and a good harvest in Europe have reduced that demand. The end of the halt of Indian exports hasn’t yet had an impact on the Chinese market. In the last 4 years, the price in the Chinese market has been low, but now it is rising. After all, growers have planted less, and the harvest has also been reduced due to the weather. In many of the regions, this reduction is estimated at 75%. Most onions come from the regions of Yunnan, Ningxia, Shanxi and Inner Mongolia.
Malaysia: Prices stabilized The price of onions has stabilized in Malaysia. There will be enough supply until August, as confirmed by Minister of Internal Trade and Consumer Affairs (KPDNHEP) Datuk Alexander Nanta Linggi. Malaysia imported 489,297 tons of onions from 24 countries last year, namely from India (31 percent), Pakistan (24 percent), China (22 percent), the Netherlands (10 percent), Thailand (six percent), New Zealand (three percent) and other countries (four percent). Malaysia imports eight types of onions: small red onions from India, large onions from India, red onions from China, small red onions from China, small red rose onions from India, small red onions from Myanmar, small red onions from Thailand and large yellow onions from the Netherlands.
Australia: Good prospects for the coming season The onion harvest in Australia is in full swing. It started in Queensland three months ago and gradually moved south. Onions Australia reports that the season’s prospects are very good. Quality and yields are high, with growers, particularly in South Australia and Tasmania, looking forward to a good season. Weather-wise, the summer has been very mild, with no heat waves or major challenges for the growers.
New Zealand: Early start The 2021 export season has started early and on a good footing Onions NZ says that total onion exports in 2021 are expected to reach between 170,000 and 175,000 tons; higher than originally expected.
YUMA, Ariz. — The Rev. Emilio Chapa was delivering a homily on a recent Sunday when he paused to lament a sight that had shaken him as he entered the sacristy before Mass.
The board where his staff posted requests for funeral services was covered with names. “I had never seen it so full before,” he told his parishioners at St. Francis of Assisi Catholic Church in central Yuma.
Yuma County, which produces the lettuce, broccoli and other leafy greens that Americans consume during the cold months, is known as “America’s salad bowl.” Now it has become a winter hothouse for Covid-19.
Over the course of the pandemic, the Yuma area has identified coronavirus cases at a higher rate than any other U.S. region. One out of every six residents has come down with the virus.
Each winter, the county’s population swells by 100,000 people, to more than 300,000, as field workers descend on the farms and snowbirds from the Midwest pull into R.V. parks. This seasonal ritual brings jobs, local spending and high tax revenue. But this year, the influx has turned deadly.
Father Chapa’s parish is weathering the full spectrum of the pandemic’s surge. In Spanish and English, he ministers to Mexican-American families who have been rooted here for generations as well as the seasonal residents, all of them afflicted. The church is handling three times the number of funerals it usually does.
“Some families have buried multiple relatives,” Father Chapa said. “It’s a dire situation.”
While coronavirus cases are starting to flatten across the country, the virus is still raging in many border communities. Three of the six metro areas with the highest rates of known cases since the outbreak began are small cities straddling Mexico: Yuma; Eagle Pass, Texas; and El Centro, Calif. And Laredo, Texas, is adding cases at a per capita rate more than three times what is being seen in hard-hit Los Angeles and Phoenix.
Seasonal migration, the daily flow of people back and forth and lax measures to contain the virus’s spread have created a combustible constellation. Arizona has seen among the highest increases in newly reported deaths of any state over the past two weeks — and it is not clear when this troubling trend will abate.
Halfway between San Diego and Phoenix, but geographically isolated from both, Yuma has only one hospital. Understaffed and overwhelmed with cases, it has been airlifting critically ill patients to other cities. And the fallout from Christmas and New Year festivities is not over.
“It’s a wave of critically ill people that isn’t breaking,” Cleavon Gilman, an emergency medicine doctor at Yuma Regional Medical Center, said after a recent 12-hour shift.
There are farmhands, loath to miss work, who waited too long to seek medical attention. There are retirees who stubbornly believed that they could power through Covid-19, just as they did when stricken with a flu, or who refused to wear masks. There are members of families who live in tight quarters or who could not resist gathering to celebrate the holidays.
Dr. Gilman blames the governor, Doug Ducey, for not enacting stringent measures. “Everything is open: restaurants, gyms, barbershops,” he said. “People are needlessly dying because there is no statewide mandate to prevent it.”
As the virus continues its rampage, the county has failed to secure an adequate supply of vaccines.
After inviting those 75 and older, teachers and law enforcement to schedule appointments recently, the health department announced that it had run out of vaccines, in part because state officials appeared not to take into account the region’s winter population bulge when they allocated doses.
“There was no plan to get the vaccine to the people who need it,” said Amanda Aguirre, president of the Center for Border Health, a network of nonprofit clinics. “We don’t have time to wait. It needs to be now.”
A special risk for farmworkers
Between October and March each year, as many as 40,000 “lechugeros,” or lettuce people, toil in Yuma, whose mild temperatures and Colorado River-irrigated land make it the ideal spot to grow leafy vegetables.
Thousands commute daily from Mexico to the verdant fields that stretch into the distance, where the rust-colored Gila Mountains glisten. Guest workers stay in motels in town.
Before dawn on a recent morning, Mexican workers trickled through the port of entry and boarded dozens of rickety white buses that idled nearby. Plastic sheets hung between rows; only one rider was allowed per bench. “If anyone has a temperature, I send them back,” said Gabriel Talamantes, one of the foremen.
A couple mornings later, health workers offered a free saliva test to laborers as they emerged on U.S. soil. “It’s for your good and the good of your family,” a loudspeaker blared in Spanish.
“We noticed younger people avoided testing,” said Flavio Marsiglia, director of the Global Center for Applied Health Research at Arizona State University. “We believe many of those young people are positive with no symptoms and spreading the virus.”
“They ride those buses that are very crowded, work very close to each other in the field, share food,” he added. “It’s very easy to spread the virus in those conditions.”
Arizona’s attempts to control the virus
Yuma reported its first presumptive case of the coronavirus on March 20, the same day that the governor initially closed bars, movie theaters and gyms, and limited restaurants to takeout and drive-through service.
“We’d seen how bad it got in New York, Seattle and bigger places. We were thinking it’s not going to be a big deal in Yuma,” said Rick Madrid, 41, manager for a wholesale food distributor who can count 11 people in his circle of family and friends who have contracted the virus.
The first death in the county occurred in late April.
In mid-May, Mr. Ducey lifted stay-at-home orders, making Arizona among the first states to reopen after a spring lockdown. As temperatures soared past 100 degrees, forcing people indoors, the caseload resumed its ascent.
On June 17, the county board of supervisors issued a mask mandate. It required all establishments to post a sign requiring face coverings and stipulated that violators would be charged with a misdemeanor. But Sheriff Leon Wilmot announced that he lacked resources to enforce the rule.
A politically charged debate raged over the utility of masks and whether the virus posed a real threat. On June 26, a friend of Mr. Madrid’s who had been an outspoken anti-masker posted a picture of NyQuil on his Facebook page with the caption, “This is all I need to fight the bug.”
He died on July 11. Another friend died days later. “By July, I was like, I can’t believe this,” Mr. Madrid said.
The virus would soon creep up on his own family.
His father, Richard, 77, a chiropractor, and his mother, Carole, 75, the office manager, had been traveling back and forth to their clinic on the Mexican side of the border each day. Many of his loyal clients, most of them snowbirds, were in Yuma, counting on him to soothe their back, shoulder and hip pains.
In mid-November, against their son’s wishes, the couple visited a restaurant that had hired Rick to roast a pig on the back patio. “He was old and stubborn, and he exhibited machismo. That’s the culture,” he said of his father, a Mexican-American and strong supporter of former President Donald J. Trump. “He wasn’t going to let this bug dominate him.”
Two days later, the couple began exhibiting flulike symptoms that turned out to be Covid-19.
The same week, Mr. Madrid’s two siblings and their spouses tested positive for the virus.
On Nov. 29, his father died. Five days later, Mr. Madrid gave in to the urge to visit his mother, ailing and grieving, at the sage-green ranch-style house where he had been raised.
Soon Mr. Madrid could not smell or taste, not even his son’s steak with jalapeños. He had the coronavirus. A week later, his wife also tested positive.
“As proud as I am of my community for being tough in pulling through, I am also disappointed that people didn’t take it more seriously,” he said.
High season brings new dangers
In sun-drenched R.V. parks, septuagenarians in shorts gather with fellow snowbirds for cocktails, sports and sunning under cloudless blue skies in the high season.
Kristi and Timothy Getz have been coming for more than a decade to Country Roads RV Village, an expansive retirement resort crisscrossed by streets with names like Party Time and Good Time.
“This place is paradise,” said Ms. Getz, who lives with her husband in a cheerful manufactured home on Off We Go Street. “My best friends are here.”
Ms. Getz, a retired manager of a truck dealership in San Jose, Calif., does not miss a dance party and loves the shows in the ballroom. Mr. Getz, a former military driver, plays the electric piano in jam sessions with his buddies.
But the pandemic has undermined community harmony — and spoiled the fun.
Just a couple of days after some 200 residents celebrated the groundbreaking for the ballroom expansion with a “burger bash” in March, the governor issued a stay-at-home order.
“We went from hugging and congratulations and excitement to ‘What do you mean there’s a lock on the pickleball court and I can’t go in the swimming pool or in the exercise room?’” recalled Pat Tuckwell, a retired health care executive from Madison, Wis., who is president of the board of directors.
Every activity, from card clubs to woodcarving and quilting, was halted.
On the Facebook page Country Roads Rants and Rages, arguments broke out between residents who believed that the virus was a hoax and those who did not. “Half the park was in denial,” said Mr. Getz, who was among those “fighting for the science.”
By the time restrictions were lifted in mid-May, most of the snowbirds had returned to their hometowns for the summer.
Back in October, they found recreational facilities reopened, with certain rules. The number of people allowed in the pools and the fitness center was limited. Card clubs remained banned.
That month, the first three cases of the virus were reported to the board. In November, the community had its first fatality.
A sign went up outside the gym in early January. The facility was closed for deep sanitizing after someone refused to wear a mask.
“Hats off to the guy that would not wear his compliance mask,” declared one resident on Facebook.
As of Jan. 8, there have been 55 known cases and three deaths in the community, but Ms. Tuckwell said the actual tally was quite likely higher, given that cases are self-reported.
Ms. Getz was horrified when she recently noticed eight people playing cards inside a nearby home, none wearing masks. Her husband did not let her confront them.
“I just don’t understand it when Yuma is such a hot spot,” she said.
At St. Francis of Assisi, worshipers pray, but prayers have not kept the virus at bay.
Armida Lopez, one of the parishioners, said she had lost count of the members of her family who have been stricken.
“People in my family are dying every day, it seems. First cousin, second cousin, uncle, brother-in-law,” she said, her voice trailing. “Right now, it’s like, who is going to die next?”
One of the most important global airfreight gateways is facing the spectre of tighter measures that could have a profound impact on cargo capacity.
According to a report in the South China Morning Post, the Hong Kong government is looking to implement measures next week that include a mandatory 14-day quarantine for airline crews.
This would apply to those on passenger and freighter aircraft returning to the territory after an international layover – so far they have been exempt from quarantine requirements.
In Hong Kong’s fourth wave of Covid-19 infections, the number of new cases has risen lately, with 70 registered on Thursday alone. Seven were of foreign origin.
Last summer, FedEx’s pilot union asked management to suspend Hong Kong operations, citing “unacceptable conditions” for pilots in quarantine and those who tested positive and were allocated to public hospitals.
Around the same time, the union representing UPS flight crews called for pilots to have the right to decline missions to Hong Kong, which was then experiencing its third wave of Covid-19 infections. Both companies declined those requests.
The impact of the new quarantine mandate for returning flight crews would hit Cathay Pacific the hardest, with serious repercussions for its longhaul network.
Tom Owen, director of cargo, said: “We are regularly in discussion with the government on a range of quarantine-related issues, given they are amended and updated regularly. At this point, we have nothing to share regarding any future changes, which I see are being speculated in the media. Our freighters continue to operate as scheduled and we are moving into the pre-CNY [Chinese New Year] rush.”
One source at a freighter airline noted this morning that, while the airfreight market was “extremely busy in all directions”, the weakest sector was Hong Kong-Europe.
A disruption of Cathay’s operations would also be a serious headache for forwarders and shippers.
Neel Shal, executive vice-president and global head of airfreight at Flexport, said: “This will definitely be a challenge for the market. Cathay is the major player in the South China market. If its schedule is disrupted it will certainly exacerbate an already tight capacity situation and one could expect rates to spike as a result.
“Right now we don’t have any visibility on how long this policy might remain in place, so we can’t comment on the market impact beyond the next few weeks.”
However, he does not envisage major problems for Flexport in the event of a quarantine mandate.
“We’ve had a diversified charter and BSA strategy in place for months, so while the potential quarantine that will impact Cathay and its ability to move longhaul cargo will be a logistical headache, a nominal amount of Flexport cargo could be impacted. We carry the bulk of our cargo from South China on our own freighters,” he said.
Meanwhile, the prospect of Covid-19 measures bringing new disruption to the air cargo industry is not confined to Asia. As The Loadstar reports today, Air France KLM may suspend all longhaul flights after the Dutch government yesterday agreed new measures aimed at containing the spread of the pandemic.
Research links some of the losses that fruit and vegetable growers suffered because of COVID-19 pandemic to labor shortages caused by the number of infections among farmworkers.
“The Effects of COVID-19 on Fruit and Vegetable Production,” by Stephen Devadoss, the Emabeth Thompson Endowed Professor in the College of Agricultural Sciences & Natural Resources at Texas Tech, and William Ridley of the University of Illinois at Urbana-Champaign, found 2020 U.S. crop losses were estimated in a range from $3.8 million-$16 million for lettuce, $1.3 million-$5 million in apples and $1.1 million-$4 million in grapes, according to the report. Total fruit and vegetable crop losses tied to labor shortages were estimated to range from $12 million in a conservative economic model to as much as $48 million in the extreme scenario.
Devadoss said Jan. 19 that several studies have been done about the effects of the pandemic on meatpacking facilities and output but very few people have considered the effect of the virus on fruit and vegetable production.
Researchers used county‐ and commodity‐level data to estimate the output elasticity of labor demand for several major labor‐intensive fruits and vegetables, according to the report.
The report was submitted for publication in July and first published online in October.
“Based on these estimates and current active COVID‐19 infection rates by county, we then forecast the likely production losses across commodities and geographical regions from shocks to the farm labor supply under conservative and extreme scenarios,” researchers said.
Outbreaks are thought to be accelerated by the close quarters in which workers live and work, the report said.
Among the study findings is that the disruptive effect of the virus on farmworkers resulted in millions of dollars in lost fresh produce production, with the heaviest toll concentrated in large fruit‐ and vegetable‐producing states such as California, Arizona and Washington.
The 2020 losses linked to labor shortages in the fruit and vegetable sector were not catastrophic, researchers said, but they were significant.
Over 30 container ships are anchored in San Pedro Bay off Los Angeles and Long Beach
In the movie “Falling Down,” the character played by Michael Douglas is stranded in a Los Angeles traffic jam. He abandons his car, starts walking with briefcase in hand and ultimately has a mental breakdown. Cargo shippers trying to get their containers through the ports of Los Angeles and Long Beach can relate.
The pileup of ships offshore in San Pedro Bay and congestion onshore at the terminals have reached epic proportions.
And the situation could become even more maddening in the weeks ahead.
32 container ships at anchor
American Shipper interviewed Kip Louttit, executive director of the Marine Exchange of Southern California, to get the latest on ships in San Pedro Bay.
He reported that as of midday Wednesday, 91 ships were in port: 46 at berth and 45 at anchor. Of those, there were 56 container ships: 24 at berth and 32 at anchor. Between Wednesday and Saturday, 19 more container ships will arrive, with the same number due to depart.
There were a few more container ships at anchor on Friday —37 in total. Yet Louttit said “there has been no significant change between the first of January and today.”
Louttit confirmed that ships have effectively filled all of the usable anchorages off Los Angeles and Long Beach. Ships have also taken six of the 10 contingency anchorages off Huntington, the next town south.
If all the anchorages and contingency anchorages fill up, ships will be placed in so-called “drift boxes” in deeper water. These are actually circles not boxes. Unlike ships at anchorages in shallower water, ships in drift boxes would not anchor, they’d drift. “When you drift out of the circle, which has a radius of 2 miles, you start your engine and go back to the middle of the circle,” explained Louttit.
Historical perspective on traffic jam
Given the drift-box option, container ships are not about to hit any kind of maximum capacity offshore of California. Nor is there a higher safety risk. “There are a lot of ships, but they’re all very carefully watched and managed,” affirmed Louttit.
The significance of so many anchored ships is what they reveal about the extent of the logistics logjam on shore.
The most recent comparable anchorage level occurred during the labor dispute between the International Longshore and Warehouse Union (ILWU) and their employers in 2014-15.
“On March 14, 2015, there were 28 container ships at anchor. We’ve blown through that record,” said Louttit. The all-time record for ships at anchorage off California occurred in 2004 during a rail staffing shortage.
“Normally, if you want a baseline, there’d be a dozen and rarely are they container ships,” he said.
Signal still flashing red
The Marine Exchange does not look past the coming four days’ arrivals. But there are other ways to see what’s headed this way across the Pacific.
It takes two to three weeks for containers to cross the ocean from China to California. The Port of Los Angeles developed The Signal, a daily digital tool powered by Port Optimizer, to indicate what’s en route. The system uses manifest data from nine of the top 10 carriers calling in Los Angeles.
The Signal data updated on Wednesday showed no letup in sight. Imports are expected to rise from 143,776 twenty-foot equivalent units (TEUs) this week to 157,763 TEUs next week to 182,953 TEUs the week of Jan. 24-30.
Importantly, the data does not solely include TEUs arriving in a particular week. It also includes TEUs arriving in prior weeks that the port expects to handle in the stated week.
Consequently, the data provides an indirect indicator of how much cargo is getting delayed. For example, on Monday, Jan. 4, The Signal indicated the port would handle 165,000 TEUs that week. But by Friday, Jan. 8, the assessment for that same week had plunged to 99,785 TEUs — implying that over 65,000 TEUs were pushed to the following week (i.e., this week). This pattern also suggests that the forecast for 182,953 TEUs the week of Jan. 24-30 will ultimately be revised downward.
In an alert to customers this week, carrier Hapag-Lloyd reported, “All terminals [at Los Angeles/Long Beach] continue to be congested due to the spike in import volumes and [this] is expected to last until February.
“Terminals are working with limited labor and split shifts,” it said, asserting that this is related to COVID. “This labor shortage affects all terminals’ TAT [turnaround time] for truckers, inter-terminal transfers and the number of daily appointments available for gate transactions and delays our vessel operations.”
As a result of “lack of terminal space” to service vessels, “there is a constant switching of terminals that must be kept in mind” given that containers are ending up “in the wrong terminal,” said Hapag-Lloyd.
Congestion woes are now spreading well beyond California ports, confirmed Hapag-Lloyd. The carrier reported “heavy congestion” in Canada and “berth congestion at Maher Terminal and APM Terminals [in the Port of New York and New Jersey] impacting all services with delays of several days being experienced upon arrival.”
Investment bank Evercore ISI predicted, “Additional checks will reach consumers at a time when unemployment is lower [than during the 2020 stimulus round], mobility has significantly improved, the overall willingness to spend of the general public is up significantly, confidence levels are higher, housing is strong and the savings rate is still extremely high. That is a set-up for a consumer boom.” Click for more FreightWaves/American Shipper articles by Greg Miller
MORE ON CONTAINERS: ‘Blue wave’ could spur stimulus on top of stimulus: see story here. Liners highly unlikely to slash service for Chinese New Year: see story here. Container shipping 2021: hangover or party on? See story here.
The drought affecting Chile since 2010 has led the government to take emergency measures in order to help farmers and ranchers.
According to information published by the General Directorate of Water of the Ministry of Public Works of Chile, as of November 2020, 16 water shortage decrees are in force in 79 communes, concentrated in the Valparaíso and Metropolitan regions.
In this scenario, it becomes fundamental to invest in solutions that will allow for efficient water usage. Alejandro Friedli, manager of Large Companies, Products, and Agriculture for Banco de Chile, said that water is one of the most sensitive points of the agricultural business and for this reason, the institution has been concerned with creating specialized financing instruments for agriculture.
He stated: “We have supported storage infrastructure (for example, reservoirs and dams) as well as efficiency improvements for these (with coatings), investments in loss prevention for water conduction, the expansion of technical irrigation surfaces, and the installation of sensors and equipment the improve the efficiency of water use, among other [measures].”
In this regard, Friedli explained that the role of the Banco de Chile is to be a link in the agricultural sector’s productive change, which it sees as “a fundamental pillar of the economy and the country’s development”.
From this perspective, he affirmed that the bank trusts the national agri-food industry and its capacity for growth, for which it has specialized in the creation of adequate financial instruments in a sector where the structure and vision of the short, medium and long terms are relevant.
To this, he added: “We have a human team that is familiar with all the particulars of the business and we maintain active participation in union activities within the sector so that we can stay up to date with the current and future needs of our clients.
The executive said that historically the Banco de Chile has had a close relationship with agriculture. In fact, the bank came into being after the merger of three financial institutions, one of which was the Banco Agrícola.
“Even though we have always been present in the sector, big changes in the industry have motivated us to rise to the occasion and gain the ability to better advise our clients. In 2017 we reinforced the agricultural area with the aim of providing a closer and more specialized service,” Friedli said.
He commented that the bank also maintains a close relationship with the union and productive sector, to keep up to date with reality as well as present and future needs.
Agricultural Water Summit – Chile 2021
Collaborative instances where different links of the agricultural industry chain meet are necessary to be able to pull through in times of water adversity.
Companies like Banco de Chile work to promote investment in the industry, providing economic solidity to water projects that help consolidate the future of agribusiness.
Agricultural Water Summit – Chile 2021 will be an event that generates space for conversation, where different figures with the fruit and vegetable sector will be able to meet and work on water problems and challenges.
The conference will be held on April 20, 2021, at the Sun Monticello Hotel Conference Center, located in San Francisco de Mostazal, Chile.
The post-Hanjin evolution of South Korea’s shipping industry took another step forward last month with the formation of the K-Alliance.
Comprising HMM, SM Line, Pan Ocean and recently merged Sinokor Merchant Marine and Heung-A Line, the alliance will strengthen the carriers’ competitiveness in South-east Asia, according to Korea’s ministry of oceans and fisheries (MOF).
It said the alliance represented about 40% of Korea’s annual container volumes of 480,000 teu with the region, adding that this is a market share that’s under pressure due to the “aggressive expansion” of international players.
Launching in the second quarter, the code-sharing agreement between the carriers will help reduce costs and increase quality of service, the MOF added, while the alliance members will also be offered preferential interest rates for new vessel orders.
Sea-Intelligence’s Lars Jensen described the alliance as “another step towards carrier consolidation” in intra-Asia, a gradual process he sees taking place over the next decade, “not unlike the consolidation process in the deepsea trades”.
He cautioned, however, that 14 Korean container lines had announced the Korea Shipping Partnership (KSP) in 2017, “without the market having seen a pronounced effect”.
Indeed, while the K-Alliance could help bolster the balance sheets of its five members, there is little expectation it will have much impact on intra-Asia trade dynamics.
HG Jung, commercial director of Chung Yang Shipping, told The Loadstar: “The K-Alliance gives the impression of a government-subsidised survival plan, rather than a market domination strategy.”
For example, he said, the Hanjin bankruptcy in 2016 had sent shockwaves through the industry and “overwhelmed not only the nationwide private logistics sector, but also gave warnings to government bodies and lawmakers”.
While the KSP was formed in the Hanjin aftermath, Mr Jung said the K-Alliance followed the shipping “disaster” experienced last year at the onset of the Covid-crisis. The Korean government had announced an aid package for the shipping industry, but the ministry “encouraged those KSP members to form an alliance and consolidate their overlapped services in order to make the funding more effective”.
Nevertheless, the rapid reversal of fortunes for container lines last year helped HMM to an unexpected rebound in volumes and profits, he noted, thanks largely to record freight rates on the deepsea trades to North America and Europe.
Mr Jung added: “There have also been rate increases in breakbulk on the back of increased Chinese demand in coal, ore and grain; Panocean and Korealine are slowly exiting out of a long tunnel of financial deficits.
“It’s too early to say Korea’s shipping industry has had a complete recovery or that it’s booming, but the rock-bottom has passed and the curve is pointing upwards – in the order of container shipping then breakbulk – and hopefully, on and on.”
Notwithstanding further rate spikes this week, the Shanghai Containerized Freight Index (SCFI) is still understating the prices shippers are paying carriers, according to a senior analyst.
“It should be noted that the market is at a point where the SCFI is, in some cases, significantly underestimating actual rates paid,” said SeaIntelligence’s Lars Jensen.
However, the SCFI’s comprehensive index, reading 2,411.82, is 167% higher than a year ago, reflecting huge spot rate increases across all export trades from Asia.
For example, rates to the South American east coast are recorded at some 200% higher than 12 months ago, while intra-Asia spots are 450% more expensive.
But the SCFI this week recorded only a modest 6% uplift for rates to North Europe, to $3,124 per teu. And although this rate is 230% higher than a year ago, it is well below the whopping price increases shippers are said to be encountering on the route.
It appears from reports by shippers to The Loadstar this week that 40ft FAK rates to North Europe for 15 January are in the range of $10,000 to $16,000.
Mr Jensen said today he was “somewhat lost for words in describing container rate developments this week”, and shippers accuse the container lines of “making a bad situation worse”.
CEO of UK-based specialist logistics firm JAG-UFS Gary Wilcox took to LinkedIn yesterday to vent his anger, saying he had been in the logistics industry for 35 years and had seen fluctuations in ocean rates before, but never to this extent.
“Today I have seen container rates from China to the UK at the highest level I have ever witnessed,” he said, adding that the shipping lines’ justification of hiding behind the pandemic was “just not acceptable”.
“There is congestion at ports, there is an imbalance of equipment and a huge demand for space, but there is no justification for an increase of over 800%!” he said.
Meanwhile, the SCFI recorded a $150 per teu increase for Mediterranean rates, to $3,223, which is 194% higher than a year ago.
On the transpacific, rates have remained stable, at an inflated level, for several weeks since the intervention of Chinese regulators and the investigation into carrier practices by the US Federal Maritime Commission.
The US west coast component of the SCFI actually edged down, by $48 per 40ft to $3,900 this week, albeit that the rate is still 190% higher than a year ago. For the east coast, the SCFI ticked up $69, to $4,874 per 40ft, which is just under 100% above the level of 12 months ago.
But Jon Monroe, of Washington state-based Jon Monroe Consulting, said the actual rates paid by shippers, taking into account premium container and space guarantee fees, was closer to $6,000 for the west coast and $7,000 + for east coast ports.
“Today I heard of some companies buying rates at $8,000-plus for the west coast. It seems unbelievable to me,” said Mr Monroe.
He reported that import orders “remain strong, with retailers ordering spring and summer merchandise early to avoid delays.
“With the surge of imports continuing through January, BCOs will continue to be reliant on NVOCCs for extra space beyond their contract,” added Mr Monroe.
The letter said the groups “support and greatly appreciate” the classification of agricultural workers as a high priority behind only health care workers and those with serious health issues in the state’s vaccination plan.
“However, we are concerned that the proposed timeline for vaccinating this population will not be complete before employment activity and temporary housing occupancy begins rising in early March,” the letter said. “Whether these workers are living in workforce housing or in private residences, which are often multi-generational and can be more crowded than state-licensed employer-provided housing, it would be better to complete vaccination of these essential farm and food workers before we approach peak seasonal agricultural employment.”
The groups recommended that Inslee:
Prioritize vaccinating all food and farmworkers living, working, or being transported in close contact settings, regardless of age;
Ensure ongoing priority for migrant and temporary farmworkers;
Convene a group of employers, housing and health providers, and worker advocates to identify logistical challenges and available resources to speed vaccinations; and
Start a communication campaign to dispel rumors and educate workers and families on the importance of vaccination.
Jon DeVaney, president of Washington State Tree Fruit Association, said the goal is to ensure workers are vaccinated “before our season really gets rolling.” Growers are also concerned that expensive COVID-19 regulations related to farmworker housing may continue for a time after the vaccine is administered to all farm workers. The state recently extended the emergency housing regulations for three months; DeVaney said it is possible that farm workers will be vaccinated before then.
Under the state’s plan, older farm workers will begin receiving vaccinations in February. Vaccinations for younger workers could happen as late as April. DeVaney said it makes more sense to do all farm worker vaccinations at a particular site at one time, rather than split the age groups.
He also said all farm workers should have access to the vaccine, regardless of age or immigration status.
“We want to make sure that we’re not segregating out certain workers as getting the vaccine and others not on the basis of their immigration status rather than on the basis of how much risk there is,” he said.