Key ag leaders shared with the Department of Transportation that the most problematic supply chain issues for the ag industry include transportation costs, labor availability, rising energy costs, and challenges with obtaining inputs and products for the ag sector.
In response to President Joe Biden’s Feb. 24, 2021, Executive Order on America’s Supply Chains, key participants in the agricultural industry detailed the key concerns for an industry impacted on multiple levels in two letters, one signed by the Ag CEO Council of the 17 top ag groups as well as another written on behalf of the Agricultural Transportation Working Group.
“After many years of low farm prices, recent price increases were poised to help elevate market net returns. Given these supply chain issues, that optimism has faded into a desire to simply not do worse than those lean years,” the Ag CEO Council groups state in their comments. “The supply chains that are critical for inputs and sales of goods face multiple and simultaneous challenges. This has led to higher prices for inputs, lower prices for outputs and, in some cases, the inability to purchase goods or services regardless of price.”
The causes of these supply chain issues have been multifold. Tariffs and the trade war disrupted markets and resulted in higher domestic steel and aluminum prices. Cyberattacks have taken down grain elevators and a packing plant. The West and Upper Plains have suffered droughts, which have reduced forage, increased irrigation needs, and lowered river levels. Hurricane Ida closed the Gulf port, slowed Mississippi River traffic, and closed chemical plants. Perhaps most significantly, the Covid-19 pandemic has affected almost every aspect of the supply chain, from transportation costs to labor availability, the CEOs write.
Labor shortages exist on the farm, in processing facilities, and among critical service providers. A National Council of Farmer Cooperative survey found that 77% of responding coops had issues retaining a skilled workforce during the pandemic. Federal food safety inspector shortages limit products that can be sold and shipped, according to the CEO letter.
ATWG adds inadequate labor availability is the largest supply chain constraint facing the U.S. agricultural industry. “ATWG members are unable to fill open positions throughout the production, transportation, warehousing, and processing phases of the supply chain. These shortages are directly impacting our members’ ability to meet consumer demands,” the group writes.
They suggest, within the Department of Transportation’s jurisdiction, policies to increase trucking productivity would be helpful, as would harmonizing the federal truck driving age limit with the state age limit to provide a more accessible pathway into the trucking industry for drivers aged 18-20. They also wrote that they support the use of vaccines to fight the spread of Covid-19, but, as announced, the Emergency Temporary Standard requiring vaccines could “cause serious labor disruptions for agribusinesses.”
Hurricane Ida closed the Lower Mississippi River and grain unloading facilities in New Orleans. Grain shipping volumes and prices have yet to recover. Fortunately, eight of the nine facilities operating before Ida are now back online. However, delays from the storm have created a backlog in the transportation system.
Drought in the Upper Mississippi basin has created low flows this year. Fortunately, dredging kept the channel at a depth that enabled traffic to continue with full loads. However, reports of light-loading due to the low river level resulting from the drought are developing, the Ag CEOs write.
Ports and shipping containers
Import volumes have overloaded marine terminals, particularly on the West Coast, causing shipping delays, canceled bookings, and surcharges. Containers are leaving the U.S. empty rather than being filled and returned with agricultural products, as is normal practice.
Accessibility to export containers has been further limited by record shipping costs and harmful surcharges. Freight charges from Asia to the U.S. have been driven as high as $15,000 to $20,000 per container. By comparison, freight charges for an export container carrying agricultural products typically cost $400-$1,800, the Ag CEOs write. With these factors combined, the ability for farmers and ranchers to fulfill overseas contracts has been significantly impacted, with some estimations nearing $1.5 billion in lost agricultural exports, the ATWG notes.
To read the complete article, go to www.farmprogress.com