Ag Exporters Grapple With COVID, Trade War, Political Unknowns (With Video)

It's a recipe for trouble: COVID disruptions are pulling refrigerated containers away from food production areas. Twice this year, outbreaks stymied U.S. food shipments to China. Tariffs are still taking a bite out of ag sales. Trade tensions with China remain high. Trade negotiations with the EU are intensifying. And the presidential election could reset the entire equation in less than two weeks.

To put the myriad issues faced by U.S. food exporters in perspective, FreightWaves interviewed Washington, D.C.-based Peter Friedmann, executive director of the Agriculture Transportation Coalition (AgTC), during the Cold Chain Summit on Friday.

Reefers in the wrong place

Containerized exports from China have flooded into U.S. ports over the past three months. The growing problem: getting enough empty containers back to China for refills.

U.S. food exporters shipping goods in reefers (refrigerated containers) face the same equipment challenge, albeit in the opposite direction. "We have been dealing with this problem since COVID began," Friedmann confirmed.

"We need those refrigerated empty containers in the places where agriculture is sourced, places like the Midwest. When refrigerated containers come in with shrimp or other products we import, they tend to go to where everybody lives, which is the coastal states. They're unloaded in New York/New Jersey, or Los Angeles/Long Beach, and they tend to stay there.

"Can you imagine when you have to reposition an empty refrigerated container from New York/New Jersey all the way to Junction City, Kansas? It's very expensive. And who actually pays for that? U.S. exporters."

COVID disruptions to China-bound boxes: Part 1

Logistical issues have emerged on the destination side, in China, as well.

U.S. reefer export cargoes faced their first big problem at Chinese ports back in February. The initial lockdowns halted Chinese trucking service from the terminals. The terminals' reefer plugs (where refrigerated boxes connect to the power source) maxed out because truckers couldn't bring reefers to the hinterland. Liners tacked surcharges onto U.S. reefer exports to China and diverted those containers to other ports.

Ultimately, China reopened its inland transport network and truckers cleared reefers from the terminal plugs, making room for fresh imports.

COVID disruptions to China-bound boxes: Part 2

The next big COVID challenge came in the summer. Chinese authorities reported an outbreak at a Beijing food market in June. They blamed it on infected frozen imported food and instituted new inspections at the ports.

By July, inspections were heavily delaying the inland movement of reefers from Chinese ports. Terminal reefer plugs filled up. Liners instituted surcharges and diverted China-bound reefer cargo once again.

AgTC's first concern "was whether the Chinese actually believed COVID could be carried on foodstuffs or whether this was another one of their phony phytosanitary restrictions to protect some domestic interest," said Friedmann.

"The scientific evidence shows that COVID doesn't live on frozen salmon or refrigerated broccoli or whatever. But we concluded that the Chinese actually believed that it could. With some countries, you can tell them they're wrong. But with other countries, like China, you can't."

FreightWaves Senior Editor Greg Miller (left); AgTC's Peter Friedmann (right)

Chinese authorities demanded that U.S. food shippers guarantee cargoes were COVID-free. Freidmann said this was effectively impossible. Instead, AgTC developed a form that exporters could submit to Chinese officials to guarantee exporters had complied with all safety protocols.

Ultimately, the problem eased and disappeared. This issue no longer waylays U.S. exports to China, Friedmann confirmed.

The reason: U.S. agriculture exporters weren't the only ones who wanted to resolve the issue. "The Chinese customers themselves did not like the disruption and there was pressure on the Chinese government from Chinese citizens and Chinese companies to accept the AgTC form."

Remember the trade war?

It's easy to forget amid the coronavirus chaos, but the U.S. has been in the midst of a trade war for the past several years — and U.S. food exporters have been unwillingly thrust onto the front line.

"Our highest-value agriculture exports tend to be refrigerated: chilled or frozen beef and pork, frozen poultry, lobster, salmon and other fish products," said Friedmann. "We have trade disputes all around the world. And in virtually all of them, refrigerated agriculture exports from the U.S. play a very central role and are very much in jeopardy.

"When China wanted to retaliate against our tariffs, they went after pork. We're in negotiations with the EU right now, and it's about U.S. beef with the British, for Brexit, and it's about beef, cheese and pork with the E.U. These negotiations always seem to be about refrigerated agriculture."

The biggest risk, he said, is that trade tensions can induce a foreign buyer to switch to a non-U.S. source and it's hard to win them back. "The supply chain for refrigerated products is very complex and challenging. Once a change is made, nobody wants to go back and restore the supply chain they had with the U.S."

Trade fallout so far

Asked about fallout for U.S. food exporters under the Trump administration's aggressive trade policies, Friedmann confirmed, "Yes, the tariffs have been a negative."

However, fallout has been unpredictable.

"When the first thing China did was retaliate against our pork exports, it decimated our pork exports. Our members were absolutely thrown for a complete loop. For a while, they were exporting virtually no pork.

"But then the African swine flu decimated China's hog herds and the Chinese were desperate to get protein. They came back into our market and bought as much pork as they could get — even though China had imposed retaliatory tariffs. 

"Chinese consumers wanted U.S. pork, even though it was more expensive, because they couldn't get it elsewhere. And they bought it in record amounts. So, what started out as a horrible six, seven, eight months for our pork exports turned into one of the best years in history. And we are still exporting a lot of pork to China."

Biden vs. Trump

The outcome of the presidential election will affect different shipping sectors differently. According to some analysts, a win by Joe Biden would (at least initially) be better for container shipping than a second term for Donald Trump, and the reverse would be true for tanker shipping.

Asked how the election outcome could affect U.S. exporters of containerized food, Friedmann responded, "There's a lot of talk about tariffs. Kamala Harris, the candidate for vice president on the Democratic ticket, raised it in the last debate. She said the tariffs were one of the things the Trump administration has done that were bad for the U.S. economy.

"That would suggest to some casual observers that if the Biden team got elected, it would repeal our tariffs against other countries and other countries would repeal their tariffs against our country.

"But here in Washington, there's nobody who really expects that there would be a dramatic change in tariffs if there was a change in the administration. 

"I think the safest way to proceed for our members and for everybody else who trades internationally is to presume that a lot of these restrictions would continue under a new administration, at least for the first six months — because a new administration would have higher priorities." Click for more FreightWaves/American Shipper articles by Greg Miller 

MORE ON FOOD EXPORTS: July: Fresh threat to food exports: China COVID inspections: see story here. February: Refrigerated cargo diverted from Chinese ports: see story here.