WASHINGTON — There have been many “extremes” over the past year and a half, some related to COVID-19 (sheltering at home and labor shortages) and some not (floods, droughts, fires and hurricanes). But one constant has persisted — logistics problems, including driver shortages, port congestion, soaring freight rates and more — and it doesn’t appear likely to improve anytime soon.

While labor shortages may be viewed as a separate issue from logistics, the lack of dock workers and truck drivers directly has affected the freight market.

In the near term, Hurricane Ida in late August further complicated logistics in and around New Orleans, a key point for US corn and soybean exports.

“Pandemic-related challenges such as labor shortages, limited containers and shipping delays have upset supply chains worldwide, and the situation is expected to worsen as the US Gulf Coast recovers from Hurricane Ida,” The New York Times said.

Shippers face a double-edged sword of higher rates for nearly all types of freight and tight or lack of availability.

Massive global port congestion initially was blamed on COVID-19 due to worker shortages and measures taken by companies and countries to protect workers. But as COVID-19 rates declined (only to be rising again), port issues seemed to shift to surging demand for nearly any product that is exported or imported from food to packaging to materials. Problems at the ports spilled over to affect railroads and trucks, although the latter has its own set of issues and may well have the greatest impact on the food industry as trucks are responsible for movement over the “last mile” of delivery.

The Consumer Brands Association (CBA) recently released its second-quarter Economic Pulse Report highlighting continued supply chain and labor issues.

“The second quarter of 2021 builds on a remarkable story of an industry that has continued to deliver essential goods to the American people every day through one of the most challenging periods in the industry and country’s history,” said Geoff Freeman, president and chief executive officer of the CBA.

At-home demand for CPG grew 8.7% in the second quarter, reflecting the “optimism of reopening,” the CBA said.

“Increased demand is driving already constrained supply chains to the breaking point,” the report said, noting the cost of making essentials continues to increase. “There are also significant delays and added costs for shipping product ingredients, packaging materials and — ultimately — finished goods to consumers caused by factors such as port congestion, truck driver shortages and rising diesel fuel costs.”

The Journal of Commerce recently noted the loss of effective capacity from ships sitting at ports and containers not being picked up and returned promptly has caused record-high spot container rates, high demurrage and detention costs and longer transit times.

Green Worldwide in its Sept. 2 freight market update noted increased congestion, labor shortages and other factors negatively affecting ocean, rail and truck freight on both coasts and globally.

Supplychaindive.com in a recent insight noted that ongoing congestion in the ocean freight market from COVID-19 outbreaks at ports and a lack of equipment have contributed to higher shipping rates.

“Full door-to-door (container) shipping prices are $26,000 now, up from $8,000 at the beginning of the year,” the insight said. “There is no sign of (ocean freight) bookings slowing down anytime soon as peak season approaches.”

Increases in freight capacity (mainly ocean freight) have been stymied by port congestion.

“In response to demand, ocean carriers have increased transpacific container capacity by approximately 22%,” Freightos said. “But with no way to increase port capacity, those additional ships are contributing to the new record number of vessels waiting for days outside of LA/Long Beach ports.”

Ocean freight rates remain extremely high but at least stable, Freightos said. Asia-US freight costs are five times year-ago levels, Asia-Europe rates are eight times last year and record high.

“Basically, freight is really expensive, but with close to no capacity many importers and exporters are willing to pay premiums in addition to these rates just to keep their goods moving,” Freightos said.

Anecdotal examples of freight challenges are numerous. Ingredient shippers relate common examples of truckers not showing up for scheduled loads without notification because they got a high-paying load elsewhere. Many sellers now are leaving freight costs once included in sales contracts open ended or adjusting them monthly or quarterly because of continuous rate changes and supply availability. One West Coast sugar importer said he could not lock in supply for 2022 because the seller could not guarantee ocean freight — either rates or capacity. Corn sweeteners, now being contracted for 2022, are surging 20% or more in some cases with higher freight costs cited by corn refiners as one component. For bulk sugar and many other ingredients, delivered prices are up significantly from a year ago, and above quoted f.o.b. prices (which also are higher in many cases), because of higher freight costs.

Despite strong demand and soaring rates, truck tonnage has slowed recently.

“Softness in tonnage over the last few months is due more to supply constraints, rather than a big drop in freight volumes,” said Bob Costello, chief economist, American Trucking Associations. “Not only are there broader supply chain issues, like semiconductors, holding tonnage back, but there also are industry specific difficulties, including the driver shortage and lack of equipment. For-hire truckload carriers are operating fewer trucks than a year earlier. It is difficult to haul significantly more freight with fewer trucks and drivers.”

Anyone involved in the food industry (and other industries) knows well the unprecedented problems of facing logistics. The bigger questions are: “When will it end”? and “What lies ahead?” Both of those questions are difficult if not impossible to answer, but there seems to be consensus that logistics issues will continue through 2022 and into 2023, with the wild card of COVID-19 and variants a key factor.

The Biden administration in late August appointed John Porcari as port envoy to the Supply Chain Disruptions Task Force that it created in June to address logistics issues. While helpful, trade sources do not see the added government involvement as quick fix.

Transportation issues, including higher rates, ultimately will be passed on to consumers in part or in whole, contributing to higher costs for food and about everything else and adding to concerns about the economic recovery. 

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