Labor contract negotiations between West Coast longshoremen and ocean terminal operators have been ongoing for greater than a yr and the earlier contract expired almost 12 months in the past. Whereas there aren’t any lengthy traces of ships ready at anchor – as seen throughout previous labor disputes – the scenario continues to be very troubling for exporters of U.S. beef and for all ranges of the meat provide chain.
Over the previous yr, regardless of lack of a labor contract, cargo motion was pretty regular on the West Coast, though sporadic work stoppages typically prompted outbound shipments to be delayed. Port congestion has been minimal, however that is primarily as a result of many importers have chosen to shift discretionary cargo to the East and Gulf Coasts till the Worldwide Longshore and Warehouse Union (ILWU) and the Pacific Maritime Affiliation (PMA) announce a tentative labor settlement. This isn’t a optimistic improvement for the U.S. beef trade, which depends on sturdy vessel service on the West Coast to serve its massive Asian markets in a well timed and dependable method.
That is very true for exporters transport chilled (by no means frozen) beef to locations corresponding to South Korea, Japan, Taiwan and China. Asian patrons pay a premium for this high-quality product, which should depart the West Coast on schedule due to its restricted shelf life. By way of April of this yr, the chilled premium on U.S. beef, when in comparison with frozen, was 113% for Taiwan and ranged from 72% to 83% for Japan, Korea and China.
If a relaxing cargo is delayed, numerous situations – none of them good – unfold. The product may need to stay within the home market, the place it can probably be offered at a reduction. Or it may need to be frozen previous to or throughout transit throughout the Pacific, guaranteeing a major low cost. Quick delays may nonetheless enable the product to be shipped chilled, however below a really tight timeline for reaching the tip consumer.
“It’s not a scenario that both an exporter or a purchaser desires to be in,” mentioned U.S. Meat Export Federation (USMEF) President and CEO Dan Halstrom. “When this occurs, it hurts the U.S. trade’s aggressive place and undermines our fame as a dependable provider.”
Whereas the tense scenario on the West Coast ports is just not the one contributing issue, chilled product is presently making up a declining share of U.S. beef exports to Asian markets. For instance, within the first quarter of 2023, beef exports to Japan had been 52% chilled – down from 53% final yr and down from 61% in 2021. First quarter exports to Korea had been 24% chilled, in comparison with 26% final yr and 31% in 2021. In Taiwan, the place the U.S. is the dominant provider of chilled beef, 39% of first quarter exports had been chilled – up barely from final yr however down from 52% in 2021.
“There are circumstances on each side of the Pacific which have slowed chilled beef exports to those markets, however the uncertainty at our West Coast ports is unquestionably an impediment,” Halstrom mentioned. “As a result of chilled product generates such super returns, this can be a pattern we hope to reverse within the second half of 2023. However that’s going to be troublesome until a labor settlement is reached quickly.”
On a optimistic be aware, the U.S. trade is transferring a bigger share of chilled beef to China – 14% within the first quarter of this yr, in comparison with simply 9% in 2022 and 2021. That is due partly to China’s elimination of COVID-related inspection and package deal disinfection necessities for imported chilly chain merchandise, which slowed entry into the market. These necessities had been lifted in January.
“Exporters who could have been reluctant to ship chilled beef to China now see extra alternatives to take action,” Halstrom defined. “There’s monumental potential for development on this class, however once more that is depending on dependable cargo operations on our West Coast.”
The port labor scenario has been particularly unsteady since June 1, when contract talks between the ILWU and PMA broke down, with the 2 sides reportedly remaining far aside on wages. This prompted slowdowns at container terminals throughout the West Coast and compelled the Port of Oakland to droop operations for 3 days. Negotiations resumed June 6 and cargo motion improved in subsequent days at California ports. Nevertheless, productiveness at Pacific Northwest ports remained very low. On June 9, floor operations on the Port of Seattle had been halted fully. Sporadic delays and disruptions continued into the week of June 12.
USMEF is working with trade companions to voice issues in regards to the impression of this case, not solely on pink meat exports but additionally your complete agricultural economic system.
“Don’t be fooled by a scarcity of ships backing up on the West Coast, as a result of that is troubling for each the quick and long run,” Halstrom mentioned. “The latest interruptions are irritating sufficient, however maybe an even bigger concern is that our West Coast ports are shedding enterprise and turning into seen as unreliable. That’s not in anybody’s greatest pursuits, whether or not you’re an exporter, a purchaser, a terminal operator or a longshoreman.”
