New shipping routes may hinder food, raw materials chains

Dive Brief:

  • American farmers already pressed by a strong dollar are increasingly struggling to survive on exports, The Wall Street Journal reported last week. That struggle is now compounded by shipping alliances' diminished port calls.
  • As freight rates are generally higher for imported goods than for exported produce, lines tend to prioritize ports located closer to consumers than farms. With consolidation of major shipping networks to just three alliances, farmers fear access to ships and containers will be limited further.
  • In addition, such changes also create an imbalance in access to steel containers and have caused shipment delays in Asia. As commodities tend to compete with low-priced goods abroad, such shifts may force higher prices for U.S. suppliers and force fewer exports.

Dive Insight:

Supply chains rely on a global logistics network with set schedules and promises of on-time delivery, so it is hardly surprising that chaos prevailed when the underlying networks were shifted at once last April. It's a triple hitter of disruptions: The new networks sow confusion among shippers, alter intermodal connections and port schedules, and bring larger ships to fewer ports resulting in increased congestion.

The Wall Street Journal report, however, reveals an additional consequence for global markets: Commodity suppliers may suddenly face higher logistics costs due to constrained supply, in terms of ports of call and container availability, for the same export demand.

The effects may not be dramatic: Ports abound, and in fact, smaller ports spurned by alliances with larger ships may see a boost in exports if they can market their availability. But it's an unanticipated change to the status quo. 

All told, for now the new alliances and bigger ships are working to correct an industry oversupply by achieving greater efficiencies and scale. The problem for commodity exporters is that this apparently comes with a price, and they're the ones to suffer.

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Filed Under: Freight Logistics