Overseas Opportunities for Exporters

By Stephanie Nall

Would-be exporters prevented from entering last year’s bull market in food products could find now a good time to expand overseas.
In early 2008, a strong global economy combined with a weak dollar made U.S. goods more competitive than in several decades. That combination, however, also meant fierce competition for containers and space on vessels — especially for refrigerated container equipment.

Some companies that had dipped their toes in the export pool for the first time simply gave up trying to find reefers and an available booking slot on a box ship.

But the weakening global economy has changed the situation dramatically. Overall imports are down by double-digits, and many U.S. exports have dried up. U.S. agricultural goods are still in relatively high demand around the world, and ocean carriers are much more interested in getting them onboard their vessels.

The dollar has strengthened against some currencies, but the falling transportation rates have more than made up for that, keeping U.S. foods competitive.

Meats, Fruits, and Vegetables on the Rise
In December, when most import and export categories were in freefall, foreign sales of U.S. beef, pork, chicken, and fresh fruits and vegetables continued to rise, although not at the same frenetic growth rates as earlier in the year.

“Exports of fresh fruits and vegetables were up 2.34 percent in December over the previous December,” says Amy Philpott, vice president of communications for the United Fresh Produce Association. “Most of the time, we’d say ‘Oh that’s not very good,’ but given everything that’s going on in the world, we’re happy.”

Overseas sales of U.S. chicken broiler meat hit 234,235 metric tons in December, up 24 percent from the December 2007 levels. For the entire year, U.S. beef producers set a sizzling sales pace of 984,712 metric tons — up 28 percent from calendar year 2007. By the end of the year, the pace had slowed, but U.S. beef producers still sold 70,783 metric tons to foreign consumers in December — a level 10.8 percent above December 2007 levels.

Pork producers also did well at the end of the year. In December, they sold 153,749 metric tons to foreign consumers, 19.7 percent more than in the same month a year earlier. That, however, was down from the 57 percent hike for the January to December period.

People Still Need to Eat in Down Economy
Although no statistics are available yet for 2009 sales, many believe the growth rate of agricultural sales is further slowing, but farm goods remain one of the bright spots in the economy.

“No matter what, people still have to eat,” says Phillip Seng, head of the Denver-based U.S. Meat Export Federation.

“This segment of the business (reefer shipments) seems to still keep doing business, even if not at the same quantities as 2008 levels,” says Bill Duggan, vice president of refrigerated services, North America for Maersk Line. “We have seen our reefer levels drop, but not dramatically. I think for some consumers, it’s a matter of luxury vs. staple. Maybe people in Asia are going to the grocery store and buying one grapefruit instead of two.”

Exporters Find More Transportation Options
For shippers, last year’s scenario was frustrating: It was easy to sell goods overseas, but difficult to deliver them to the foreign markets. Duggan says that for companies making sales, it’s now easy to arrange transportation.

“Today in the marketplace, there is equipment available from all carriers,” he says. “After the demand last year, we flowed assets into this market instead of having all our eggs in the southern hemisphere market. Last year, shippers were focused only on ‘Get me a reefer,’ but there are a lot of choices for shippers this year.”

Duggan says the choices include speed and reliability of service and the reputation of carriers in handling perishable commodities. But ocean carriers anxious to fill empty slots on the vessels are giving shippers another choice as well by competing to offer lower rates.

Waiting for Lower Rates
The falling ocean transportation rates in some cases are actually making it harder to land a sales deal now, according to Bob Weiss, independent administrator for the Food Shippers Association.

“Some of my members have customers overseas who are holding off on purchases, because they think (freight) rates will fall more, and supplier prices will also decrease,” Weiss says, adding that he’s now negotiating contracts with carriers that are significantly lower than last year.

“I don’t try to drive rates down to rock bottom,” Weiss says. “That’s counterproductive. It’s a tough time for carriers. When times are better, the good ones will remember which shippers worked with them.”

In This Issue

News, Trends & Analysis
New Items

Inventory Investment and the Implications on GDP Growth

Supply Chain
Responding to Changes in the Supply Chain

Compliance Corner: How to Utilize Technology to Manage Global Trade Compliance

Overseas Opportunities for Exporters

Create a Strategy before Cutting Costs

Features
Gateway at a Glance – Great Lakes, St. Lawrence Seaway

2009 Ro-Ro Trend

Supply Chain product review
Automotive Supply Chain Software

Ports & infrastructure
Five Major Ports, Five Different Ways to Handle the Recession

Funding a National Freight Policy

Commentary
Will the Stimulus Package Help the Trade Conditions?

Casualties

Who, What, Where, When

Final Say