(Bloomberg) -- A looming strike of US dockworkers is threatening to disrupt US grains and other commodity exports at a crucial time for American farmers seeking to sell bumper harvests.
The possible port strike that could begin Tuesday at East and Gulf Coast ports risks upending shipments to China and other key destinations just as the harvest season gets underway. At the same time, congested railroad traffic and low water levels on the Mississippi River are also complicating the movement of crops.
The supply chain can either be a facilitator of farmer profitability or it can be an obstacle to it, said Mike Steenhoek, the executive director of the Soy Transportation Coalition. “Unfortunately, the current supply chain is an obstacle to farmer profitability.”
Growers already have been struggling with declining farm incomes because of high input costs, global competition and low commodity prices. The Conference Board estimates a strike could cost the US economy $540 million a day.
The US National Grain and Feed Association and 55 other trade groups last week pressed President Joe Biden to avert port disruptions, warning that labor strikes would hurt the agriculture supply chain and broader economy.
A strike would directly impact the shipment of containers, which account for almost 10% of grain and the bulk of cotton and meat exports from the US, according to USDA data. In addition, ripple effects throughout the supply chain could affect shipments of other commodities.
As the harvest season gets underway, even the slightest delay in moving American products efficiently has a disruptive and harmful effect on the supply chain and economy, Mike Seyfert, the NGFA’s chief executive officer, said last week.
Biden said Sunday he wouldn’t intervene in any dockworkers strike. Resolving the dispute is a matter for collective bargaining, he told reporters in Delaware.
Rail Relief
The potential disruption comes as the supply chain got some relief Monday, as BNSF Railway Co. said it will allow the resumption of grain shipments to Mexico — the US’s top importer. BNSF in late August stopped issuing permits for grain shuttle trains to Mexico due to congestion and train backlog, while Union Pacific Railroad Co. took a similar move on Sept. 18.
BNSF said it will resume issuing such permits beginning Tuesday, with distribution based on the “fluidity of the pipeline.” Union Pacific didn’t immediately respond to a request for comment.
Meanwhile, river traffic is being impacted as drought hits the Mississippi River. Last year, when the river levels were also low, barge rates rose to multi-year highs and exporters were able to send products by train to the ports in the Pacific Northwest. This year, the rail congestion and possible port strikes make that option more problematic.
According to the USDA, barge rates downriver are at their highest level since September of last year. As the Mississippi waters recede, barge companies such as American Commercial Barge Line are reducing the weight of vessels and making shipment even more expensive.
Those logistical issues are happening right at the end of the year, when transportation costs typically rise because of the greater demand to move recently harvested crops. This year’s supply-chain complications threaten to push costs even higher, further reducing the competitiveness for American exports in comparison with Brazil and Argentina.
--With assistance from Ilena Peng and Gerson Freitas Jr..
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