A major discrepancy in ocean-going shipping rates is making it difficult for Pacific Northwestern (PNW) hay export firms to compete with their California counterparts.
Industry officials in the region say closing the gap will take a major effort to improve overall PNW business activity.
Hay exports from all U.S. West Coast ports were up by 4.7% on a year-to-year basis through October 2013, according to the U.S. Department of Commerce. But during the same period, PNW hay exports were down 7.2%, while exports from California increased by 18.3%.
“Of all the different factors involved, freight is the one that’s really, really hindering us,” says Mike Hajny, vice-president at Wesco International, Inc., an exporter based in Ellensburg, WA.
Currently, it costs about $900 to ship a container of hay – at 25 metric tons or roughly 28 U.S. tons – out of the PNW to an Asian port, with freight rates to increase in early February. In comparison, it costs only around $300 to ship a container out of a Los Angeles port.
Higher freight rates have basically shut PNW hay exports out of China – the fastest growing export market for U.S. hay in recent years, says Hajny. China is a price-driven market when it comes to hay imports, he explains. Traditionally, PNW’s advantage has been its reputation for delivering a quality hay supply. “If you’re adding another $25-35/ton to your price to cover freight costs, it puts you at a tremendous disadvantage.”
Like what you're reading? Subscribe to eHay Weekly and get the latest news right to your inbox.
By most accounts, the freight-rate difference between the two regions has to do with the volume of imports; that coming into PNW ports is substantially lower than what California ports handle. Increased import volume would make more containers available for shipping hay and other products out of the PNW. In turn, that would force shipping costs downward.
“As a region, the only way you can be a big, healthy exporter is to be a big, healthy importer,” says Mark Anderson, CEO of Anderson Hay and Grain Co., Inc., an export firm with facilities in Washington, Oregon and southern California.
To improve the situation, PNW regional business and government leaders need to forge new strategies to increase import activity, he says. Leaders must improve transportation infrastructure, including better highways and railways. “People here tend to want to make this about the ports. But it’s just as much about the general economy.”
An important first step, says Wesco’s Hajny, would be to show how freight rates affect export volume. He encouraged those attending the January annual meeting of the Washington State Hay Growers Association to get involved.
“Having a few exporters beating the drum on this may not get much done,” he says. “On the other hand, if you have 800 farmers calling for change to keep their products competitive in export markets, it will get people’s attention. What’s really needed at this point is a grassroots effort to let people know what’s going on.”
You might also like: