First there was the fiscal cliff, then there was the dairy cliff, and now the agriculture sector is on pins and needles hoping to avoid falling over the container cliff. The latest possible catastrophe to plague the ailing U.S. economy is a narrowly-averted, yet still pending strike of port and dock workers that threatens a multi-billion dollar export trade, including record-setting meat exports.
For the last several months of 2012, a potential longshoremen’s strike at major East Coast and Gulf Coast ports created a cloud of uncertainty for the U.S. export industry. The existing contract between the U.S. Maritime Alliance and the International Longshoremen’s Association (ILA), expired Sept. 30, but a 90-day contract extension pushed the deadline for a possible strike to Dec. 29.
The last minute announcement of a 30-day extension of the existing labor contract came as very good news for the U.S. meat industry and many other U.S. agricultural interests. Paul Clayton, U.S. Meat Export Federation (USMEF) senior vice president for export services, said that while the current extension is not a long-term solution to the labor impasse, exporters were relieved to know that port activity would continue without disruption until at least Jan. 28.
USMEF data reveals that a potential ILA strike – the first such strike in 35 years – could wreak havoc in the domestic meat markets. Looking at U.S. beef exports, the greatest potential impact rests with the Port of Houston, which handled nearly 150,000 metric tons of outbound beef in the first three quarters of 2012 – or about 25% of all beef shipped out of the U.S. through an ocean port. Other East Coast and Gulf Coast ports handle smaller volumes of beef, but the cumulative impact would be very significant.
For pork, USMEF said the largest impacted outlet would be the Port of Norfolk, Va., which handled more than 90,000 mt from January through September. Other major outbound ports for U.S. pork that would be affected by a strike include New York, Philadelphia, Houston, Charleston, S.C., Jacksonville, Fla., Wilmington, N.C., Gulfport, Miss., and Savannah, Ga.
Last month USMEF reported that while beef export volumes struggled late in 2012, values remained very strong on higher prices paid for U.S. product.
Beef exports posted solid results in October, with export value ($496 million) increasing 10% over 2011 despite a 4% decline in volume (101,447 mt). This was consistent with 2012’s January-October pattern, which saw an 11% decline in volume (951,886 mt) compared to 2011 while export value ($4.6 billion) remained 2% ahead of last year’s record pace.
USMEF President and CEO Philip Seng said that although beef volumes haven't been exceptional, exports have faced some particular challenges: “Considering the economic headwinds we face in several markets, beef export value is holding up extremely well – especially on a per-head basis,” he said. “For livestock producers who are facing some very tough obstacles, the export markets are truly a source of optimism.”
But that optimism could be obliterated if the Maritime Alliance and the ILA fail to achieve a successful conclusion to contract discussions this month, and a strike commences. I discussed the situation with Seng in a recent edition of Feedstuffs In Focus, the podcast I host at Feedstuffs.com.
You can listen to our conversation, and read more about the prospects for 2013 meat exports, here.