Dairy Container Costs "Going Crazy"
30 Jul 2021
Andrew Miller
CONTAINER PAIN: Wimpak, Minyip, general manager James French says margins are being squeezed by the price of containers.
The skyrocketing cost of shipping containers is hitting the margins of Victorian pulse, grain, dairy and meat processors and exporters.
Thomas Elder Markets analyst Andrew Whitelaw said containers (boxes) were used to export pulses, grains, meat, and wool from Victoria.
"The box market has gone crazy this year," Mr. Whitelaw said.
Rates were at their highest since 2001, with the cost of hiring a 40-foot container to export products to India now sitting at $4000, (A$7700).
That compared with the first week in June 2019 when the rate was US$1300.
The top five agricultural containerized export destinations are China, Japan, the USA, Vietnam, and South Korea.
READ MORE: Rising port costs being passed back to the farmer
Port of Melbourne figures show wheat accounts for 10 percent of all agricultural exports, with hay, chaff and fodder coming in a close second.
Other cereals, barley, lentils, and chickpeas comprise nearly 20 percent of all exports.
Dried milk and processed dairy products make up more than 12pc of exports.
Huge demand
Mr. Whitelaw said part of the problem was the huge demand for containers, from Chinese manufacturers.
"Everyone seems to have much more disposable income, and most of the western world isn't able to spend that money on leisure or travel activities," Mr Whitelaw said.
"This has resulted in huge volumes and gadgets and gizmos shipped out of China."
Sea freight broker Anchor Logistics director Bob Brittles said a combination of factors had resulted in supply and demand pressures.
The blockage of the Suez Canal, when the Ever Given ran aground earlier this month, had a massive effect.
"When the Ever Given was freed, 350 ships followed her through and dumped about 350,000 containers in Europe and just after that there were unloading delays in China.
"Those delays held up 650,000 containers."
He said the Australian market was serviced by about 12 major shipping lines.
"They have been influenced by the coronavirus situation and closures of various ports, over the last year and a half."
That had resulted in congestion and delays in unloading in many south-east Asian ports, which was contributing to the container shortages.
"The containers are in the wrong place, the ships are in the wrong place," Mr Brittles said.
Rising prices
Grain cleaning and packing service Wimpak, Minyip, general manager James French said container prices to ship to most overseas ports had risen dramatically.
"The Bangladesh rates are very similar to India and the shipping lines are making a move (on prices) every four to six weeks," Mr. French said.
He said grower pricing might have to reflect the freight cost.
"Normally we are putting work on, six to eight weeks out, but we are struggling to do that, knowing what our freight rates are going to be," he said.
"It makes us more reluctant to buy more product when we don't know what the price will be at the other end."
READ MORE: Food-grade container shortages hitting Victorian exporters hard
Burra Foods exports most of its dairy products and chief executive Stewart Carson said there was a direct container cost, as well as timing and availability.
"You might have a vessel booked to leave on Friday, then you're told the vessel won't be available until Tuesday or Wednesday," Mr. Carson said.
"What do you do with that container? In some cases, you have to put it on power, which costs you money."
Mr. Carson said the company carried the cost or sought to recoup it from the market.
"Everyone is paying a competitive milk price, you can't say sorry I'll pay 10 cents less because the container price has gone up," Mr. Carson said.
Companies could not pass the cost back to the farmer, which was only right.
"I think that's great, it gives an assurance to the farmer," he said.
He said Burra was in the same position as all other processors.
Southern Grain Storage director Campbell Brumby said his company was fortunate that his company had finished its export program before the price increases hit.
"I was speaking to a colleague who was paying $1750 for a box to a particular destination, and was now looking at $4250 if they can get the container," he said.
He put the price increase down to the state government's lease of the Port of Melbourne.
"We've been doing containers for about 10 years and when we first started, charges were negligible," he said.
"Since the lease was sold to DP World, the rates have gone through the roof - we just have to pay them and the market absorbs the cost.
"As long as all our competitors and all the people we are trying to trade with are working on the same cost basis, the market tends to absorb it.
"Whether its pulses or cereals, the market will be the market."