U.S. exports of quality grains and food products to Asia will increase steadily as consumers there develop a “demand for better nutrition,” according to Moffatt & Nichol economist Walter Kemmsies.
Many agricultural products can be sourced globally, however, so U.S. agricultural exports must be priced competitively if the nation is to retain or expand market share, said Peter Friedmann, executive director of the Agriculture Transportation Coalition, who joined Kemmsies on a Journal of Commerce Webcast addressing the trans-Pacific maritime market.
China and India, the world’s two largest countries, continue to grapple with water shortages that force them to look overseas for the soybean, oil seed and meat products popular with the growing middle classes in Asia.
At the same time, Asian nations are reconsidering their traditional export-driven economies in light of the global economic recession of 2008-09, and they are gradually shifting toward economic growth based upon consumer demand, similar to the U.S. and Europe, Kemmsies said.
As wages increase in many Asian economies, consumers there will be able to afford the quality food products exported by the U.S.
In past years, U.S. agricultural exporters faced issues on the ocean shipping side of their business that affected their ability to compete in overseas markets. Problems such as securing vessel space and equipment or sudden increases in freight rates would result in lost sales.
“The challenges for exporters this year are not on the ocean,” Friedmann said. Agricultural exporters this year are struggling on the land side with potential shortages of truck capacity and with environmental regulations.
Come July, a shortage of trucking capacity could develop as federal hours-of-service restrictions for drivers take effect. The reduction in the time drivers are allowed to spend behind the wheel each week will effectively diminish capacity, and this will happen as the industry already faces a driver shortage.
In California, regulations to reduce emissions from refrigerated equipment could result in a shortage of reefer transportation capacity and subsequently higher trucking rates. Fines for violators will be high, Friedmann said.
One way to quickly increase trucking capacity would be for the U.S. to adopt the international gross truck weight limits of 97,000 pounds, Friedmann said. In many states, the limit is 80,000 pounds.
The trucking industry believes that by adding a third axle to their vehicles, trucks with a gross weight of 97,000 pounds can be operated safely, without undue wear and tear on roadways. Raising the limit would increase trucking capacity 20 percent almost overnight, he said.