[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
THE IMMEDIATE CHALLENGES TO OUR
NATION'S FOOD SUPPLY CHAIN
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HEARING
BEFORE THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 3, 2021
__________
Serial No. 117-20
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Agriculture
agriculture.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
47-137 PDF WASHINGTON : 2022
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COMMITTEE ON AGRICULTURE
DAVID SCOTT, Georgia, Chairman
JIM COSTA, California GLENN THOMPSON, Pennsylvania,
JAMES P. McGOVERN, Massachusetts Ranking Minority Member
FILEMON VELA, Texas AUSTIN SCOTT, Georgia
ALMA S. ADAMS, North Carolina, Vice ERIC A. ``RICK'' CRAWFORD,
Chair Arkansas
ABIGAIL DAVIS SPANBERGER, Virginia SCOTT DesJARLAIS, Tennessee
JAHANA HAYES, Connecticut VICKY HARTZLER, Missouri
ANTONIO DELGADO, New York DOUG LaMALFA, California
BOBBY L. RUSH, Illinois RODNEY DAVIS, Illinois
CHELLIE PINGREE, Maine RICK W. ALLEN, Georgia
GREGORIO KILILI CAMACHO SABLAN, DAVID ROUZER, North Carolina
Northern Mariana Islands TRENT KELLY, Mississippi
ANN M. KUSTER, New Hampshire DON BACON, Nebraska
CHERI BUSTOS, Illinois DUSTY JOHNSON, South Dakota
SEAN PATRICK MALONEY, New York JAMES R. BAIRD, Indiana
STACEY E. PLASKETT, Virgin Islands JIM HAGEDORN, Minnesota
TOM O'HALLERAN, Arizona CHRIS JACOBS, New York
SALUD O. CARBAJAL, California TROY BALDERSON, Ohio
RO KHANNA, California MICHAEL CLOUD, Texas
AL LAWSON, Jr., Florida TRACEY MANN, Kansas
J. LUIS CORREA, California RANDY FEENSTRA, Iowa
ANGIE CRAIG, Minnesota MARY E. MILLER, Illinois
JOSH HARDER, California BARRY MOORE, Alabama
CYNTHIA AXNE, Iowa KAT CAMMACK, Florida
KIM SCHRIER, Washington MICHELLE FISCHBACH, Minnesota
JIMMY PANETTA, California JULIA LETLOW, Louisiana
ANN KIRKPATRICK, Arizona
SANFORD D. BISHOP, Jr., Georgia
______
Anne Simmons, Staff Director
Parish Braden, Minority Staff Director
(ii)
C O N T E N T S
----------
Page
Axne, Hon. Cynthia a Representative in Congress from Iowa,
submitted op-ed................................................ 137
Balderson, Hon. Troy, a Representative in Congress from Ohio,
submitted video................................................ 150
Fischbach, Hon. Michelle, a Representative in Congress from
Minnesota; submitted comment letter authored by Jack Roney,
Director of
Economics and Policy Analysis, American Sugar Alliance......... 151
Johnson, Hon. Dusty, a Representative in Congress from South
Dakota, submitted letter....................................... 144
Panetta, Hon. Jimmy a Representative in Congress from California;
submitted letter on behalf of British Columbia Produce
Marketing Association, et al................................... 138
Scott, Hon. David, a Representative in Congress from Georgia,
opening statement.............................................. 1
Prepared statement........................................... 4
Submitted comment letter authored by Agricultural
Transportation Working Group............................... 121
Submitted letters on behalf of:
Ott, Matthew, President and Chief Executive Officer,
Global Cold Chain Alliance............................. 101
Owens, Graham, Co-Chair, Government Affairs Committee,
National Industrial Hemp Council; President, Delta
Agriculture............................................ 104
Scott, Kevin, President, American Soybean Association.... 118
Stuckey, Hon. Stephanie, Chief Executive Officer,
Stuckey's Corporation.................................. 120
Submitted statements on behalf of:
Potts, Julie Anna, President and Chief Executive Officer,
North American Meat Institute.......................... 127
National Cotton Council.................................. 131
The Fertilizer Institute................................. 134
Thompson, Hon. Glenn, a Representative in Congress from
Pennsylvania, opening statement................................ 4
Submitted article............................................ 141
Witnesses
Schwalls, Jon T., Executive Officer, Southern Valley Fruit and
Vegetable, Inc., Norman Park, GA; on behalf of Georgia Fruit
and Vegetable Growers Association.............................. 8
Prepared statement........................................... 9
Supplementary material....................................... 170
Submitted questions.......................................... 198
Cinco, Ed, Director of Purchasing, Schwebel's Baking Co.,
Youngstown, OH; on behalf of American Bakers Association....... 11
Prepared statement........................................... 13
Supplementary material....................................... 170
Ferrara, Greg, President and Chief Executive Officer, National
Grocers Association, Washington, D.C........................... 16
Prepared statement........................................... 18
Supplementary material....................................... 185
Submitted questions.......................................... 199
Durkin, Mike, President and Chief Executive Officer, Leprino
Foods Company, Denver, CO; on behalf of International Dairy
Foods Association.............................................. 24
Prepared statement........................................... 26
Supplementary material....................................... 185
Samson, Jon, Vice President of Conferences, Executive Director,
Agriculture & Food Transporters Conference, American Trucking
Associations, Arlington, VA.................................... 32
Prepared statement........................................... 33
Supplementary material....................................... 189
Wells, Rod, Chief Supply Chain Officer, GROWMARK, Inc.; Chairman
of the Board, Agricultural Retailers Association, Bloomington,
IL............................................................. 39
Prepared statement........................................... 41
Supplementary material....................................... 190
THE IMMEDIATE CHALLENGES TO OUR NATION'S FOOD SUPPLY CHAIN
----------
WEDNESDAY, NOVEMBER 3, 2021
House of Representatives,
Committee on Agriculture,
Washington, D.C.
The Committee met, pursuant to call, at 10:02 a.m., in Room
1300 of the Longworth House Office Building and via Zoom, Hon.
David Scott of Georgia [Chairman of the Committee] presiding.
Members present: Representatives David Scott of Georgia,
Costa, McGovern, Adams, Spanberger, Hayes, Delgado, Rush,
Pingree, Kuster, Bustos, O'Halleran, Carbajal, Khanna, Lawson,
Craig, Harder, Axne, Schrier, Bishop, Thompson, Austin Scott of
Georgia, DesJarlais, LaMalfa, Davis, Allen, Kelly, Bacon,
Johnson, Baird, Jacobs, Balderson, Cloud, Mann, Feenstra,
Miller, Moore, Cammack, Fischbach, and Letlow.
Staff present: Prescott Martin III, Lesley Weber McNitt,
Kelcy Schaunaman, Ashley Smith, Luke Theriot, Parish Braden,
Patricia Straughn, Jennifer Tiller, Erin Wilson, and Dana
Sandman.
OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN
CONGRESS FROM GEORGIA
The Chairman. The Committee will come to order. I want to
welcome everyone, and thank you for joining us with this very
critical, important, and urgent hearing. It is very important
that we take stock of where we are at this point, in terms of
making sure that we keep our food supply chain safe and secure,
and moving our goods, our food products, our equipment that our
farmers need to really make sure that we are responding to this
very critical need. We have a distinguished panel, and I am so
delighted with the great work that my staff has done in
assembling this hearing. This is very important.
After brief opening remarks, Members will receive testimony
from our witnesses today, and then our hearing will be open to
questions. Members will be recognized in order of seniority,
alternating between Majority and Minority Members, and in order
of arrival for those Members who have joined after the hearing
was called to order. And, as always, when you are recognized,
please make sure you are muted when you are not speaking, and
when you are speaking, you can unmute. And I want to start with
my own opening statement here.
I really, really wanted to hurry up and have this hearing
so that we will be able to relay to the American community that
our food supply at this point is secure. We do not have, at
this point, a shortage of food. And the purpose of this hearing
is to make sure, as the challenges continue to unveil with the
pandemic, which is causing so much of this problem--we hope it
can go away quickly. We hoped that a year ago, but it is still
here. We don't know how much longer it will be here. But we
cannot wait to be able to look today at the immediate
challenges that face us in order to keep our food supply
plentiful and secure.
Today's hearing is a very important, with widespread look
at our supply chain issues. We want to look at the logistics
involved with ensuring that our grocery store shelves, our
convenience store shelves, all of the retail elements where our
people get their food products, are well stocked, and we want
to make sure that we in Congress are doing what we need to do
to make sure that that stays constant.
To start, our supply chain challenges are yet--our food
is--supply is safe so far, but we do have some challenges that
are widespread and unprecedented, and they are not just limited
to food and agriculture. They are global. We are a global
force. We have the world's greatest agriculture system, and it
spans the world. So, whatever happens in whichever part of the
world that is not good, it impacts us. It impacts our farmers.
It impacts our grocery stores, all of that. And we want to make
sure that we in Congress, and this Committee, get to the bottom
of what some of the serious immediate challenges are. And I
want to commend several of our House Agriculture Subcommittees
who have held hearings on this, including the beef supply
chain, small and local supply chains, and we also have had a
meeting with the Federal Maritime Commission to discuss
shipping issues and possible remedies.
I do not want to understate that these complex disruptions
are causing economic hardships, delays, limited product
choices, increased costs of production, and most notably, for
much of our American people, the prices have zoomed. So, we are
caught in the middle here, and we are committed to doing our
part in Congress, and we in the House Agriculture Committee
will shine a light on these issues and move forward.
I also want to bring attention to--while we are sailing
fairly smoothly in terms of no disruptions in our supply chain,
we do have a serious immediate challenge, and it is a challenge
that we have to address, and it is this. We need, right now,
15,000 more commercial truck drivers. If there is an Achilles'
heel in our challenge, it rests with these huge vacancies in
our truck drivers, commercial truck drivers. Let me tell you
why. Right now, according to our food service distribution
industry--they are the ones that brought this to my attention,
and I need to share it with this Committee, because we are
going to have to do something about this. Right now, we are
15,000 commercial drivers short, and we have to move
forthrightly to respond to that.
But more than that--and here is the real element of this
Achilles' heel. According to not just the Food Service
Distribution Association, but our Transportation Department and
others, here is the problem: 90 percent of our commercial truck
drivers don't last 1 year, and so we have before us a major
recruitment problem, and a retention problem. And I have moved
on this in our Committee, and we are going to call upon, and
work with, as our Agriculture Committee, and work with our
Education and Labor Committee, and work with our Transportation
and Infrastructure Committee, and I've asked my staff to begin
to reach out.
I believe strongly, ladies and gentlemen, that if we do not
address this immediate concern of getting 15,000 more truck
drivers, and if we do not especially address the question and
the issue why are 90 percent of our commercial truck drivers
not lasting a year, that doubles the impact of this challenge.
It is sort of like trying to fill the bucket up, and we can put
all the water in it, but it is meaningless if we don't close
the holes at the bottom of the pail. And so, this is why I
wanted to let you know that this Agriculture Committee is not
waiting 1 second on that. We are already moving to put this in
action, and we are calling upon the impacted committees,
Transportation and Infrastructure, and Education and Labor, to
try to see what we can do, and then pull in the Labor
Department, the Transportation Department, the Secretary, and,
of course, our Secretary, Tom Vilsack.
Now, some of this is going on already, and I want to give
President Biden some credit here, folks. He gets a lot of
blame, but he has moved on this already. With his 24/7 Plan,
that has opened up a way for us to get what truck drivers we
have on the road that can travel weekends, they can travel
nights now, 24 hours, 7 days a week. But, if we don't have the
truck drivers, what good is that? So, this is why we have to
move urgently, and put together a major recruitment and
retention program for commercial truck drivers.
And now I just want to also thank our Secretary of
Agriculture, who has moved on this, in terms of putting money
already out there. I think it is about $10 billion that he is
already putting into action, in terms of making sure that the
Agriculture Department is ready right now to assist with this
in providing emergency funds to make sure we maintain. But all
I say is that we have a tremendous challenge here. We can't shy
from it.
And I want to conclude my opening remarks by saying that we
are a great nation, and we have gone through some major
challenges. At this point, this is our Paul Revere moment. We
have to sound the alarm on this weakness that we have right now
of needing 15,000. This is what they are saying. We need 15,000
truck drivers right this moment. This will maintain where we
are. And then we really need to work with the nitty gritty of
it of retention. I was just shocked when they informed me that
90 percent right now of our truck drivers don't last a year.
So, this is a serious problem, we are moving forward, and I
just appreciate everybody here today, and I wanted to just
sound the alarm. But also, now we must have a Franklin Delano
Roosevelt moment. When they had the Depression during the
1930s, we responded, and we did things we did not even do
before, didn't know how to do. And as a result of going through
that, we put things in place as a result of the Depression that
are lasting and helping us right to this day. This is our
shining moment, Committee. Let us rise to the occasion, and let
us address this real tough issue of getting more commercial
truck drivers, and retaining them.
[The prepared statement of Mr. David Scott follows:]
Prepared Statement of Hon. David Scott, a Representative in Congress
from Georgia
Good morning, and welcome to today's hearing as we discuss a
critical issue that impacts every single person in this country--the
immediate challenges to our nation's food supply chain.
Today's hearing will be an important look into how widespread these
supply chain issues are, the logistics involved with ensuring our
shelves are stocked, how the food and agriculture industry has had to
pivot to rise to the moment, and ultimately, what Congress and our
House Agriculture Committee can do to alleviate these disruptions.
To start--the supply chain challenges are widespread and
unprecedented. They are not limited to food and agriculture, and they
are global in nature. These challenges were largely driven by the
pandemic and have persisted, due to the uneven recovery and the Delta
variant of COVID-19. The pandemic created significant new challenges,
and it revealed and intensified other issues in our supply chain that
existed before the pandemic, like labor shortages and shortages of our
critically important truck drivers. For example, the food service
distribution industry has an estimated 17,500 warehouse positions and
15,000 driver positions currently open.
Congress and this Committee have been working with the
Administration to get to the bottom of these challenges and understand
how we can partner with industry to assist the recovery and rebuilding
process.
Some of our House Agriculture Subcommittees have already held
hearings on specific sectoral concerns, including the beef supply chain
and small and local supply chains. We also had a meeting with the
Federal Maritime Commission to discuss shipping issues and possible
remedies. This full Committee hearing will take a broader, holistic
view of the food and agriculture supply chain.
While these supply chain disruptions are serious and unprecedented,
it is important to remember that we are not facing a scarcity of food
and agricultural commodities. The U.S. is still the world's best
producer of an abundant, secure food supply. Despite the challenges our
agricultural industry is facing, it is also still on pace to set record
export levels. And in the cases of commodities that have enjoyed higher
prices recently, those prices are welcomed by farmers, many of whom
suffered from low prices for years prior to the market improving.
I also do not want to understate that these complex disruptions are
causing economic hardship, delays, limited product choices, increased
costs of production, and most notable for much of the American public,
increased prices for consumer goods.
We are committed to doing our part in Congress and the House
Agriculture Committee to shine a light on these issues and partner with
industry and the Administration to find solutions. I commend President
Biden for his hard work to take these supply chain challenges head on,
as evidenced by his recent deal with ports to run 24 hours a day, 7
days a week, and the workforce development provisions in the
Infrastructure Investment and Jobs Act. The President also had the
wisdom to include Agriculture Secretary Tom Vilsack as one of the co-
chairs of his Supply Chain Disruptions Task Force. Secretary Vilsack
has announced significant USDA resources, targeted toward resolving the
bottlenecks in the food and agriculture supply chain. I look forward to
working with him to help our incredible food and agriculture industry
get through these formidable challenges.
With that, I'd now like to welcome the distinguished Ranking
Member, the gentleman from Pennsylvania, Mr. Thompson, for any opening
remarks he would like to give.
The Chairman. And with that, I will yield to our Ranking
Member for his remarks.
STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF PENNSYLVANIA
Mr. Thompson. Well, Mr. Chairman, thank you very much, and
I agree with you. We need to sound the alarm, because I think
we are actually in a crisis, when I look at all aspects of
this, and things that were perhaps avoidable, and most
importantly, things that we can address with the right action,
so I am looking forward--we have a talented group of witnesses
today on the panel that have come forward to share their
perspective. I am really interested to hear--we really do need
a root cause analysis of all the things that have contributed.
I have worked on--in my role as a senior Member on Education
and Labor, and a leader on career in technical education, I
have worked on the CDL drivers for many years, and we actually
have tools out there to help people get trained, so it is not a
matter of not having resources dedicated there.
This hearing today is a very important and long overdue
hearing to review the current strains within the supply chain,
and their impact on American agriculture, and I see this as the
first of what I hope will be many public conversations on this
topic by our Committee. We have a talented panel today, but
this is impacting every American family, and we have a lot of
key stakeholders that we weren't able to fit onto the panel
today, so I would certainly encourage--and this is a crisis. I
would encourage that we do a series of these hearings.
I point to just an article yesterday, in one of my largest
newspapers, probably one of my largest newspapers, The
Derrick,\1\ of Oil City, that talked about the Cranberry Area
School District, that normally receives, from their food
distribution, 100 cases of food. That is what it takes to
provide something I think that we somewhat take for granted,
school lunches, and they are getting 50, and the wonderful men
and women that are working in food services at that school
district are trying to do their best to be creative as to how
they deliver the nutrition that they need to do for those
school lunches, or breakfasts, that the kids need to have. That
is a crisis, when you have school districts that have their
supplies cut in half.
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\1\ Editor's note: the article referred to is located on p. 141.
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I am looking forward to hearing about workforce issues,
looking forward to hearing--I think there is an entire side of
this that the Biden Administration has ignored, in terms of
disruption of food supply, and that is the fact that our
farmers, who rely on domestic exports--we have a lot of--a
tremendous amount--probably the majority of shipping containers
going back overseas empty, and we have these commodities that
are so important to our rural communities, and our farmers and
ranchers, that are sitting there ready to go. We don't need
truck drivers for that. I don't know what we need. We need some
type of change to--where these containers are not allowed to go
back overseas empty.
We need flexibility, and regulation implementation. We need
a transition, a pivot, from the Biden energy policy that has
reduced the amount of natural gas production. And I am not--
specifically about that as an energy source--as the derivatives
used to manufacture plastics, because for every food supply, we
need packaging, and plastics are an important part of that. So,
there is a lot that I am looking forward, hopefully, to hearing
about today.
As the United States emerges from the pandemic, we are
facing a new combination of challenges and consequences,
including rapidly rising inflation, skyrocketing energy costs,
and a shortage of available goods and labor. Now, as we
approach the holidays, these issues are on the minds of every
American. And in addition to everyday needs, meals, gifts, and
celebrations will look wildly different this year as families
face an onslaught of high prices, limited stock, and minimal
customer service. Now, the Biden Administration would lead you
to believe that these are ``high class problems.'' That is kind
of a flippant statement, and I believe that it represents just
how out of touch this Administration is with main street. Main
street and farm lanes, let me put it that way, and the everyday
people who see their hard-earned dollar stretched thinner every
day.
Mr. Chairman, I would have liked to see the Administration
participating in today's hearing, because whatever solutions
that we can identify, we need them to be able to execute or to
administer. That is what the Executive Branch is supposed to
do. And while I appreciate the peril that each of our witnesses
is working through, I think it is necessary to hear from one of
the main culprits. In too many instances the White House uses
industry as a scapegoat, rather than partnering with them to
solve problems.
And while we can pull other factors, like natural
disasters, much of what we will hear about today is how
feckless liberal policies under consideration by this
Administration are compounding, instead of mitigating, this
crisis. This Administration has single-handedly perpetuated a
fear of high taxes--higher taxes, contemplated regulations
without any type of flexibility that will limit crop protection
tools and land use, reduce our nation's energy dependence, and
reverted to divisive and unreasonable vaccine mandates, and
challenged regulations in our transportation sector. And to
make matters worse, as we sit here, trillions more in reckless
spending are being readied behind closed doors. Funding that
will only add fuel to the fire of skyrocketing inflation and
economic uncertainty.
More so, and let me be very clear, this is a ruinous crisis
for our farmers and ranchers. You buy retail, sell wholesale,
and pay shipping each way. Increased input costs are hampering
producers' abilities to provide an affordable food and fiber
supply. To add insult to injury, transportation and shipping
delays, as you have reflected on, have had serious consequences
on their ability to export products, a void being filled by
foreign competitors.
Now, I can only hope that this excellent panel will shed
some light on a path out of this mess. We are looking for
solutions, that is what we do in the Agriculture Committee, and
I hope this Committee considers inviting the Administration to
testify about this issue as well. I look forward to working
with you, Mr. Chairman, to bring forth solutions, many of which
we will hear about today, and I want to thank the expert
witnesses who have joined us today on very short notice, and
the numerous associations, organizations, and businesses who
have provided additional testimony in advance of the hearing.
With that, Mr. Chairman, thank you, and I yield back.
The Chairman. Thank you, Ranking Member. And now the Chair
would request that other Members submit their opening
statements for the record so witnesses may begin their
testimony, have ample time, and to ensure that they do indeed
have ample time to answer our questions, and be able to share
their knowledge with us. And now it is my great pleasure to
welcome our distinguished panel of witnesses. First of all,
thank you very much for coming, and preparing, and sharing with
us your information.
Our very first witness is Mr. Jon Schwalls. Mr. Schwalls is
the Executive Officer of Southern Valley Fruit and Vegetable,
Incorporated, from the great State of Georgia. Southern Valley
is a produce growing, packing, and shipping facility, and Mr.
Schwalls is testifying on behalf of the Georgia Fruit and
Vegetable Growers Association. Welcome.
Our next witness is Mr. Ed Cinco, who is the Director of
Purchasing for Schwebel's Baking Company, based in Youngstown,
Ohio. He is testifying on behalf of the American Bakers
Association.
And our third witness today is Mr. Greg Ferrara, who is
President and Chief Executive Officer of the National Grocers
Association, NGA. NGA represents America's 21,000 independent
community grocers, and the wholesalers that service them.
And now to introduce our fourth witness today, I am pleased
to yield to our distinguished Chairman of our Livestock and
Foreign Agriculture Subcommittee, our colleague from
California, Mr. Costa.
Mr. Costa. Thank you very much, Mr. Chairman, and this is a
very important and serious hearing that we are having, and it
is timely, and I thank you for that. And I know you are in a
good mood this morning because the Braves did bring it home
last night, so you have a smile on your face.
The Chairman. Yes.
Mr. Costa. This next gentleman--if you like pizza, you are
going to like my friend, Mike Durkin from Leprino Foods. They
are the largest producer of mozzarella cheese in the nation,
which means the world, but they also produce a lot of other
important proteins, and lactose and dairy ingredients that are
critical to our food supply chain. And Mr. Durkin's experience
in other leading roles puts him in a good position to testify
this morning, Mr. Chairman, and Members of the Committee, of
the critical challenges, and the crisis that we are facing in
our supply chain. We look forward to hearing his testimony, as
well as the other witnesses'.
The Chairman. Thank you, Mr. Costa. Now our fifth witness
is Mr. Jon Samson, Vice President of Conferences and Executive
Director of Agriculture & Food Transporters Conference,
American Trucking Association. The American Trucking
Association represents every sector of the trucking industry,
including members who work in the food supply chain. What a
distinguished panel that we have.
And now, finally, to introduce our sixth witness, I am
pleased to yield to our colleague, the distinguished gentleman
from Illinois, Mr. Rodney Davis.
Mr. Davis. Thank you, Mr. Chairman, and I have to say, the
winning Braves manager comes from Illinois's 13th District.
Brian Snitker grew up in Macon, Illinois, and, as an almost
lifelong Braves fan, I am right with you on the championship,
Mr. Chairman.
The Chairman. Man, thank you. What a night, what a World
Series.
Mr. Davis. It was a great night, great night. And I do want
to say thank you to my good friend Rod Wells. He is the Chief
Supply Chain Officer at GROWMARK, Inc., and he is here on
behalf of the Agricultural Retailers Association. GROWMARK
employs and serves an incredible number of constituents that I
represent in my ag-centric district in Illinois, but for all of
you on this Committee who know me, you may feel very sorry for
Mr. Wells, because he was my neighbor when I moved to Illinois
back in 1977, so he had to put up with me on a very personal
basis. Even when he went to--he and his family moved halfway
across the State to Olney, Illinois, I used to spend a lot of
holidays and New Years' down with he and his family. But I
couldn't ask for a better witness to talk about the issues
affecting central Illinois, and southwestern Illinois, and my
constituents, and this great nation, for that matter, when it
comes to the supply chain. Welcome, Rod, and you are lucky I
didn't give away any secrets. I yield back.
The Chairman. Thank you, Congressman Davis. I appreciate
that. And I am so pleased to have this distinguished panel of
witnesses before us, and each of you will have 5 minutes. The
timer will be visible to you on your screen, and will count
down to zero, at which point your time has expired. So why
don't we get right into it? Mr. Schwalls, you will be first.
Please begin when you are ready.
STATEMENT OF JON T. SCHWALLS, EXECUTIVE OFFICER, SOUTHERN
VALLEY FRUIT AND VEGETABLE, INC., NORMAN PARK, GA; ON BEHALF OF
GEORGIA FRUIT AND VEGETABLE GROWERS ASSOCIATION
Mr. Schwalls. Chairman Scott, Ranking Member Thompson,
Members of the Committee, thank you for your invitation to
participate in today's hearing. My name is Jon Schwalls, and I
am the Executive Officer at Southern Valley in Norman Park,
Georgia. I am here today on behalf of the Georgia Fruit and
Vegetable Growers Association. Southern Valley is a fully
integrated year-round growing, packing, and shipping operations
of fruits and vegetables. I appreciate the opportunity to speak
with me today and share how the pandemic has created
unprecedented challenges to our supply chain, placing the
produce industry in a crisis.
When the pandemic began in March of 2020, Southern Valley
did as many farming operations did, we quickly implemented
procedures to protect our workers and consumers by mitigating
any potential exposure to the virus. Even though nearly half of
our market share had disappeared due to closure of restaurants,
schools, cafeterias, our spring crop had already been planted
at that time, so we had no choice but to harvest that crop,
while also protecting the health and the safety of our
employees.
For the first 6 months of the pandemic, our costs for
COVID-19 prevention and employee health and safety were over
$120,000. We survived 2020, and first half of 2021, but it has
certainly not been without significant increase to inputs and
costs. Recurring monthly costs of $16,000 for COVID prevention
continue today. These costs include our health task force,
which is led by a local physician, additional security
measures, PPE, quarantine housing, and related supplies.
We have made substantial adjustments in our purchasing
model to help alleviate costs with the price forecast. Southern
Valley has contracted our year's supply of crop protection
products, fertilizers, and fuel for farm operations during the
first quarter of the year. Farming operations have not only
increased in field input costs, but also shortage in supply of
many inputs, and suppliers can no longer guarantee our price
due to the shortages, shipping delays, and production.
The industry has seen unprecedented increases over the past
12 months for production costs. Specific cost increases that we
have seen here today are fertilizers, which are up 35 percent;
crop protection products, 25 percent; fuel, 48 percent; and
plastic and drip tape, 35 percent. We have also had significant
increases of packing costs. Corrugated boxes, up 17 percent;
packing supplies, 30 percent; pallets, 75 percent; and
refrigerant, 200 percent. Our outbound freight to customers is
up 40 percent.
We are in a supply chain crisis. The U.S. ports we rely on
are backed up, and products needed for farming, such as tractor
tires and computer chips, are waiting to be unloaded. There are
not enough drivers, warehouses, chassis, and shipping
containers to keep the product moving to their intended
customer, which in this case is the American farmer. Some
examples are: previously crop protection products could be
sourced the same or next day. Now that is 7 to 10 days. That is
very important, because diseases and fungus are time sensitive.
Even a few days' delay can have a significant impact on crop
yield and/or total crop loss. Fertilizers that could previously
be sourced within a week, we are waiting 3 to 4 weeks now. And
things like tractor tires that could be sourced the same day,
we are not even being given a delivery date.
In the early days of the pandemic, the Federal and state
governments took swift action to invest in the food systems,
and to work together to keep supply chains moving. The
situation we now face echoes some of the challenges we faced in
the spring of 2020. Finally, Georgia lacks a processing
facility for produce. Currently there is no opportunity to
market produce that is cosmetically flawed. The addition of a
processing facility would allow products that are currently
tossed to be sold in one of four categories, fresh cut, fresh
prepared, fresh frozen, or frozen prepared. A facility like
this would make great strides in reducing food waste, as well
as adding shelf life to these fruits and vegetables.
In times when producers are spending more to grow their
product, a processing facility would incentivize growers to
stay in farming to better balance out the additional costs
incurred throughout the pandemic, and supply chain crises, and
create food safety and stability. I thank you for allowing me
to participate today. I look forward to the continued
discussion, and I will be able to answer any questions you have
today or follow up after the hearing. Thank you.
[The prepared statement of Mr. Schwalls follows:]
Prepared Statement of Jon T. Schwalls, Executive Officer, Southern
Valley Fruit and Vegetable, Inc., Norman Park, GA; on Behalf of Georgia
Fruit and Vegetable Growers Association
Chairman Scott, Ranking Member Thompson, and Members of the
Committee, thank you for the invitation to participate in today's
hearing. Today, I want to bring attention to the resiliency of the
produce industry and ask for assistance as we continue to adapt through
the current supply chain crisis.
My name is Jon Schwalls, I'm an Executive Officer at Southern
Valley in Norman Park, GA, here today on behalf of Georgia Fruit and
Vegetable Growers Association. Southern Valley is a fully integrated,
year-round growing, packing, and shipping operation for fruits and
vegetables.
In my 26 years with Southern Valley, I've had the opportunity to
work in multiple capacities, from my direct involvement in the supply
chain, to the development and implementation of a vertically integrated
business structure, to the daily oversight of all operations.
I appreciate the opportunity to speak to the Committee today and
share how the pandemic has created unprecedented challenges to our
supply chain, placing the produce industry in crisis.
When the pandemic began in March of 2020, Southern Valley did as
many farming operations--we quickly implementing procedures to protect
our workers and consumers to mitigating any potential exposure to the
virus.
With the spring crop planted at the height of the pandemic, we knew
harvesting was necessary and we had to protect our employees, even
though nearly half of our market had disappeared with the closure
restaurants, school cafeterias, and more. In the first 6 months of the
pandemic, our costs for COVID-19 prevention were over $120,000. This
included initial costs of $27,500 for personal protection items and
housing/facility alterations to maintain employee protection and social
distancing.
We survived 2020 and the first half of 2021, but it has not been
without significant input costs. Recurring input costs for [COVID]
prevention which continues today include our Health Task Force, led by
a physician to examine operations and improvements at $3,000/month,
security to protect our employees from the risk of infection from non-
employees being brought in at $5,400/month, as well as PPE, quarantine
housing, and related supplies at an additional $7,500/month.
We've made substantial adjustments in our spending model to help
alleviate costs. With price forecasting, Southern Valley purchased our
year's supply of crop protection products, fertilizers, and fuel for
farm operations in January and February of this year.
Farming operations are facing, not only increased field input
costs, but also a shortage in supply of many inputs. Suppliers can no
longer guarantee supply with the increased demand, and they are unable
to give us a price on crop protection products or fertilizers going
forward.
While we were able to lock in some input prices, the industry has
seen unprecedented increases over the past twelve months for field
input costs. Specific cost increases Southern Valley has experienced
year to date include:
Field Input Cost Increase
Fertilizers.............................................. 35%
Crop Protection Products................................. 25%
Fuel..................................................... 48%
Plastic Mulch and Drip Tape.............................. 35%
Packing Cost Increase
Corrugated Boxes......................................... 17%
Packaging supplies....................................... 30%
Pallets.................................................. 75%
Refrigerant.............................................. 200%
Transportation Increase
Outbound Freight......................................... 40%
Now we find ourselves in the middle of a supply chain crisis. The
U.S. ports we rely on are backed up and products needed for farming
such as tractor tires and computer chips are waiting to be unloaded.
Once unloaded, there are not enough drivers, warehouses, and
shipping containers to keep the products moving to their intended
customer, in this case the farmer. Some examples of this are:
Previously, Crop Protection Products could be sourced by the
same or next day. This is important as diseases and fungus are
very time sensitive, even a few days delay can have a
significant impact on crop yield and or total losses. We
currently have a 7-10 day wait to source these products.
Fertilizers could previously be sourced within a week; we
are now waiting 3-4 weeks.
Tractor tires could be sourced the same day, within the last
year it's moved to 5-7 days, currently many of the tires we
need cannot be sourced with a delivery date.
Tractor parts. Normally same day--2 days at most, now we
have backorders for 2-14 weeks.
This problem hits close to home in Georgia with Savannah's port,
the largest in the western hemisphere, unable to move shipments. There
are reports that on an average, pre-pandemic, there would be 10,000
containers waiting to be trucked from the port in Savannah, but in the
past several months that number has increased almost to 80,000
containers waiting to be moved.
In the early days of the pandemic, our Federal and state
governments took swift action to invest in food systems and to work
together to keep supply chains moving. The situation we now face echoes
some of the challenges we faced in the spring of 2020.
Finally, Georgia lacks a processing facility for produce. Today's
consumer and retailer want a flawless product. Currently, if a fruit or
vegetable is cosmetically flawed, it is thrown away with no other
opportunity for market. The addition of a processing facility would
allow products that are currently tossed to be sold in one of four
categories: fresh cut, fresh prepared, frozen cut, frozen prepared. A
facility like this would make great strides in reducing food waste as
well as adding shelf life to these fruits and vegetables. In times when
producers are spending more to grow their product, a processing
facility would incentivize growers to stay in farming--to better
balance out the additional costs incurred throughout the pandemic and
supply chain crisis.
Thank you for allowing me to participate today. I look forward to
the discussion and am able to answer questions today or in follow-up
after the hearing.
The Chairman. Thank you very much, Mr. Schwalls. And now we
will recognize Mr. Cinco. Please begin when you are ready.
STATEMENT OF ED CINCO, DIRECTOR OF PURCHASING, SCHWEBEL'S
BAKING CO., YOUNGSTOWN, OH; ON BEHALF OF AMERICAN BAKERS
ASSOCIATION
Mr. Cinco. Good morning, Chairman Scott, Ranking Member
Thompson, and Members of the House Agriculture Committee. Thank
you for holding this hearing, and for the opportunity to
testify today on the unique supply chain challenges that face
the baking industry. My name is Ed Cinco, and I am the Director
of Purchasing for Schwebel's Baking Company. Schwebel's Baking
Company has been a household name in Youngstown, Ohio since
1906, a company founded by Doris Schwebel, and family-owned
since its inception. Currently Schwebel's has a workforce of
800 employees in two bakeries, with a dedicated delivery team.
Schwebel's product lines include hearth breads, traditional
white bread and buns, variety breads spanning wheat and
breakfast breads. I am testifying today on behalf of the
American Bakers Association, of which Schwebel's is an active
member, who represents 300 companies and 1,600+ facilities.
Today I will provide an overview of the multi-faceted supply
chain disruptions that the baking industry is currently facing,
and what we will be facing in the future.
First issue I would like to discuss is the workforce
shortage in the baking industry. Schwebel's Baking Company has
not been immune to the workforce shortage. We have experienced
high levels of turnover due to the need of 24/7 production runs
to provide a fresh quality product to our customers. The
shortage of workers in our sector means we do not have enough
workers for our shifts. We are forced to shut down production
lines, this results in fewer products being delivered to retail
stores and food services, including restaurants and
institutions. Additionally, many wholesale bakers provide baked
goods for Federal feeding programs, including the School
Breakfast and Lunch Programs, SNAP, and WIC. The baking
industry is also facing a shortage of drivers. The baking
industry has one of the largest trucking fleets in the United
States and is reliant upon drivers to transport our products to
the end-user.
Further, these workforce challenges have significantly
impacted our suppliers. ABA has a real concern over President
Biden's COVID-19 action plan that will make this workforce
tighter, due to the fact that they will have to be vaccinated.
The baking industry does support the President's goal of
getting Americans vaccinated, but we have real concerns about
the rulemaking and the negative impact on the fragile
workforce. We also worry about the access to COVID-19 rapid
tests.
Baking industry uses a variety of transportation modes,
including ports, rails, roads to move supplies to and from the
bakery. The industry is reliant on the U.S. ports to move the
freight to--these recent bottlenecks have negatively impacted
the smooth flow of trade for both ingredient suppliers and
exports of the American products. Failure to alleviate these
will lead to unusable products due to short shelf lives of some
ingredients. Successful baking operations require sourcing of a
unique combination of inputs, including commodities, specialty
ingredients, packaging, and baking equipment to keep producing
products. Reliable and consistent procurement of supplies under
normal circumstances is a complex, difficult task, but when
supply chains are unpredictable or slowed, bakers become highly
vulnerable.
Depending on the baked goods produced, companies will need
a wide array of inputs, flour, oil, sugar, spices, gluten, et
cetera. Recently we have seen a supply shortage of critically
important ingredients such as gluten, emulsifiers, soybean oil,
and packaging. Upcoming issues are being projected for honey,
sesame seeds, and durum flour, which is a main part of the
school lunch programs. The demand for soybean oil and other
vegetable oils has exceeded the current domestic supply. There
are several factors influencing the edible oil supply
availability. The 2020 drought, lower than projected plantings
in 2021, and President Biden's EPA's Renewable Biodiesel
Program. This means for some food companies edible oil will
literally not be available at any price due to the diversion of
the edible oil to the biodiesel industry.
Some bakers can order ingredients and supplies ahead of
their normal ordering schedule to ensure delivery of products
to customers. Unfortunately, this comes at a substantial cost
to the manufacturer, as it takes significant planning,
resources, and additional space, as well as carrying costs. ABA
members are reporting that because of the lack of certain
ingredients, they will no longer be able to manufacture 10 to
15 percent of their product line. If the United States is
unable to alleviate the pressure around the critical baking
ingredients, bakers could anticipate less products on store
shelves and in food services, as well as those dependent on
USDA feeding programs. Bakers will have to make tough
decisions, and this is going to impact American families.
The baking industry is facing numerous challenges,
workforce, transportation, supply, procurement, and regulatory
requirements, all of which threaten to disrupt the fragile
supply chain. Thank you for the opportunity to testify.
[The prepared statement of Mr. Cinco follows:]
Prepared Statement of Ed Cinco, Director of Purchasing, Schwebel's
Baking Co., Youngstown, OH; on Behalf of American Bakers Association
Chairman Scott, Ranking Member Thompson, and Members of the House
Agriculture Committee:
Thank you for holding this hearing on ``the immediate challenges to
our nation's food supply chain'' and for the opportunity to testify
today on the unique supply chain challenges that are facing the baking
industry. My name is Ed Cinco, and I am the director of purchasing for
the Schwebel's Baking Company.
Schwebel's Baking Company has been a household name in Youngstown,
Ohio since 1906. The Company was founded by Dora Schwebel and has been
owned by the family since its inception. Currently, Schwebel's has a
workforce of 800 employees spanning two bakeries along with a dedicated
delivery team. Schwebel's product line includes Hearth breads,
traditional white pan bread and buns, as well as variety breads
spanning from wheat breads to breakfast breads.
I am testifying today on behalf of the American Bakers Association
(ABA), of which Schwebel's Baking Company is an active member. ABA is
the Washington, D.C.-based voice of the wholesale baking industry.
Since 1897, ABA has worked to increase protection from costly
government actions, build the talent pool of skilled workers with
specialized training programs, and forge industry alignment by
establishing a more receptive environment to grow the baking industry.
ABA's membership has grown to represent more than 300 companies with a
combined 1,600+ facilities. The baking industry employs almost 800,000
skilled individuals, generates over $44 billion in direct wages, and
has an overall economic impact of over $154 billion.
Today, I will provide an overview of the multi-faceted supply chain
disruptions that the baking industry is experiencing currently and what
we will be facing in the future. ABA members want to ensure a
continuity for a reliable and steady production and supply of
delicious, nutritious, baked goods throughout the country for American
families, food service and the USDA's Federal feeding programs to
ensure food security for all.
Workforce Shortage
Workforce shortages are a critical supply chain barrier the baking
industry is facing. The baking industry was designated as essential
critical infrastructure by the Department of Homeland Security at the
outset of the COVID-19 pandemic. Our workers are essential and when the
industry faces a worker shortage, it poses a major threat to the baking
industry's supply chain.
Schwebel's baking Co. has not been immune to workforce shortages,
we have experienced high levels of turnover due to a need to run 24/7
in order to produce a fresh quality product. In addition to the lack of
new employees the aging and experienced workforce are leaving at an
alarming rate due to the new issues facing the world. This lack of new
trained employees and the loss of experience has put a strain on the
current workforce the likes not seen by Schwebel's in its 115 year
existence.
The shortage of workers in our sector; means that if we don't have
enough workers for our shifts, we are forced to shut down production
lines. This results in fewer products being delivered to retail stores
and food service including restaurants and institutions. Additionally,
many wholesale bakers provide baked goods for the Federal feeding
programs that include the School Breakfast and Lunch Programs, SNAP and
WIC. In the current supply chain hurdle climate, many bakers are
turning down additional business as they only have the workforce to run
limited production lines--forcing difficult choices on which products
to make, and when.
The baking industry is also facing a shortage of drivers. This
issue is being felt by many manufacturing sectors, which makes it even
more difficult to find and retain talent. The baking industry has one
of the largest trucking fleets in the U.S. and is reliant upon drivers
to transport our products to the end customer. Further, these workforce
challenges are impacting our suppliers. For example, we depend upon
specific ingredients and supplies to make and package our products.
Some ingredient suppliers are hesitant to take on new business for fear
of being unable to deliver their product to the manufacturer, forcing
bakers to consider other methods of sourcing thus further increasing
the prices of ingredients.
Last, the industry is already struggling with retaining and
recruiting workforce. ABA members have real concern that the
President's COVID-19 Action Plan will only make the workforce situation
worse. The baking industry supports the President's goal of getting
Americans vaccinated, but we have real concerns on how such a
rulemaking will negatively impact our industry's fragile workforce.
ABA is a member of the U.S. Rapid Action Consortium (RAC) whose
mission is to safely and effectively reopen the U.S. economy faster
through a COVID-19 rapid action testing system to enable U.S.
businesses to better create safer workplaces. The Consortium has
already seen a significant supply chain strain on members' ability to
access COVID-19 rapid tests through these efforts. The logistics of
COVID-19 vaccines, booster shots and testing are challenging and with
the ongoing workforce shortage, thoughtful and flexible compliance
implementation with a vaccine and testing policy will be critical to
keeping our bakeries operational.
I am incredibly proud of Schwebel's workforce and the entire baking
industry. Throughout the pandemic, we have been hard working and
resilient to ensure a steady supply of baked goods for communities
across the nation.
Operational Bottlenecks
The baking industry uses several transportation modes including
ports, rails and roads to move supplies and end products to customers.
The industry is reliant upon U.S. ports to move freight. The recent
bottlenecks at the ports have negatively impacted the smooth flow of
trade for both ingredient and supply imports and exports of American
products.
ABA is supportive of the move to begin operating ports 24 hours a
day, 7 days a week to begin to alleviate this congestion. In the baking
industry, manufacturers are operating 24 hours a day. Logistical
transport for bakery products is typically done overnight as there is
less traffic and so that fresh products can be delivered to customers
in the early morning hours.
Additionally, failure to alleviate the port bottlenecks could mean
rancid ingredients, rendering these inputs unusable due to excessive
delays in transit. For example, soybean oil, a crucial component in
many baked goods, has a short shelf life. Recently, a U.S. soybean oil
supply crisis has made the U.S. a net importer of this ingredient,
forcing U.S. bakers to become increasingly dependent upon imports of
this expirable product. If a vessel remains at port for an
unforeseeable time, this could make the ingredient unusable. Such a
situation could result in halting production of specific products in
which the ingredients are essential.
Rail is another mode of transportation that is used by bakers to
deliver large quantities of ingredients, such as flour. However, bakers
are experiencing issues with rail as the deliveries are often
inconsistent and unreliable. Bakers are experiencing deliveries that
are getting stuck at the rail yards. This has led many bakers to
consider alternative modes of transportation to ensure delivery of
supplies and ingredients.
Last, as mentioned previously, the driver shortage creates another
barrier to delivering products by truck. Bulk transportation for tank
or silo materials is especially short drivers due to the logistical
issues associated with a time sensitive delivery. Timing is critical as
not to run out or overload the tank or silo at time of delivery and can
occur at any time on any day. It is important that these transportation
and logistics issues be resolved to ensure the continued reliable and
steady supply of baked goods throughout the U.S.
Supply Procurement
Successful baking operations require sourcing of a unique
combination of inputs, including commodities, specialty ingredients,
packaging, and baking equipment to keep producing merchantable, quality
products. Reliable and consistent procurement of supplies under normal
circumstances is a complex and difficult task, but when supply chains
become unpredictable or slowed, bakeries become highly vulnerable.
Among all inputs, the sourcing of commodities and ingredients are
often the largest challenge for baking manufacturers. Depending on the
baked goods produced, companies will need a wide array of inputs, such
as flour, oils, sugar, spices, gluten, vinegar, etc. Recently, we have
seen supply shortages on critically important ingredients such as
gluten, emulsifiers, soybean oil, packaging, and printing capabilities
for the packaging. Upcoming issues are being projected for Honey Sesame
Seeds and Durum Flour which is a main part of the school lunch program.
Many of these challenges directly result from the global disruption of
the highly connected global supply chain further exacerbated by COVID-
19.
The demand for soybean oil and other vegetable oils has exceeded
the current domestic supply. There are several factors influencing the
supply availability. The 2020 drought, lower than expected projected
plantings in 2021 and the EPA's renewable biodiesel program play a
large role in the soybean oil supply crisis bakers are experiencing
today. Additionally, non-food use for biodiesel and renewable diesel
has expanded greatly and this demand is anticipated to double in the
next 2 years. As a result, economists report that vegetable oil prices
have tripled in the past 12 months and that the food sector faces
rationing and shortages for the third quarter of 2021 and into 2022.
The increase in biodiesel has also reduced the processing capacity
available for vegetable oils. Additional capacity is being created but
is not projected to go on-line until 2023.
This means for some food companies, edible oil literally will not
be available at any price due to diversion of edible oil from producing
food to burning as fuel at the end of this calendar year. One solution
is for the Environmental Protection Agency (EPA) to use its statutory
authority under the Federal Renewable Fuel Standard (RFS) program to
consider food and commodity prices and impact to the supply chain when
setting the 2021 and 2022 Renewable Volume Obligation (RVO) mandates
for biodiesel and renewable diesel. Congress gave EPA flexibility in
setting targets and intended that EPA transition the program away from
burning food, and toward next-generation cellulosic technology using
residuals and other non-food feedstocks. EPA has the authority to set
the RVO targets at levels that do not disrupt agricultural markets and
our food supply.
Another critical issue impacting bakers is the shortage of gluten.
The domestic Gluten supply is currently depleted, which means the
gluten needed for bread production must now rely on imports. However,
the vessel and container shortages coupled with bottlenecks at the U.S.
ports complicate the receipt of this critical ingredient. The result
was a simple case of supply and demand which forced many suppliers to
default on 2021 contract since they simply did not have the necessary
volume. The lack of volume caused a bidding war where gluten price more
than tripled from their budgeted prices.
The last ingredients I want to discuss are spices and seasonings.
These ingredients are typically imported from India. India has been
greatly impacted by the COVID-19 pandemic. Workers in India are
retreating from crowded industrial areas to rural areas thus impacting
the workforce and productivity. There are expected delays for spices,
seasoning including, pepper, salt and cinnamon.
Other issues within the supply chain are the lack of available
containers to put new product in. The aforementioned bottleneck at the
ports is slowing the return of empty containers to the origination
point of an ingredient such as the spices and seed coming from India.
The delay or lack of an ingredient could stop operations within a
plant, resulting in store shelves going empty and workers being let go.
Some bakers can order ingredients and supplies ahead of their normal
schedule ensuring deliver of products to customers. Examples of current
lead time increases are Emulsifiers (2 weeks to 8 weeks), Seeds (2
weeks to 5 weeks), Gluten (6-8 weeks), all liquid deliveries (3 weeks
to assure a driver). Unfortunately, this comes at a cost to the
manufacturer, as it takes significant planning, resources and
additional onsite or offsite storage capacity building and carrying
costs. ABA Members are reporting that because of the lack of certain
ingredients they will no longer be able to manufacture 10-15% of their
product line. If the U.S. is unable to alleviate the pressure around
the critical baking ingredients, bakers could anticipate less products
on store shelves and in food service, as well as those dependent on
USDA's feeding programs. Bakers will have to make tough decisions, and
this will impact American families.
Food Labeling
The ongoing challenges the baking sector is facing in the supply
chain are now creating concerns about our ability to meet regulatory
labeling obligations. In January 2021 and as recently as August, ABA
expressed concerns to the USDA's Agricultural Marketing Service (AMS)
regarding its compliance date for the National Bioengineered Food
Disclosure Standard (NBFDS or rule) of January 1, 2022. We recommended
the USDA's AMS maintain the compliance date and exercise enforcement
discretion for an additional year, January 1, 2023. This is an approach
that has worked well for the FDA for food safety and nutrition
regulations. However, to date USDA has determined that it does not have
the authority to do so without conducting rulemaking.
The supply chain issues have also driven formula changes to
specific products. In turn these changes are cause ingredient and
nutritional changes adding expense in packaging design.
Additionally, FDA recently released its voluntary sodium reduction
strategy guidance that only provides a 2\1/2\ year compliance period.
Even in stable times, the timeline that bakers had requested with the
Agency to reformulate, test, label, market and bring to retail and food
service, is 4 to 5 years. Bakers have strong concerns that in the
current stressed supply chain environment, it will be extremely
difficult, if not impossible, to reach that short compliance goal.
Additional Effects
All the issues discussed above are causing double digit percent
price increases that are being passed on to the customers (grocery
store, fast food, entertainment venues, schools). The increases are
necessary for companies to stay viable for their employees and
shareholders. Unfortunately, the end-user will see prices go up on the
products they need. However, the real concern is access to the
commodities, ingredients, and supplies, without that access we can't
produce our products. Food security remains our top concern.
Conclusion
The baking industry is facing numerous challenges: workforce,
transportation, supply procurement and regulatory requirements, all of
which threaten to disrupt the fragile supply chain. The baking industry
wants to ensure store shelves, restaurant menus and Federal food
programs continue to receive the nutritious and delicious baked goods
American families depend on to feed their families.
Thank you for the opportunity to testify before the Committee on
the supply chain challenges the baking industry is experiencing.
The Chairman. Thank you very much. And now, Mr. Ferrara,
please begin when you are ready.
STATEMENT OF GREG FERRARA, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, NATIONAL GROCERS ASSOCIATION, WASHINGTON,
D.C.
Mr. Ferrara. Good morning, Chairman Scott, Ranking Member
Thompson, and Members of the House Agriculture Committee. It is
an honor to have the opportunity to testify before you today to
provide the perspective of the independent grocer on America's
current food supply chain challenges. My name is Greg Ferrara,
President and CEO of the National Grocers Association. NGA is
the voice in Washington for America's 21,000 independent
community grocers, and the wholesalers that service them.
Independent community grocers account for 33 percent of all
grocery sales, exceeding $250 billion, and more than one
million American jobs. We are inherently tied to the strength
and vitality of the markets we serve, at the heart of the local
communities, and the U.S. economy. Independents provide jobs
and boost local tax revenues while bringing choice,
convenience, and value to hard-working Americans. We serve as a
critical market for agriculture products for independent small-
scale farmers, as independents differentiate themselves from
their competition by sourcing locally.
Without a doubt, the last 18 months have been the most
challenging time in grocery that anyone in our industry can
remember, and the COVID pandemic has made the grocery supply
chain literally a kitchen table issue for millions of
Americans. Since the beginning of the pandemic, we have
experienced unprecedented levels of consumer demand. While the
early days of the pandemic were marred by panic buying and
acute shortages of must-have consumer products, this new phase
of the global supply chain crunch presents a brand new set of
challenges.
The good news is that American consumers no longer have to
confront the stark images that marked the beginning of the
pandemic of empty grocery shelves and hour-long lines at
checkout. America's food supply chain, from farmers to
manufacturers, wholesalers to retailers, demonstrated its
resilience and flexibility by catching up with demand in most
grocery categories. The greatest risk we face in the market is
not the supply chain challenges under discussion today, but
rather the panic buying mindset of--is what poses the greatest
risk to the availability of food, and the ability of grocers to
keep the shelves fully stocked.
As industry and government leaders, we must be responsible
spokespeople for the food system, and reassure the American
public that there is plenty of food to go around. With that
being said, the global pandemic has changed the economy, and
the food supply chain is adjusting to deal with the new
challenges presented by the new economic order. From the
independent grocer's perspective, there are three central
factors contributing most significantly to the current supply
chain crunch.
First, labor availability. A common denominator from every
witness is that the lack of labor availability is impacting all
of us. People have left the workforce, perhaps for good. Others
left temporarily, and still have not come back. More Americans
are working from home, leading to a culture shift in how
consumers shop, and what they purchase. The food industry
continues to adapt to a shifting marketplace, but the bottom
line is we must have access to a stable workforce in order to
adequately meet the demands of American consumers. Despite the
record wage growth and endless opportunities, we still face a
major labor shortage.
Second, shortcomings in America's transportation
infrastructure capacity is driving supply bottlenecks and
delays. Specifically, the trucking industry faces an acute
shortage of truck drivers, a critical cog in the supply chain
required to move product along each step in the food production
cycle. America is still short by more than 100,000 truck
drivers, and the problem is only getting worse. The Federal
Government must take actions to increase transportation
efficiency and capacity, while maintaining current regulatory
flexibility, such as the hours-of-service waivers, as we see
the letup in demand.
Finally, third, power buyer and supply chain concentration.
The pandemic has exposed a growing problem in the food and
agriculture sector, market concentration has led to uneven
supply. The largest retail power buyers use their immense
economic power to pressure suppliers into prioritizing their
shipments over other retail customers, while extracting
concessions on wholesale pricing. As a result, independent
grocers have lost access to both popular products and
promotional pricing, often putting them at a disadvantage when
competing with their largest rivals. Consumers that live in
rural or low-income food-insecure areas that are typically
served by independents are disproportionately impacted and must
travel longer distances to find products they need at more
crowded retailers.
Although the current crisis has exacerbated economic
discrimination in the grocery sector, this phenomenon is not
confined to the pandemic. For decades independent grocers have
not had equal access to pricing promotions and packaging deals
that are provided to the largest firms, and during this time
independent grocers have lost ground in many rural and urban
areas where food deserts now exist, in large part to
competitive disadvantages in the marketplace that often favor
the biggest chains and dollar stores. To fix our supply chain,
NGA believes we must fix the competitive free market and
enforce anti-trust laws that are already on the books. That is
why NGA, along with farmers, and business groups, and the Main
Street Competition Coalition, is calling on Congress to revive
anti-trust enforcement of existing laws that level the playing
field like the Robinson-Patman Act (Pub. L. 74-692).
Although we expect some inconveniences in product
availability to be present in the near future, I have no doubt
that American ingenuity, and the dedication of the patriotic
individuals that comprise our food sector, will prevail over
the headwinds that we face in the marketplace. It will take
time to adjust to the new economic reality, but targeted
interventions from our Federal policymakers will help us get
back on the right track even quicker. With that, I am happy to
take your questions.
[The prepared statement of Mr. Ferrara follows:]
Prepared Statement of Greg Ferrara, President and Chief Executive
Officer, National Grocers Association, Washington, D.C.
Introduction
Good morning, Chairman Scott, Ranking Member Thompson, and Members
of the House Agriculture Committee. It is an honor to have the
opportunity to testify before you today to provide the perspective of
the independent grocer on America's current food supply chain
challenges. My name is Greg Ferrara, President & CEO of the National
Grocers Association (NGA). NGA is the voice in Washington for America's
21,000 independent community grocers and the wholesalers that service
them.
Independent community grocers account for 33 percent of all grocery
sales, exceeding $250 billion and more than one million American jobs.
We are inherently tied to the strength and vitality of the markets we
serve--at the heart of local communities and the U.S. economy.
Independents provide jobs and boost local tax revenues while bringing
choice, convenience and value to hard-working Americans.
From the customers they see each day to the local producers who
fill their shelves, the country's independent community grocers offer
insight into America's communities that is truly unique. Their
aggregate influence is more than matched by their cornerstone role in
every Congressional district, nourishing their neighbors not only with
food and goods, but through leadership and service.
COVID-19's Enduring Impact on the Grocery Supply Chain
Without a doubt, the last 18 months has been the most challenging
time in grocery retailing that anyone in our industry can remember.
Since the declaration of the national emergency and the industry's
designation at an essential infrastructure, independent grocers have
experienced sustained and unprecedented levels of consumer demand. In
the early days of the pandemic, we were confronted by the 2 biggest
weeks in grocery retailing in documented history as we experienced the
effects of panic buying and the closure of food service establishments.
Customers came in large volumes and stocked up on groceries and
household products taking fewer trips with much larger basket sizes
than normal.
We experienced shortages across a variety of products from
household cleaners, paper products, and shelf-stable goods like canned
soup, vegetables, rice, beans, and pasta. When Americans visited their
neighborhood grocery store, they were confronted with empty shelves and
extremely long checkout lines. Many Americans wondered whether there
would be enough food to go around to feed their families. But despite
the initial onslaught and disruptions to our daily lives, America's
food supply chain demonstrated its flexibility and resilience and
caught up with demand in most grocery categories. The food supply chain
recovered from the initial shocks and consumer confidence in food
retailers steadily recovered. America's farmers, ranchers, and workers
throughout the food distribution chain responded heroically and rose to
the occasion to keep our food supply stable. In short order, retailers
and consumers alike no longer worried about the prospect of empty
grocery shelves and coming home empty handed after a grocery run.
From the American farmer to the independent supermarket operator,
our food supply chain is strong and endured the greatest test in
generations. We are fortunate to live in a country that sources the
vast majority of its food domestically. Although import and export
delays are crippling for many industries who rely on foreign trade,
bottle necks at the ports have spared most grocery list items because
our food is largely produced right here on American soil. As other
nations' food systems face a major test in the current supply chain
crunch, it serves as a sober reminder never to take the abundance of
Americas food supply for granted. Our stable agriculture and food
system not only guarantees our economic security, but also our national
security. A population's access to sufficient, safe, and nutritious
food has been a core state interest since the beginning of civilization
itself.
It is important to frame our current supply chain challenges by
remembering that America is blessed to enjoy the most robust and safest
food system in the world. We as food industry representatives and
elected officials must continue to reassure the public and educate our
constituents about the reliability of our food supply chain to avoid
the panic buying that marred the industry during the early days of the
pandemic. It is the panic buying mindset that poses the greatest risk
to the availability of food, not the challenges that we are here to
discuss today. I do not mean to downplay our current challenges--we are
likely stuck with inconsistencies in select product availability and
moderate food price inflation for the near future. But we can avoid the
worst scenarios by being responsible spokespeople for America's food
and agriculture sector. Alarmism can easily spiral into news
sensationalism or viral social media cycles that influence the buying
patterns that we seek to avoid. It happened once and it can happen
again.
With that being said, the global pandemic has changed the economy
and the food supply chain is adjusting to deal with the new challenges
presented by the new economic order. From the independent grocery
sector's perspective, there are three central factors that are
contributing most significantly to the current supply chain crunch:
(1) Labor Availability--The common theme from all industries
represented on this witness panel is that we all suffer
from a lack of labor availability. People have left the
workforce, perhaps for good. Others left temporarily and
still have not come back. More Americans are working from
home leading to a culture shift in how consumers shop and
what they purchase. The food industry continues to adapt to
a shifting marketplace, but the bottom line is that we must
have access to a stable workforce in order to adequately
meet the demands of American consumers.
(2) Freight Capacity Constraints--Shortcomings in America's
transportation infrastructure capacity is a driving factor
behind supply bottlenecks and delays. Specifically, the
trucking industry faces an acute shortage of truck-drivers,
a critical cog in the supply chain required to move product
along to each step in the food production cycle. America is
still short by more than 100,000 truck drivers and the
problem is only getting worse.
(3) Buyer Power and Supply Chain Concentration--The pandemic has
exposed a growing problem in the food and agriculture
sector: market concentration is exacerbating product
shortages by depriving the market of much needed
redundancies and driving unfair distributions of products
in short supply. The supply chain crunch has illustrated
that capacity cannot easily increase in concentrated
markets, so when one firm experiences a shock, everyone
suffers. Retail concentration enables dominant retailers to
use their immense economic power to pressure suppliers into
prioritizing their shipments over other retail customers
thus harming independent retailers and their largely rural
and urban customer base.
I will explore each of these concepts in greater detail later in my
testimony and offer solutions for how Congress and the Federal
Government can address the mounting supply chain challenges that the
food sector faces today. I have great confidence that the food industry
will rise to the occasion and meet these challenges like we always do.
Our food system is the envy of the world because the industries that
comprise our sector--from farmers to retail stores--always find a way
to persevere.
Workforce Challenges in Grocery
Throughout the pandemic, grocers have faced workforce challenges in
keeping up with immense operational demands. Responding to historic
demand from consumers--in addition to implementing of comprehensive
safety and sanitation measures--has required grocers to scale up the
workforce significantly. The industry's ability to meet our customers'
needs would not have been possible without the dedicated and talented
frontline workers who showed up to work every day to keep store shelves
stocked. These Supermarket Superheroes, as we call them, served as they
faced serious challenges, including childcare, transportation,
interruptions, and health concerns.
Grocers have done everything in their power to protect their
workforce throughout the pandemic. As essential frontline workers, NGA
worked hard to secure personal protective equipment during the onset of
the pandemic when PPE was in short supply to protect the grocery
workforce. When vaccines became available, grocers made every effort to
vaccinate their workforce. Many grocers allowed their workers to take
paid time off to get vaccinated and to recover if they experienced side
effects.
18 months of working on the front-lines of the fight against COVID-
19 has come at great personal cost. To put it bluntly, our workers are
mentally and physically exhausted. Grocers have stepped up to recognize
these supermarket superheroes by increasing pay and other benefits to
their workers. According to NGA survey data, more than 93% of
independent grocers reported additional pay and bonuses to their
workers in recognition of their service during the pandemic. NGA was
disappointed that Congress did not also step up and recognize frontline
workers for their service to the country in any of the economic rescue
packages passed in 2020 and early 2021. We continue to believe that
these individuals are deserving of recognition from their leaders for
going above and beyond to serve the country in a difficult time. We
have publicly supported policies such as a payroll and income tax
holiday for frontline food supply chain workers, such as the
legislation that Ranking Member Thompson proposed last year, the AG
CHAIN Act.
The pandemic's strain on the food industry workforce is driving the
most significant constraints the food industry faces. Inadequate labor
availability has become the single greatest challenge to the entire
food supply chain. As the pandemic has worn on, grocers and wholesalers
have increasingly struggled to fill open positions throughout grocery
operations, including warehouse workers, truck drivers, stockers,
clerks, and the higher-skilled positions around the store perimeter,
like butchers, chefs, bakers, and deli managers. The labor shortage
makes it a greater challenge to serve our customers, sometimes leading
to longer wait times at check-outs and delays in restocking shelves.
Grocers are fighting tooth and nail to retain and recruit workers
by taking extraordinary steps to keep staffing at a manageable level.
NGA survey data finds that 85% of independents are increasing wages and
making overtime hours available to its workforce. Many are instituting
one-time signing and referral bonuses for new workers that come on
staff. Despite these efforts, we still face the most difficult staffing
environments in memory and the shortfall has a compounding effect. The
continuous and sustained high levels of consumer demand add pressure to
the existing workforce. And with most operations being short-staffed,
existing workers have to work even harder to deal with the labor
shortfall. Over-extending current staffing is not the answer because it
leads to burnout, exhaustion, and greater rates of attrition. A common
theme is that we're seeing an increasing number of grocery storefronts
adjust for shorter store hours.
The bottom line is that our workforce is exhausted and our industry
needs help. As we work to adjust to the new normal in food retailing,
we need the government's help in attracting talent into the grocery
workforce. We can offer stable, reliable, good-paying jobs to millions
of Americans, especially those seeking the enter or re-enter the
workforce. We have jobs for just about every skill level from clerking,
to chefs, to IT, to marketing and even top management.
As Congress and state and local governments consider recalibrating
workforce development and training programs to match unemployed workers
into good jobs, NGA is urging policymakers to develop and implement
vocational training and hiring programs that offer a pathway into the
grocery industry. These jobs are available in nearly every community
across the country and can offer new career opportunities. If
individuals are interested in becoming a chef or mastering the culinary
arts, grocery stores are often the perfect fit as independents
differentiate themselves in offering quality pre-made and prepared
foods. If workers unemployed during the pandemic were inspired by the
popular Netflix show, The Great British Bake Off, we offer meaningful
opportunities to talented bakers as well.
The key to re-staffing the grocery and food sectors is that we need
to think outside of the box in terms of how we educate and prepare
workers entering the workforce. We are in a new reality and programs
must reflect the needs of both workers and employers. NGA applauds
ongoing bipartisan efforts to tackle the issue of updating workforce
training programs to offer solutions to help Americans looking to start
or change careers. We stand prepared to offer our ideas on how to craft
solutions that will works for the grocery sector, one of the largest
employers in the country.
While we strongly support the use of vaccines to stop the spread of
[COVID-19], we are concerned about the potential unintended
consequences of the business vaccine mandate that the Occupational
Safety and Health Administration is expected to release any day now in
the form of an Emergency Temporary Standard (ETS). If the rule is too
onerous, particularly for small businesses, it could exacerbate the
labor and workforce challenges we're experiencing today. The industry
is already so strained that it cannot sustain another hit to
employment. We encourage Congress and the Administration to consider
providing the food sector with flexibility in vaccinating our
workforce. We hope that any ETS will mitigate any potential disruptions
to the food supply that would occur should it place a significant
burden on employers. The last thing we need is a worsening workforce
crisis as the existing labor force works in overdrive to feed the
American people.
Trucking Constraints in Food Retail
America's grocery distribution system relies heavily on motor
carrier freight transportation capacity and efficiency. Grocery
wholesalers and self-distributing independent retail grocers employ a
significant number of truck drivers and require large fleets of tractor
trailers to ship product from warehouses to grocery store shelves.
Our industry has been heavily impacted by the ongoing truck driver
shortage, which has only worsened during the COVID-19 pandemic and the
current supply chain crunch as trucking capacity is being redirected
towards alleviating log-jams at the ports. As a result, freight costs
have increased dramatically since March 2020 with some NGA members
reporting increases in costs up to five times higher than pre-pandemic
levels. Higher freight costs translate directly to higher food prices
in the grocery store checkout as grocers are forced to pass down
increased costs onto consumers. Increasing freight costs are one of the
drivers of the current inflationary pressures that we see on retail
food prices.
In addition to higher freight costs, NGA members are also
experiencing much lower in bound service levels of goods than pre-
pandemic norms. Some of our members are reporting aggregate service
levels as low as 60 percent compared to the high 90s before March of
2020. A number of retailers and wholesalers are also reporting late
deliveries that miss critical stocking windows, leaving some shelf-
space empty for longer periods than anticipated.
To increase transportation efficiency and capacity, NGA recommends
adoption of policies that would mitigate the ongoing truck driver
shortage, such as removing the commercial driver's license (CDL)
restriction on drivers aged 18-20 from transporting across state lines.
Such a move would expand the labor pool for potential truck drivers and
provide young adults with well-paying jobs that are currently average
in the six figures. Currently 49 states allow 18 year olds to obtain a
CDL, but Federal law prohibits them from interstate delivery. NGA
supports the Bipartisan Infrastructure Framework's inclusion of the
DRIVE SAFE Act in the legislation. This measure would ensure that roads
would continue to remain safe by requiring younger truck drivers to
complete an apprenticeship program so they have plenty of experience
behind the wheel before being authorized to drive interstate and long-
haul distances.
As we continue to experience sustained high levels of consumer
demand at the grocery checkout counter, non-scheduled and emergency
delivery of products to grocery loading docks are required to keep
shelves full. Flexibilities provided by the Federal Motor Carrier
Safety Administration (FMCSA) such as relief from Hours-of-Service
requirements has played a critical role over the last 18 months to
allowing our distributors to keep up with demand. The industry has
proved that we can maintain a high degree of trucking safety while
keeping shelves stocked with nutrition and affordable foods. NGA is
asking the FMCSA to maintain these flexibilities as we see no letup in
consumer demand.
The Effects of Consolidation and Buyer Power on the Food Supply Chain
The COVID-19 pandemic has made the grocery supply chain literally a
kitchen table issue for the American people. While shortages and
limited availability of critical inputs and supplies affects everyone,
the impact of these shortages are felt disproportionately by
independent grocers and smaller players in the market. Inconsistent
distribution and apparent shortages of consumer goods has made it more
difficult for customers of independent grocery stores to obtain high-
demand products because we compete against dominant players with
immense economic power that can wield tremendous influence over their
suppliers.
Today 65 percent of grocery shelf-space in America is controlled by
five grocery retailers. These dominant firms that we call ``power
buyers'' have taken advantage of supply chain crunches to entrench
their economic power at the expense of smaller competitors and
producers. Many independent grocers have struggled throughout the
pandemic to stock must-have products--such as essentials like paper
towels and toilet paper, cleaning suppliers, and critical packaged
foods like canned soup--while large national chains have exercised
their buyer power to demand on-time, compete orders, and in some cases
to secure excess supply.\1\ In addition to supply inequities,
independent grocers are experiencing unprecedented levels of price
discrimination. Our largest competitors use their influence to maintain
favorable wholesale pricing as independents experience a retreat of
promotional trade spending, a critical marketing tool that allows
independent grocers to compete on price.
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\1\ https://www.freightwaves.com/news/walmart-tightens-on-time-in-
full-requirements.
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According to the USDA Economic Research Service, areas with a
higher share of low-income households, as well as rural areas, tend to
have more independent food retailers and fewer chain stores.\2\ The
same study found that stores with a higher share of Supplement
Nutrition Assistance Program (SNAP) redemptions are more likely to be
independently owned, particularly in rural areas.\3\ These consumers
are represented most directly by the House Agriculture Committee whose
Members overwhelmingly represent rural and low-income districts.
Therefore, it is your constituents who are the greatest victims of the
current supply chain crunch and mounting food price inflation.
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\2\ https://www.ers.usda.gov/webdocs/publications/85783/err-
240.pdf.
\3\ Id.
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Rural and low-income consumers must travel longer distances to find
the products they need at a more crowded large national retailer. In
rural areas, customers often drive 30 to 50 miles to secure necessary
household and food products at the larger chains. We also believe that
these consumers are bearing the greater burden of food price inflation.
Historically, dominant chains have been able to resist inflationary
cost increases thanks to their uneven bargaining leverage over
suppliers. As a result, suppliers are forced to impose higher costs
onto their smaller customers who have less clout in the market
A consolidated food marketplace is a system that benefits a select
few at the expense of everyone else, including consumers, workers, and
independent retailers and suppliers. The COVID-19 pandemic and supply
chain crunch has only exposed these underlying weaknesses as consumers
experience in real time the unequal effects of buyer power and
consolidation. However, this problem is not new, so it is important to
examine the history and nature of competition issues in the food and
grocery sector to help inform our understanding of the supply chain
issues we are experiencing today.
According to the U.S. Census Bureau, in the last 25 years, grocery
storefronts have shrunk by a third. Fifteen of the top 20 grocers in
the 1980s either merged or were acquired by the 2000s. During this time
independent grocers lost ground in many rural and urban areas where
food deserts now exist due in large part to competitive disadvantages
in the marketplace that favor big box retailers and dollar stores.
These retail store formats use their size and national reach to
influence terms of trade in their favor at the expense of independent
retail competitors. Demands from power buyers impose disadvantageous
terms, conditions, and prices on independent grocers. This economic
discrimination reduces the smaller rivals' competitiveness through
higher costs or reduced product supply or quality, and directly harms
competition consumers, and the economy. The largest national chains
have buyer power because of their significant bargaining leverage over
suppliers. This leverage exists because the national chains are
critical ``gatekeepers'' between grocery suppliers and consumers,
controlling a majority of grocery shelf-space in the country.
Critically, the dependency is asymmetric; the dominant grocery
retailers are not nearly as dependent on a particular supplier as the
supplier is on the retailer. This is because a particular grocery
supplier's products generally represent only a small fraction of a
grocery retailer's sales, which may encompass tens of thousands of
products. A dominant retailer often enjoys several branded suppliers
for a particular product in addition to selling its own, private label
version. As a result, a dominant retailer has a substantial advantage
over its suppliers in a negotiation because the risk for the retailer,
if the supplier refuses its demands an no deal results, is
substantially smaller than it is for the supplier.
The paradigmatic example for this one-sided bargaining dynamic is
Walmart. Its ability to unilaterally demand concessions from suppliers
is legendary. For example, in 2017, Walmart announced a new requirement
that suppliers for Walmart stores and Walmart's e-commerce business
must provide on time and in full deliveries 75 percent of the time.
Since then, Walmart has repeatedly tightened this requirement, raising
the bar for on time, in full deliveries from 75 percent to 85 percent
and then to 87 percent in 2019. In September 2020, while manufacturers
and suppliers throughout supply chains were struggling to safely meet
demand during the COVID-19 pandemic, Walmart raised the bar again,
demanding 98 percent on time, in full deliveries. Walmart penalizes
suppliers that fail to meet its demands by charging a penalty of three
percent of the cost of goods sold--a devastating penalty in an industry
already operating with razor-thin margins.
Another example that hits close to home if you represent rural and
low-income areas is how the problem of economic discrimination enables
the proliferation of dollar stores. We call this brand of economic
discrimination packaging discrimination (i.e., refusing to provide
certain package sizes or promotional packaging to certain grocers,
while providing them to competing retailers). The dollar stores use
their buyer power to demand ``cheater size'' products, which include
smaller amounts in a package that can be sold at a lower price. These
``cheater packs'' create a false impression among consumers that they
are paying a lower price for the same product they see at independent
grocers. This provides dollar stores an unfair edge over traditional
grocery stores who offer a greater assortment of healthy and nutritious
foods. In fact, it is often the case that dollar stores perform the
bare minimum depth-of-stock and perishability requirements necessary to
be authorized for a SNAP license.
Proliferation of dollar stores throughout rural and urban America
has not only pushed countless independent grocery stores out of
business, but they are directly contributing to food desert and healthy
food access challenges that many Members of this Committee are
committed to addressing through legislation.
For decades, these patterns of retail consolidation and increasing
buyer power has been the driving force for further consolidation
upstream in the food supply chain. In order for food suppliers to
compete, they must achieve scale for two reasons: to accommodate the
vast distribution networks of the largest retailers and to attempt to
regain bargaining leverage. Food suppliers have responded by
consolidating at an unprecedented rate. Just in 2019, over 300 food
industry mergers and acquisitions were recorded.\4\
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\4\ https://www.foodandpower.net/ownership-control.
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The spiral of consolidation throughout the food supply chain has
advanced to the point where just a handful of firms compete to buy
agriculture products. A lack of competition at the farmgate results in
unreasonable producer demands and it drives down prices paid to farmers
and ranchers to anticompetitive lows. But consumers often do not see
the advantages of those low acquisition costs because the large
suppliers capture that revenue and price discrimination amongst
retailers reduces price competition in the retail market.
Supplier consolidation is directly responsible for a number of the
supply chain shocks we experienced during the pandemic. Early in the
pandemic, COVID-19 outbreaks in various meat plants took nearly 40
percent of meatpacking capacity offline at one point. This resulted in
skyrocketing meat prices, limited product availability, and farmers and
ranchers being forced to euthanize livestock due to a lack of buyers in
the marketplace. This is just one example where supply chain shocks
could have been avoided if more redundancies were built into the supply
chain through more robust competition. We also saw huge spikes in price
and diminished output in other concentrated protein markets such as
eggs.
While much of the stocks have been replenished on high-demand
consumer products like cleaning supplies and many shelf stable good
categories, the industry continues to see diminished service levels on
key products. The problem is especially troubling heading into the busy
holiday season where retailers and wholesalers have already received
out-of-stock notices on key products, such as canned gravy, frozen
pies, pastry shells, stuffing, amongst other holiday staples. Other key
categories impacted by shortages and out-of-stocks include, processed
meats, deli meats, paper and bath tissue, cookies and crackers, dairy
and plant-based creamers, yogurt, baby food, and cereal. Some out-of-
stock product availability is due to the lack of shortages in product
packaging in plastics and aluminum. Although NGA understands that
shortages and access to key product inputs is impacting everyone
throughout the food supply chain, and suppliers are doing their utmost
to meet increased consumer demand, we continue to see evidence that the
independent grocery segment is being impacted disproportionately
relative to our chain competition. NGA members too often find full
shelves and display cases of products that we cannot source when we
visit our large national chain competitors. Our wholesalers routinely
see products not available to them by their primary suppliers available
in large quantities on the ``diverter wire,'' a secondary market for
excess products.
Much of the current supply chain challenges and market inequities
wrought by excess consolidation and buyer power can be addressed
through more robust competition. The current outcome was not
inevitable. The antitrust laws were designed to protect against
anticompetitive economic discrimination. Congress recognized the
benefits of independent business and the threats posed by economic
discrimination when it enacted the Robinson-Patman Act in 1936, a law
designed to foster robust competition and protect against coercion by
dominant firms. The Robinson-Patman Act reflects Congress'
determination that discriminatory treatment among competitors is
pernicious and should be prohibited. But current antitrust enforcement
efforts have failed to address these anticompetitive harms, and judges
have inappropriately limited the scope of the law despite clear
statutory language. Despite Congress' broad goals in 1936, the Federal
Trade Commission has not brought a case under the Robinson-Patman Act
in more than 20 years. Nor has the FTC brought an enforcement action
against economic discrimination using other antitrust.
That is why NGA is a founding member of a coalition that launched
last week known as the Main Street Competition Coalition. The coalition
is comprised of Main Street business groups and agriculture producers
that are committed to promoting competition and reviving and reforming
the Robinson-Patman Act. We advocate for antitrust policies that ensure
a level playing field to benefit both businesses and consumers. The
coalition is not only concerned about anticompetitive economic
discrimination in the food sector, but in other industries as well,
including alcohol, convenience stores, pharmacies, restaurants, and in
the shipping industry.
Our goal is to harness the renewed interest in the antitrust reform
in the Big Tech sector to drive reforms that impact every day Main
Street businesses. We are urging Congress to consider the views of our
coalition as part of the conversation around competition challenges
throughout the economy. We believe strongly that many of the problems
confronting our economy, including shortages, inflation, and
disruptions, can be ameliorated by curbing anticompetitive economic
discrimination and promoting free markets through rigorous enforcement
of the antitrust laws
Conclusion
Americans are blessed to live in a country that features the
safest, most abundant, affordable food supply in the world. The supply
chain challenges the food sector currently faces is not insurmountable.
Although we expect some inconveniences and distribution inconsistencies
to be present in the near future, I have no doubt that American
ingenuity and the dedication of the patriotic individuals that comprise
our food sector will prevail over the obstacles and headwinds that we
face in the marketplace. It will take time to adjust to the new
economic reality, but targeted interventions from our Federal
policymakers will help us get back on the right track even quicker. To
this end, we recommend that Congress consider measures to help industry
attract workers seeking to enter or re-enter the workforce. We need
legislative solutions to add much-needed capacity to our nation's
freight and trucking sector. Finally, we need to rededicate our
antitrust policies to the benefits that flow from free enterprise and
fair competition, rather than giving dominant players free reign to set
terms of trade for everyone else in the marketplace.
With that, I am happy to take your questions.
The Chairman. Thank you. Mr. Durkin, please begin when you
are ready.
STATEMENT OF MIKE DURKIN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, LEPRINO FOODS COMPANY, DENVER, CO; ON BEHALF
OF INTERNATIONAL DAIRY FOODS
ASSOCIATION
Mr. Durkin. Good morning. Good morning, Chairman Scott, and
Ranking Member Thompson.
The Chairman. Good morning.
Mr. Durkin. Good morning, Chairman Scott, Ranking Member
Thompson, and Members of the House Committee on Agriculture. My
name is Mike Durkin, I am the President and CEO of Leprino
Foods Company, and I am here to testify on behalf of the dairy
industry and our company. Leprino Foods is a family-owned and
privately held company headquartered in Denver, Colorado with
4,500 employees and nine plants across States of California,
Colorado, New Mexico, Michigan, Pennsylvania, and New York.
Leprino is the single largest purchaser of milk in the
United States, and actually supporting over 1,000 dairy farms.
We are the world's largest producer of mozzarella cheese, and a
leading supplier of dairy nutrition products, including lactose
and whey protein. The supply chain challenges have
significantly impacted our business, and we don't expect them
to ease anytime soon. I am here to talk about a critical
component of this disruption that has not received a lot of
attention lately, and that is exports. America cannot ignore
the impact the crisis is having on U.S. exports. Mr. Chairman,
to use your words, I am here to sound the alarm on the export
crisis we are experiencing.
Exports are critical to the overall financial health of the
entire United States agricultural sector, in our case the U.S.
dairy industry. Leprino exports 26 percent of our milk
equivalent volume to over 55 countries, well above the industry
average of 16 percent. I am here to share our story and call on
this body to help with solutions across all aspects of the
supply chain, including exports, because this is a severe
threat to the U.S. agriculture industry.
Freight rates from Asia and the U.S. West Coast are
currently 15 times higher than freight rates from the U.S. to
Asia, creating a clear financial incentive for ships who depart
empty, with no U.S. goods on board, versus waiting to be
loaded. As a result, shipping companies are refusing to load
U.S. agricultural exports, and over 70 percent of the
containers are returning to Asia empty. In September, volume
from the California ports was just \3/4\ of the normal export
volume. This works for carriers. We have been told it is more
cost effective to skip the Port of Oakland, one of our primary
export ports, than to accept exports. U.S. agricultural
exporters, however, are in a crisis.
For Leprino, over 99 percent of our 2021 ocean shipments
have been canceled or rebooked to a later date at least once,
and in some cases up to ten times or more. Over 100 bookings
this year have been canceled or rebooked 17 times. This equates
to a 5 month delay for our customers, who depend on our
products, including infant formula companies around the world,
that is necessary to feed millions of babies across the world.
We have been forced to hold loaded containers in carrier yards
using equipment already in short supply.
These delays not only put our customers at risk, but we
have also experienced unprecedented increases in freight and
storage and demurrage fees. One freight bill of $5,500 was
dwarfed by the detention and demurrage fees of over $20,000. In
total, our freight and storage costs have spiked $25 million in
2021, and we expect it to increase another $25 million in 2022.
This export crisis may result in irreparable harm to the
American agriculture, as customers around the world are
questioning the U.S. dairy industry's reliability as a
supplier. For example, one of our largest customers have
incurred over $\1/2\ million in air freight to get the product
to where they need, and they also informed us recently that
they will now source their product from Europe. These
relationships took years, and even decades, to develop, and
they will not be quickly or easily regained.
The U.S. dairy industry cannot stay competitive with
expensive and unreliable freight costs. And as this cascades
through the entire supply chain, the loss of foreign sales
pushes more product into the U.S. market, which pressures
wholesale prices, and ultimately farm milk prices. There is no
doubt this is contributing to the extended period of weak dairy
farm margins. In response, the dairy herd is now contracting at
its fastest rate since 2009. The bipartisan Ocean Shipping
Reform Act of 2021 (H.R. 4996) begins to address the problem.
This bill will prohibit the opportunistic carrier practice of
sailing to Asia empty when U.S. agriculture exports await
shipment. It has bipartisan cosponsorship, which is growing,
and should be passed and signed into law.
The bill is a great start, but more is needed. For example,
major ports across the world operate at 24/7, and only recently
did the U.S. begin to do so temporarily. Given the labor
shortage and required training, however, this action is
unlikely to provide any relief for at least 6 to 12 months. In
addition to prohibiting foreign carriers from leaving the U.S.
empty, the Administration and Congress must work together to
provide our major ports and port workers with the
infrastructure and environment to operate and meet demand.
Thank you for the opportunity to share the exporter
perspective. I am happy to answer any questions.
[The prepared statement of Mr. Durkin follows:]
Prepared Statement of Mike Durkin, President and Chief Executive
Officer, Leprino Foods Company, Denver, CO; on Behalf of International
Dairy Foods Association
Good morning, Chairman Scott, Ranking Member Thompson, and Members
of the House Committee on Agriculture. My name is Mike Durkin. I am
President and CEO of Leprino Foods Company and I'm here to testify on
behalf of the dairy industry and our company. Leprino Foods, a family-
owned and privately held company, is headquartered in Denver, Colorado
and has over 4,500 employees in the U.S. in six states including
California, Colorado, New Mexico, Michigan, Pennsylvania, and New York.
Leprino is the largest purchaser of milk in the United States
supporting over 1,000 dairy farms. We are the world's largest producer
of mozzarella cheese, and a leading supplier of dairy nutrition
products, including lactose and whey.
The supply chain challenges have significantly impacted our
business, and we don't expect them to ease anytime soon. I'm here to
talk about a critical component of this disruption that has not
received as much attention--exports. America cannot ignore the impact
this crisis is having on U.S. exports.
Exports are critical to the overall financial health of the entire
U.S. agriculture sector, and in our case, the U.S. dairy industry.
Leprino exports 26% of our milk equivalent volume to over 55 countries,
well-above the industry average of 16%. I'm here to share our story and
call on you for solutions across all aspects of the supply chain--
including exports--because this is a threat to U.S. agriculture. The
West Coast port disruptions of 2015 pale in both magnitude and duration
when compared to those of the current crisis (see chart).
10/4/21--Los Angeles/Long Beach Congestion: 2015 vs. 2020-21
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: American Shipper/based on data from Marin[e] Exchange
of Southern California.
Freight rates from Asia to the U.S. West Coast are currently 15
times higher than freight rates from the U.S. to Asia, so there is now
a clear financial incentive for ships to depart U.S. ports empty--with
no U.S. goods on-board--versus waiting to be loaded. As a result,
shipping companies are refusing to load U.S. agricultural exports, and
over 70% of containers are returning to Asia empty. In September alone,
volume from California ports was just \3/4\ of normal export volume
(see chart).
Loaded Outbound TEUs Processed at Major California Ports
(30 Day Months)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: Ports of LA, Long Beach, Oakland.
This seems to be working well for carriers. We've been told it is
more cost effective to skip the Port of Oakland (one of our primary
export ports) than to accept exports, and at least one carrier has
reported record-breaking financial performance. U.S. agricultural
exporters, however, are in crisis.
Here is what Leprino has been facing:
Over 99% of our 2021 ocean shipments have been canceled and
re-booked for a later date at least once, if not twice, and in
some cases up to ten times or more.
Over 100 bookings this year have been canceled and re-booked
17 times. This equates to a 5 month delay for customers who
depend on our products, including infant formula ingredients
necessary to feed millions of babies around the world.
We have been forced to hold loaded containers in carrier
yards, using equipment already in short supply.
These delays not only put our customers at risk, but we have also
experienced unprecedented increases in freight, storage, and demurrage
fees. One freight bill of $5,472 was dwarfed by detention and demurrage
fees of more than $20,000. In total, these costs have spiked $25
million in 2021 and we currently anticipate a similar $25 million
impact in 2022.
While some believe this issue will resolve itself, this export
crisis may well result in irreparable harm to American agriculture as
customers around the world are questioning the U.S. dairy industry's
reliability as a supplier. For example, one of our biggest nutrition
customers recently informed us they now source from Europe due to
shipping delays. These relationships take years to develop and will not
be quickly or easily regained and the U.S. dairy industry cannot stay
competitive with expensive and unreliable freight practices in markets
where we are already fighting for market share because of tariff
disadvantages.
These export challenges cascade through the supply chain. The loss
of foreign sales pushes more product onto the U.S. market, which
pressures wholesale product prices and ultimately farm milk prices.
This is no doubt contributing to the extended period of weak dairy farm
margins (see chart). In response, the dairy herd is now contracting at
its fastest rate since 2009.
Milk Market Income Over Feed Costs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: USDA.
The bipartisan Ocean Shipping Reform Act of 2021 begins to address
the problem. This bill will prohibit the opportunistic carrier practice
of sailing to Asia empty when U.S. agricultural exports await shipment.
It has bipartisan cosponsorship which is growing and should be passed
and signed into law.
That bill is a good start, but so much more is needed.
For example, most major ports around the world routinely operate
24/7. Only recently did the Administration and certain U.S. ports agree
to begin doing so temporarily. Given labor shortages and required
training, however, this action is unlikely to provide any relief for at
least 6 months. In addition to prohibiting foreign carriers from
leaving the U. S. empty, the Administration and Congress must work
together to provide all our major ports and port workers with the
infrastructure and environment to operate and meet demand. That is
crucial.
I urge all Members on this Committee to work together to allow U.S.
agriculture and our exports to thrive.
Thank you for the opportunity to share the exporter perspective.
The remainder of this written testimony was prepared by our
respected industry partner, the International Dairy Foods Association.
On behalf of the entire U.S. dairy industry, I ask that you consider
these important additions that reach beyond the scope and time allotted
for my oral testimony.
Supply chain issues have become an increasing headwind for food and
agriculture over the past year and a half. Demand for dairy goods is
near an all-time high, yet inputs and reliable transportation are
harder and harder to come by in a timely manner while the labor market
will likely remain strained for months. Our industry has shown itself
to be resilient and we will continue to work hard to make sure all
Americans continue to have access to affordable, nutritious, and
healthy dairy foods. We are working together as an industry to ensure
these products remain readily available during periods of rising
demand, such as the approaching holiday season.
The International Dairy Foods Association (IDFA) represents the
nation's dairy manufacturing and marketing industry, which supports
more than 3.3 million jobs that generate $41.6 billion in direct wages
and $753 billion in overall economic impact. IDFA's diverse membership
ranges from multinational organizations to single-plant companies, from
dairy companies and cooperatives to food retailers and suppliers, all
on the cutting edge of innovation and sustainable business practices.
Together, they represent 90 percent of the milk, cheese, ice cream,
yogurt and cultured products, and dairy ingredients produced and
marketed in the United States and sold throughout the world. Delicious,
safe and nutritious, dairy foods offer unparalleled health and consumer
benefits to people of all ages.
Our testimony will focus on supply chain challenges facing dairy
companies, both in terms of our domestic operations as well as the
problems processors are currently encountering in exporting our
products overseas.
Farm to Table Supply Chain Challenges for U.S. Dairy
All members of our industry face similar problems impacting our
domestic supply chains, including labor shortages, limiting production
and difficulty moving products all the way through to the consumer,
along with steadily increasingly costs for procuring inputs for our
products. Supply chain pressures have persisted for so many months and
at so many levels that every aspect of the dairy business now is
impacted, creating a high level of uncertainty from farm to table. In
our industry, the last thing we want is to be unreliable suppliers to
our customers which will make us unprofitable and unable to compete
globally as an industry.
Unfortunately, the reality of today's supply chain means that
producing dairy products in the United States has gone from complex to
difficult, and already thin margins have become razor thin. There are
pain points at every link in the domestic dairy supply chain impacting
all parts of the industry. Here are a few examples:
Equipment and Ingredients: Whether ingredients are imported
or domestically produced, prices have increased, and
availability has significantly tightened. In some cases, our
industry is having to find new supply altogether and ships
cannot reliably get terminal appointments to offload imports
while trucks sit empty at facilities awaiting drivers to
distribute ingredients. Importantly, this is true for equipment
and supplies necessary to manufacture, such as protective
clothing for employees, not just ingredients.
Product Manufacturing: As demand has increased for dairy
products, many companies have expanded operations and invested
in new facilities. However, because of these growing supply
chain issues, we cannot find enough workers to fully operate
even previously existing facilities, leading to lost shifts or
running fewer product lines and making fewer products, which
puts greater strain on the entire food system.
Packaging and Storage: Packaging and storing our products
has become difficult as the resins and glues required to seal
our packaged goods are in short supply and prices have
significantly increased. Even wood pallets, which are used for
storing and sorting products for distribution, have doubled or
tripled in cost. Our industry is scouring the globe for
supplies while prices rise and availability shrinks, further
impacting our members' bottom lines.
Distribution: We're facing a major crisis in transportation:
a major truck driver shortage and now the beginning of a truck
shortage due to a lack of computer chips. Our members are
providing attractive incentives to drivers, but there are only
so many truck drivers and they are limited in the number of
hours they can drive and the weight they can haul.
Customers: Our customers expect the same high quality,
business reliability, and consistency from our members that
they've always known. Dairy companies are working to solve
problems behind the scenes to deliver on time, but it's getting
increasingly difficult to meet those demands, and due to the
problems encountered in manufacturing, processors have fewer
products to allocate to customers. In many cases, dairy
companies may have contractual obligations to make deliveries,
which adds another layer of distress that reverberates through
our supply chain.
There are many other examples that are equally well documented--
such as the increasingly empty shelves at grocery stores, missed milk
deliveries at schools, or restaurants trimming their menus--but the
story is consistent and worsening across our supply chain.
Not even considering foreign markets, the above start-to-finish
domestic supply chain story is a constant struggle for U.S. dairy and
agriculture across the board. Altogether, without accounting for
significantly increased labor costs, procurement prices alone are up
between 20-30% for most U.S. dairy businesses. This level of inflation
is neither something processors are willing nor able to pass on to
consumers nor realistic to maintain a profit margin. In sharing all
these examples, our goal is to provide each Member of this Committee
with a clear view of the many challenges dairy processors are
experiencing. These supply chain issues are severe and eroding our
ability to compete. Our supply chains are stretched beyond anything we
have ever experienced, and urgent action is required.
Importance of Trade to the U.S. Dairy Industry
Considering the current domestic supply chain environment, the
obvious question might be, why bother trying to export? In the United
States, approximately 1 day's worth of U.S. milk production each week
goes to exports, which results in approximately $6.5 billion in U.S.
dairy products being exported to over 133 countries around the world
every year. Recent estimates show that the United States now exports
more dairy production than we consume in fluid milk products at home.
There has never been a time when trade was more important to the U.S.
dairy industry than it is today.
Companies and cooperatives in the U.S. dairy exporting community
are committed to doing as much as possible with as few resources as
possible to support our long-term global business relationships and
maintain our presence in global markets. We recognize that once lost,
our market share will quickly go to competitors in producing countries
such as those in Europe or New Zealand and is unlikely to be regained
given their preferential tariffs compared to ours.
But the value of trade to U.S. dairy is less in what we have built
and more in what we are building. Looking ahead, with continually
rising production, we believe that opportunities to share in global
markets abound if we can create a supply chain to service them. Given
the abundant resources and tremendous ingenuity and efficiency of
American agriculture, USDA predicts an additional 25 billion pounds of
milk will be produced in the United States by 2030. Based on current
consumption trends, we would need to export 40% of that increase in
production for dairy farming and processing to remain economically
viable. If we do not build our globally competitive market access now
through reduced tariffs, competitive prices, and consistent shipping,
our farmers will be unable to grow. There is hardly a more critical
priority for the U.S. dairy industry than trade.
The Export Challenge
Unfortunately, international business has now become a significant
challenge and liability as dairy manufacturers struggle to find ways to
export products. At any given time in recent weeks, between 70-90 cargo
ships are anchored outside the ports of Los Angeles and Long Beach,
waiting to unload thousands of containers. Once unloaded, many of these
ships are finding it more profitable to turn around and depart for Asia
empty rather than wait to reload U.S. agricultural exports, resulting
in a backlog of products waiting to be exported. Industry coalition
data estimates an average of 22% of U.S. agricultural foreign sales are
currently unable to be fulfilled due to shipping rates, ships departing
without export cargo, and other detention/demurrage challenges.
With supply chain pressures, the U.S. dairy industry is losing its
global competitiveness as exporters are grasping at any opportunities
to maintain relationships with buyers and trading partners. As
previously mentioned, many customers require their suppliers to enter
into contracts, and many of those contracts include clauses that
stipulate a product's remaining shelf life after delivery, the length
of time a supplier may be the supplier of choice for that customer, and
the expected level of products to be delivered over the course of the
contract. Unforeseen ripples in the supply chain would be expected and
manageable under normal circumstances, but when shippers are unable to
obtain container space for export for multiple weeks or even months,
many customers rightly evaluate their contracts. Although it's no fault
of any manufacturer, the current supply chain challenges are not the
fault of the customers either. Regardless, the liability for each is
enormous.
U.S. dairy processors take their sales commitments seriously and as
such have been evaluating every option to meet the terms of global
contracts, but the export shipping crisis has made performance
impossible on a consistent basis. Exporters are begging to borrow
container space on outbound vessels or are losing money on products due
to freight surcharges but doing so anyway to preserve a global
contract. We hear reports of rail cars sitting on sidings for weeks due
to a lack of other options, while shippers have tried to reroute their
entire distribution chains to access new ports for export. Air freight
has become one of the only reliable, albeit extremely costly, delivery
tools. Additionally, U.S. importers, who have very publicly struggled
to find import shipping capacity, have started leasing their own
vessels, which has even further decreased the available carrier supply
for exports. Surely, we can--and must--find a better, more efficient
way of servicing global customers.
Brainstorming a Better Way
Across U.S. dairy we recognize that these problems are complex and
will likely require a variety of solutions. We also recognize that many
solutions may not be quick fixes. As a business community, we must
collaboratively brainstorm with Congress and the Administration to
develop ways to improve the current situation, share information, and
ultimately solve these problems. IDFA supports Congress taking the
following steps to benefit U.S. dairy's supply chain:
Pass the Ocean Shipping Reform Act of 2021 (H.R. 4996):
Congress should pass the Ocean Shipping Reform Act of 2021
which would address unreasonable detention and demurrage
charges, export cargo bookings, and other carrier practices
that are currently hurting U.S. agricultural exporters.
Pass the Infrastructure Investment and Jobs Act (H.R. 3684):
The current bipartisan infrastructure bill includes a provision
that would help address the current shortage of commercial
truck drivers. Specifically, the bill establishes a pilot
apprenticeship program to train 18 to 20 year old qualified
commercial driver's license (CDL) drivers to operate vehicles
in interstate commerce. Not being able to travel across state
lines for drivers in this age range is one of the single
biggest obstacles to having enough truck drivers. This is
despite the fact that 49 states already allow 18 year olds with
a CDL to drive within their borders.
Increase Truck Weight Limits: Congress should pass
legislation to increase the gross vehicle weight limits for
trucks that travel on Federal highways from the current 80,000
pounds to 91,000 pounds with an additional sixth axle. This
configuration complies with the Federal bridge formula and is
shown to have better braking capacity than 80,000 lb., five-
axle trucks. This adjustment would allow manufacturers to
transport products more efficiently while also reducing
industry's carbon footprint.
In addition, here are some additional ideas we've been discussing
within our industry:
Empty Containers for Exports: Whether seeking additional
generalized trade commitments by reopening the World Trade
Organization's Trade Facilitation Agreement, or by seeking a
structure of financial incentives for filling outbound
containers (or disincentives for not doing so), or by
establishing a code of practice on filling containers to
minimum levels when goods are available, all options need to be
considered to resolve the crisis of carriers exporting such
high quantities of empty containers when a backlog of
agricultural exports are waiting to be shipped. Beyond the
economic impacts, this current practice of shipping excessive
volumes of empty containers creates unnecessary carbon
emissions, as well.
Provide Supply Chain Transparency: Establish one or more
additional advisory committees of industry representatives
devoted to shedding light on problems in the supply chain to
the Administration on a real-time basis before pain points
become crises.
Discuss Options to Prioritize Perishable Goods: It is not
uncommon to give preference to perishable goods in trade
scenarios; for example, the U.S.-Mexico-Canada Agreement has
provisions built into its Chapter on Sanitary and Phytosanitary
Measures that allow for expedited import check procedures for
perishable goods. Similar provisions could be applied to
loading goods for export.
Consider Threshold for Emergency Protocol for Servicing
Exports/Imports: Following the example of the Jones Act,
consider whether emergency situations exist (e.g., food
security, national security) which require temporary/
provisional or permanent authorities that require carriers
servicing U.S. ports to prioritize offloading or accepting
certain goods for import or export, respectively.
Designate Responsibility for Supply Chains in USTR: Direct
the Office of the U.S. Trade Representative to immediately
engage in supply chain matters, both domestically and abroad,
which are impacting U.S. agricultural exporters, with a view
of, for example, developing improved and enhanced trade
facilitation text commitments in the future or monitoring
state-owned shipping actions by China.
Review the U.S. Oversight of the Supply Chain: The Federal
Maritime Commission (FMC) has limited authority over ocean
vessels and has moved slowly to address some of these
challenges. At the same time rumors of new offices or agencies
exist. Before changing existing Federal authorities, consider
directing the Government Accountability Office (GAO) to
determine whether additional authorities, new roles, or less
Federal intervention is needed to support the resilience of the
U.S. supply chain for U.S. agricultural exporters.
Conclusion
Chairman Scott, Ranking Member Thompson, and Members, the time for
solutions is urgently upon us. As a dairy industry, we take pride in
feeding global communities with nutritious and delicious dairy
products, but we cannot continue to do so in the current environment.
We request immediate attention to this significant escalating
challenge. Here, we have suggested actions that can be taken today to
address and improve our supply chains and offered longer-term solutions
that require action by Congress and the Administration. Thank you for
considering our views as part of today's hearing.
The Chairman. Thank you, Mr. Durkin. And now, Mr. Samson,
you are recognized when you are ready.
STATEMENT OF JON SAMSON, VICE PRESIDENT OF
CONFERENCES, EXECUTIVE DIRECTOR, AGRICULTURE & FOOD
TRANSPORTERS CONFERENCE, AMERICAN TRUCKING ASSOCIATIONS,
ARLINGTON, VA
Mr. Samson. Good morning. Thank you, Chairman Scott,
Ranking Member Thompson, Members of the Committee. To be
honest, I was very excited to be able to come out and join this
hearing, and then, after hearing both the Chairman and the
Ranking Member's opening statements, hearing the passion of
wanting to actually go in and fix this, talking about crisis,
but there is also opportunity out there. And so, we are
engaged, we are excited to be here, but to see the Committee
jump into this, to see the agriculture side really take away
from the news cycle of we are going to be short Christmas trees
and Christmas presents, and actually look at our nation's food,
fuel, fiber, and feed, and look at that as--this is the real
important piece of the supply chain that we need to fix. And
so, the fact that you are raising that right now is
extraordinarily important, and we are extraordinarily excited
to be part of the process.
I am proud to testify on behalf of ATA's Agriculture and
Food Transporters Conference, the specialty advocacy arm within
the American Trucking Association dealing with those that are
hauling our food and agriculture products. ATA members play a
critically important role in our food supply chain. ATA is an
80 year old federation, and the largest national trade
association representing the trucking industry, with affiliates
in all 50 states, and so we have an arm in each state and work
closely with our state trucking associations. Our membership
encompasses over 34,000 motor carriers and suppliers directly
and through affiliated organizations.
Importantly, for the purposes of today's hearing, ATA
members serve agriculture producers, agriculture and food
processors, food distributors, restaurants, many of my fellow
panelists here. More than 80 percent of U.S. commodities rely
exclusively on trucking to meet their freight transportation
needs. Overall, trucking moves 72.5 percent of the nation's
freight tonnage annually.
In March 2020--I think it is important to go back and look
quickly at the supply chain breakdown that we saw during the
COVID pandemic, understanding that we face a separate supply
chain concern right now, but we did--in March 2020, as schools
and restaurants began to shutter at the onset of the pandemic,
our food supply chains broke down. The markets disappeared over
night, restaurants closed, schools closed, and so we worked
closely within the supply chain, within the industry, as well
as USDA and FDA, to figure out how we can come together,
communicate, figure out alternative marketplaces to really get
everybody back on track.
We saw, and everybody witnessed, the slaughtering of
chickens, putting those into the landfill, milk being dumped,
beans being tilled back into the soil, stuff that we did not
like to see from a U.S. food supply chain, that food waste, and
so we worked closely to try to limit that. Communications were
a big piece of that, you can see that in the written testimony,
as well as looking at any sort of technology to really allow us
to contact and tap into other marketplaces. And as we saw
similar shutdowns in the fall, winter of 2020, we started to
see some of that food waste minimized, and so we believe that,
through the communication, we were able to see some positive
impacts out of that.
In my full written testimony, we touch on five separate key
issues for motor carriers in the food supply chain. Of course,
as we are communicating right now with the bipartisan
infrastructure, the congestion caused by decaying
infrastructure is definitely a top focus within ATA. Workforce
development, I know that is top of mind for many people, the
labor shortages right now, and Mr. Chairman, you had mentioned
the driver shortage. I believe our economist looks at the
number of 80,000 short after the pandemic. And so, these
retention issues, bringing on new drivers, attracting new
drivers, has been an extraordinarily difficult task, and
something that we have been fully involved and focused on, and
hope to have some positive results within the next couple
years.
Vaccine mandate consequences, as we know, there are a lot
of companies out there that are hesitant, especially when it
comes to the trucking side within the supply chain, and so we
have been focusing and working with our companies on the
vaccine mandate as well. Flexibility and cooperation in
commercial relationships, this is something, of course, within
that initial shutdown of COVID, we really needed to make sure
that our relationships within the industry supply chain were
strong, and this, I believe, is something that we are going to
be able to point towards as we go into these new food supply
chain issues that we are currently witnessing.
And last, and I know it is going to be talked about
significantly during this hearing, but the port productivity
issues that we are facing. Everybody is well aware of them, and
we are trying, from a carrier angle, to work through the supply
chain issues, and come out with something that is going to be
workable for everyone. So, with that, Mr. Chairman, I would
like to open it up to any questions.
[The prepared statement of Mr. Samson follows:]
Prepared Statement of Jon Samson, Vice President of Conferences,
Executive Director, Agriculture & Food Transporters Conference,
American Trucking Associations, Arlington, VA
Chairman Scott, Ranking Member Thompson, and Members of the
Committee, I am grateful for the opportunity to testify on these
important issues on behalf of the American Trucking Associations
(ATA).\1\
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\1\ American Trucking Associations is the largest national trade
association for the trucking industry. Through a federation of 50
affiliated state trucking associations and industry-related conferences
and councils, ATA is the voice of the industry America depends on most
to move our nation's freight. Follow ATA on Twitter or on Facebook.
Trucking Moves America Forward.
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ATA is an 88 year old federation and the largest national trade
organization representing the trucking industry, with affiliates in all
50 states. ATA's membership encompasses over 34,000 motor carriers and
suppliers directly and through affiliated organizations. Our
association represents every sector of the industry, from Less-than-
Truckload to Truckload, agriculture and livestock transporters to auto
haulers and movers, and from the large motor carriers to owner-operator
and mom-and-pop one-truck operations. Those members who work in the
food supply chain, whether they serve producers, packagers,
distributors, wholesalers and grocers, or others, have overcome
tremendous challenges over the past eighteen months and continue to
adjust as inefficiencies arise in international and domestic supply
chains.
Agriculture and food transporters play a critical role in our
nation's economy. We produce the world's safest and most abundant food
supply and trucking serves the producers and companies at every point
in the supply chains to support agricultural production, processing,
export, and domestic distribution. The trucking industry moves over 70
percent of the nation's freight tonnage every year, and agriculture and
food transporters are responsible for transporting the subset of goods
that, unlike stereos and televisions, are perishable products that
cannot survive excessive wait times on maritime or warehouse docks.
Trucks deliver critical foodstuffs to store shelves and school
lunch tables in every community nationwide. We enable flexible multi-
modal supply chains for agricultural producers and their service
providers by moving goods the last mile from maritime, rail, air, and
intermodal facilities. Truck drivers perform an indispensable service,
and their work moving goods across the country is necessary and
critical to our economy and way of life.
As evidenced by the response to the COVID-19 pandemic, and as
highlighted by the current challenges facing our supply chains,
trucking is the dynamic linchpin of the U.S. economy. Our industry
currently moves more than 70 percent of the nation's annual freight
tonnage.\2\ Over the next decade, trucks will be tasked with moving 2.4
billion more tons of freight than they do today, and will continue to
deliver the vast majority of goods to American communities.\3\
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\2\ U.S. Census Bureau Commodity Flow Survey, 2017.
\3\ Freight Transportation Forecast 2020 to 2031. American Trucking
Associations, 2020.
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More than 80 percent of U.S. communities rely exclusively on
trucking to meet their freight transportation needs. In 2017, trucks
moved $10.4 trillion worth of goods, 71.6% of the value of all goods
moved in the U.S.\4\ The trucking industry is also one of the country's
leading employers, including over 3.6 million drivers.\5\ Overall,
nearly eight million people are employed in trucking-related
occupations.\6\ Trucking accounts for one out of every eighteen
American jobs and ``truck driver'' is the top job in 29 states.\7\
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\4\ U.S. Census Bureau Commodity Flow Survey, 2017.
\5\ American Trucking Trends 2020. American Trucking Associations.
\6\ Ibid.
\7\ https://www.marketwatch.com/story/keep-on-truckin-in-a-
majority-of-states-its-the-most-popular-job-2015-02-09.
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This hearing presents an opportunity for stakeholders to highlight
major headwinds for agriculture and food transportation, and to
consider the opportunities that this Committee and the House of
Representatives have to ensure the safety, efficiency, and reliability
of the agriculture supply chain during this ongoing national recovery.
Deteriorating roads and bridges, severe congestion, freight
bottlenecks, and unprecedented backlogs of cargo at our U.S. ports and
inland terminals all reduce the resiliency and efficiency of the
agricultural supply chain. ATA and its Agriculture and Food
Transporters Conference are grateful for the opportunity to provide
insights on these challenges and potential solutions.
As the Committee examines agricultural supply chain challenges,
please consider five key areas: (1) infrastructure investment, (2)
workforce development, (3) potential consequences of an employer-based
vaccine mandate, (4) the role that commercial flexibility played in the
initial response to COVID-19 challenges, and (5) challenges created by
equipment and labor shortages at U.S. maritime ports and inland storage
facilities and distribution centers. I will address each of these areas
in detail in my testimony, as they are critical to ensuring the
economic competitiveness of the American trucking, agriculture, and
food service industries.
America's truckers proudly answer the call to deliver necessities
across the country day and night. They perform that duty whether
challenged by a global pandemic, dilapidated and failing
infrastructure, and rising prices and regulatory burdens that make it
harder for companies to operate their businesses. Thank you for holding
today's hearing to consider these critical issues. I look forward to
working with you to share information and inform potential legislative
solutions to protect the safe and efficient movement of our nation's
goods.
Key Issues for Food and Agriculture Transportation:
(1) Infrastructure Investment
With H.R. 3684, the Infrastructure Investment and Jobs Act, pending
final passage by the U.S. House of Representatives, I strongly
encourage Committee Members to support its historic investment in our
nation's roads and bridges. Congress is on the cusp of finally ensuring
that the roads and bridges that carry the nation's economy are safe,
reliable, and prepared for future growth.
No legislation is perfect, but the American Trucking Associations
strongly supports passage of the IIJA because the costs of inaction are
too high and because it is our best option at this time. Agriculture
and food transporters working with perishable products depend on a
well-maintained, reliable, and efficient network of highways that
enable the timely and safe delivery of their cargo. Without highways in
good repair, our nation's agriculture and food producers will struggle
to get their commodities to domestic and global markets; food
distributors will struggle to get their goods to store shelves,
restaurants, and schools; and American families will suffer as a
result.
For years, underfunded roads and bridges have increasingly choked
our economy's supply lines, making it costlier and more time-consuming
to transport all goods, including agricultural and food products.
Furthermore, congestion caused by decayed infrastructure adds nearly
$75 billion to the cost of freight transportation each year.\8\ In
terms of agriculture and food transport, as the Committee is likely
aware, the consequences of these losses are far-reaching and extend to
the need to dispose of expired or unsafe food products such as spoiled
milk, tilled beans, or slaughtered meat products.
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\8\ Cost of Congestion to the Trucking Industry: 2018 Update.
American Transportation Research Institute, Oct. 2018.
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The bipartisan IIJA provides important investments to maintain and
improve our core interstate system, and targets additional funding for
intermodal freight connectors and projects of national significance
that are critical for efficient agriculture supply chains. I echo the
comments of Chris Spear, the CEO and President of the American Trucking
Associations, who has spoken to this issue before Congress, the
industry, and national media: Infrastructure is not partisan, and
anyone in Congress who believes that roads and bridges are political
hasn't been driving on them. The time to pass a bipartisan
infrastructure bill is now.
(2) Workforce Development
The IIJA does more than invest in those critical aspects of our
nation's infrastructure. It authorizes critical programs and lays a
path to ensure a highly trained, safe, and diverse workforce is
available to truck goods across the country. According to statistics
released just last week, the trucking industry is currently short
80,000 drivers.\9\ That deficit will only continue to grow without
studying and modernizing regulations on who can drive in interstate
commerce, and without targeted investments in programs to attract a
new, diverse generation of drivers and supply chain workers. By 2030
and at current trends, the gap could grow to 160,000.\10\ Overall,
nearly one million new drivers will need to be trained and hired in the
next decade to keep pace with increasing consumer demand and an aging
workforce.\11\
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\9\ Driver Shortage Update 2021. American Trucking Associations.
October 25, 2021.
\10\ Ibid.
\11\ Ibid.
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The truck driver shortage is only one aspect of how unmet labor
force needs create supply chain inefficiencies. Drivers working at
maritime ports or transporting goods between domestic distribution
facilities all rely on local labor forces to load or unload perishable
cargoes so that trucking companies can keep their assets moving in
service of their customers and so that drivers can maximize their on-
duty time under Federal hours of service regulations. The staffing
shortages for these workers substantially decreases driver efficiency
if they also have to wait for loading and unloading.
Accordingly, ATA and the members of our Agriculture and Food
Transporters Conference strongly support the workforce development
provisions in IIJA that will help ensure a resilient, safe, and diverse
workforce. In particular I want to highlight the importance of the
pilot program (based on the DRIVE Safe Act, H.R. 1745) to study
allowing highly trained younger drivers to participate in interstate
commerce, the establishment of an advisory board to promote the
recruitment and retention of women in the trucking workforce (Promoting
Women in Trucking Workforce Act, H.R. 1341), and the authorization of a
program to promote and improve job opportunities for a diverse
transportation workforce (Promoting Service in Transportation Act, H.R.
3310).
The DRIVE Safe Act pilot program will allow the U.S. Department of
Transportation to collect the data to show what 49 states already
recognize, that 18 to 20 year olds can be trained to operate safely in
interstate commerce and help meet the critical need for 80,000 new
truck drivers nationwide. This pilot program will remove an obsolete
Federal regulatory barrier for up to 3,000 drivers, and will
demonstrate that young drivers can be trained in trucks equipped with
the latest safety technology and deployed to add critically needed
resilience and capacity to national supply chains. To qualify to
operate in interstate commerce under the pilot program, drivers must
complete 400 hours of training using leading safety equipment,
including 240 hours with an experienced mentor, on top of the current
minimum requirements to obtain a commercial driver's license for
drivers of all ages. For agriculture and food transporters, the
capacity that can be unlocked by bringing safe, trained younger drivers
into the workforce is critically important to ensure the resilience of
the supply chains on which they depend.
The Promoting Women in Trucking Workforce Act and the Promoting
Service in Transportation Act are also important tools for our nation's
supply chains to attract a younger and more diverse workforce. Although
women currently make up 47% of the workforce, only 7% of truck drivers
are women \12\ and only roughly 26% of all transportation and
warehousing jobs are held by women.\13\ For too long, blue-collar
professions like trucking have been stigmatized, and the
disproportionate emphasis on 4 year colleges at the expense of
vocational schools and the skilled trades has discouraged too many
potential drivers from getting behind the wheel. ATA supports both of
these important legislative efforts and applauds their inclusion in the
IIJA.
---------------------------------------------------------------------------
\12\ American Trucking Trends 2020. American Trucking Associations.
\13\ Monthly Employment in the Transportation and Warehousing
Sector. USDOT Bureau of Transportation Statistics. September 2021.
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Agriculture producers, processors, and distributors have seen the
consequences of an undersized and less resilient workforce as they
struggled to meet surging demand and adjust to constant challenges over
the past 2 years. The inclusion of these workforce provisions will play
a key role in bolstering the transportation industry and helping it
attract and retain a new generation of labor that will ensure its
ability to respond to future food supply chain disruptions. ATA
strongly encourages the Committee to be aware of the importance of
these workforce provisions in the pending infrastructure bill to the
reliability of the agriculture and food transportation.
(3) Vaccine Mandate
The challenges facing our food supply chains are rooted in
inefficiencies that are out of the control of truckers--potholes,
closed bridges, congestion, and prohibitions on younger drivers--but
those challenges impact everyone in the highly competitive trucking
industry equally. As the Committee studies the challenges facing the
food supply chain, ATA respectfully requests consideration of the
negative consequences that an employer-based Federal vaccine mandate
will have on the resilience and sustainability of the supply chain.
As mentioned above, there are labor shortages causing
inefficiencies at ports, inland warehouses, and distribution
facilities. America's trucking industry is built on a deregulated model
with hundreds of thousands of licensed motor carriers of all sizes.
Setting an arbitrary threshold for vaccine mandates based on company
size puts the companies above that threshold at a disadvantage where
their drivers and workers can simply leave for jobs at companies where
they will not be subject to a mandate. Trucking workforce data gathered
by ATA indicates that an employer-based vaccination mandate based on
the arbitrary threshold of 100 employees could mean the loss of up to
37% of drivers for covered companies to retirements, attrition to
smaller carriers, or conversion to independent contractor owner-
operators. Federal regulations should not play favorites among
competitive industries but this proposal does exactly that.
ATA strongly supports efforts to provide access to vaccination and
COVID-19 testing broadly throughout the country. Our members working in
the supply chain play a major role in ensuring distribution of vaccines
and medicines nationwide. More broadly, agriculture and food
transporters ensure that the institutions and families across the
country have access to necessities despite the ongoing challenges to
daily life--milk, eggs, bread, produce, and the COVID-19 vaccine
itself. Truckers in fleets of all sizes play a role in meeting that
demand and transporting the goods we all need.
As of the drafting of this testimony, the Occupational Safety and
Health Administration's (OSHA) COVID-19 Emergency Temporary Standard
(ETS) had just cleared the Office of Management and Budget's review.
While this Committee considers ways to support resiliency in food and
agricultural supply chains, ATA requests that Members be aware of the
following necessary provisions that ATA explained to the Administration
need to be included:
(1) An exemption for truck drivers akin to that provided by Canada
for its drivers or alternatively deferring coverage of
truck drivers to the traditional regulating agency with
transportation expertise--the Federal Motor Carrier Safety
Administration (FMCSA)--rather than OSHA;
(2) Federal contractors that implement the vaccine mandate required
in Executive Order 14042 should not have to comply with a
second set of OSHA rules--those that implement the E.O.
14042 mandate should be deemed compliant with the OSHA ETS
and ideally vice versa to avoid overlapping and
contradictory requirements; and
(3) A reasonable implementation timeline for any ETS of not less
than 90 days.
While much of the country was sequestered in their homes over the
past eighteen months, the trucking industry served its essential
function and did so successfully with safety standards developed by
public health experts. In fact, ATA surveyed its members and provided
data to the Administration showing that our drivers were well below the
infection and mortality rates of the general population. We support the
Administration's goals of increased vaccination rates and clear health
guidelines to enhance protections for all Americans. We have urged
trucking industry employees to get vaccinated and will continue to do
so. We will also continue to work with Federal authorities to increase
voluntary vaccination rates for our sector.
Unfortunately, however, the anticipated OSHA rule as outlined
together with the Federal contractor vaccination mandate may have vast
unintended consequences. The scope of the mandate was an open question
as of the drafting of this testimony, but the Committee should know
that if the ultimately-published ETS and Federal contractor
requirements do not take into account the effects on our industry, ATA
may be forced to take action against the ETS and contractor mandate to
protect the industry. Because of its potential one-size-fits-all
approach, such a rule would inherently fail to balance the risks of a
single standard for all industries against the broad impact that such a
rule will have in exacerbating challenges to the supply chain and
economy. Even if the ultimate goal is something we all agree on--
increasing vaccination protections and defeating the COVID-19
pandemic--it is vital that public health measures first do no harm,
especially to critical elements of our food supply chain.
(4) Supply Chain Adjustments in Response to COVID
The landscape-level challenges that face the entire trucking
industry place unique challenges before the food and agriculture
haulers. As I mentioned, these companies were at the forefront of
helping their shipper customers adjust to an economy where the entire
marketplace of mass food distribution disappeared almost overnight.
Shippers and carriers were forced to find new homes for their products,
and ATA worked closely with supply chain partners and regulators to
accommodate those changes while minimizing waste and disruption.
By focusing on improving communication between supply chain
partners outside their contractual obligations and addressing the
ability to repackage from a large-market focus to the consumer level,
the food supply chain evolved to meet the unique demands of the COVID-
19 pandemic. Supply chain horror stories of dumping tankers of expired
milk, containers of harvested products left to rot, and disposing of
thousands of slaughtered animals that went unprocessed in a timely
manner all illustrate the consequences of inefficiency and highlight
the need for the private-sector and regulators to strengthen the
resiliency of supply chains to meet future challenges.
As shippers' traditional marketplaces collapsed they were left
scrambling to find other consumers for their products. This immediate
shift exposed the initial lack of connectivity among partners in the
supply chain when faced with the dramatic changes wrought by the
pandemic. However, by bringing together technology providers, logistics
companies, shippers, government agencies, and charitable organizations,
supply chains were cooperatively able to piece together short-term
solutions to minimize disruptions.
We witnessed schools and restaurants shutter overnight, and many
food distributors were left with commercially packaged foodstuffs. The
market took a few days, but started to repackage those goods for
consumer purchase. Many restaurants turned into ``bodega-like''
operations selling packages of uncooked goods to customers who
ordinarily would have been sit-down restaurant customers. Produce
trucks parked in parking lots also sold their perishable products
directly to consumers.
A common thread in the discussions between supply chain partners is
that there is no one silver bullet to ensuring resilient food and
agriculture supply chains. The improved level of communication made
necessary by COVID-19 response efforts must continue, and unique
solutions must be found to workforce challenges facing our respective
industries supply chains struggle to provide necessary capacity to meet
consumer demand. America's agriculture community produces the world's
safest and most abundant food supply, and our motor carriers remain
dedicated to playing their role in bringing those goods to market.
(5) Port Productivity Challenges
As media and policymakers focus on the backlog of import cargo at
U.S. maritime ports, particularly on the West Coast, it is an
opportunity to examine the long-term trends in port practices that
reduce the resilience of food supply chains. Volumes are surging at a
time when labor and equipment shortages leave inland distributors
unable to accommodate the demand. Inabilities to process cargo at
ports, dray import and export containers between ports and inland
distribution facilities, and transport inland goods efficiently between
production facilities and warehouses all create challenges for our food
supply chain.
The entire food supply chain would benefit from steps to
incentivize communication between supply chain partners, realign
financial incentives by modernizing regulations related to detention
and demurrage charges by ocean carriers and marine terminal operators,
and address the chassis and equipment shortage.
Improving Communication
Private-sector partners need to continue improving their
communication to avoid supply chain breakdowns, even in the face of
peak season demands, a lack of carrier capacity, a lack of equipment
availability, and ongoing labor supply challenges. In that context,
Congress and Federal regulators must understand the context of the
current and potential bottlenecks in order to respond accordingly with
effective and meaningful relief. For instance, a port remaining open
24/7 will do little to increase the flexibility of the supply chain if
the port does not have adequate equipment available to move containers,
they are slow to process the trucks that serve the facilities, inland
warehouses are full, or if inland warehouses are only staffed to open
their shipping docks for limited hours. Solutions should focus on
addressing the constraints specific to those port facilities, not
merely increasing the amount of time a driver can legally operate in
order to overcome the inefficiencies.
In addition to the delays and limited hours of operation at inland
facilities complicating the carriage of goods to and from ports, the
ports themselves struggle with disjointed information sharing. ATA
members working in intermodal freight, as well as those transporting
agriculture and food, report that information systems and notifications
vary substantially between facilities. Each terminal within a larger
port often has its own information sharing system, an inefficient state
of affairs for truck drivers and supply chain participants that would
otherwise benefit from more global availability of information.
Truckers working at ports often must return containers or chassis at
one terminal then pick up new equipment at a different terminal, and
most terminals operate on different systems. Miscommunication is often
exacerbated by short notice of constantly-changing windows of
availability for cargo and equipment pickup and drop-off at each
terminal.
Modernizing Incentives at Ports
The Federal Maritime Commission has studied the issue of unjust and
unreasonable practices relating to detention and demurrage penalty
charges levied on carriers and shippers by ocean carriers and marine
terminal operators. Fines intended to incentivize the efficient
movement of goods to and from U.S. ports are, obviously, failing to do
so. Rather, motor carriers and food shippers working at ports are too
often forced to pay unfair penalties and then weigh the risks of
pursuing litigation or arbitration with large, global shipping lines to
recover their losses.
Too often, the delays for pickup and return of equipment and cargo
for the movement of food and agriculture goods at ports are due to
circumstances beyond motor carriers' control. Part of the challenge is
in obtaining the necessary equipment, particularly chassis, to move
containers to warehouses. Another aspect of the challenge is that labor
shortages at those inland facilities slow the loading and unloading of
goods. Federal hours of service regulations do not account for or
accommodate labor challenges, so the time a driver spends waiting on a
chassis to move goods from the port, or missing the delivery window at
an inland facility because of delays at the port is unrecoverable.
Drivers and equipment are critical resources for the overall food
supply chain, and effective utilization of both is critical to
alleviate the current port backlog.
The answer to these myriad challenges is not increasing the amount
of time a driver can be on-duty, but rather restoring financial
incentives for ocean carriers and marine terminal operators to work
with shippers and carriers to move goods efficiently. These entities
should not benefit from unreasonable demurrage charges when cargo is
not made available to carriers and shippers in a timely manner, and
they should not be able to levy unfair charges for the late return of
containers when there is no space for the carrier or shipper to return
the equipment.
If drivers are unable to return a container and obtain the proper
chassis, they cannot pick up their next container, slowing operations
and contributing to the buildup of containers at the port. In addition
to improving port information sharing and restoring fairness to the
financial incentives for moving cargo, there is a critical need to
incentivize better chassis management and to secure more chassis and
equipment to move more containers at ports.
Equipment Availability
There is virtually zero availability of chassis, which is a
critical chokepoint for U.S. ports at this time. Trucking companies and
intermodal equipment providers that purchase this equipment rely on
both domestic and foreign suppliers. Recent trade actions, including
Section 301 tariffs imposed during the Trump Administration and an
antidumping and countervailing duty ruling from the Department of
Commerce and the U.S. International Trade Commission (USITC) earlier
this year, limit chassis availability from global sources. ATA is
concerned that the combination of the tariffs and duties only increases
the cost of chassis without providing a sizeable increase in domestic
production to meet the demands of the U.S. intermodal marketplace.
Without increased chassis availability, the carriers serving our food
supply chain will continue to struggle to meet consumer demand in an
efficient and timely manner.
A lack of interoperability for chassis in certain locations further
strains the motor carriers and shippers moving food and agricultural
products through our ports. Many ocean carriers require motor carriers
to use chassis from their preferred intermodal equipment provider in
order to pick up a container from that shipping line. This is true even
for merchant haulage where the shipper contracts with the motor carrier
for land transportation rather than with the ocean carrier. This could
require a motor carrier to return one chassis and pick up another one
just to pick up a container from a specific ocean shipping line. This
inefficient system that allows ocean carriers to sideline competition
also prevents motor carriers from choosing their own chassis provider,
adding time and expense that is eventually passed on to consumers.
Finally, the supply chain challenges that make it harder to move
agriculture and food products efficiently are manifesting in an
inability to receive new trucks and the necessary parts to maintain
fleets. Making it harder to keep trucks that are already operating on
the road places the economy at risk of an even greater capacity
shortage. Semiconductor shortages are slowing delivery of new equipment
because OEM companies are being forced to idle plants as they wait to
build up sufficient stock to produce trucks. Fleets are cannibalizing
older equipment to keep their assets moving as best they can. These
shortages will continue to challenge those companies working in the
food supply chain, and we encourage the Members of this Committee to
consider these industry concerns.
Conclusion
Chairman Scott, Ranking Member Thompson, and Members of the
Committee, thank you again for the opportunity to testify before the
Committee at a moment where significant challenges face our nation's
agricultural and food product supply chains. The members of the
American Trucking Associations are working ceaselessly to move goods
across this country, and on their behalf I am grateful for the
opportunity to present you with insights on steps that can be taken to
help the industry.
The entire ATA federation stands ready to work hand-in-hand with
you, Congress, and the Biden Administration to address the issues we
are discussing today. Thank you.
The Chairman. Yes. Thank you, Mr. Samson. And now I
recognize Mr. Wells. Please begin when you are ready.
STATEMENT OF ROD WELLS, CHIEF SUPPLY CHAIN OFFICER, GROWMARK,
INC.; CHAIRMAN OF THE BOARD,
AGRICULTURAL RETAILERS ASSOCIATION, BLOOMINGTON, IL
Mr. Wells. Thank you. Good morning, Chairman Scott, Ranking
Member Thompson, and distinguished Members of the House
Committee on Agriculture. Thank you for allowing me to testify
today regarding the immediate challenges to our nation's food
supply chain. My name is Rod Wells, and I serve as the Chief
Supply Chain Officer of GROWMARK, Incorporated, headquartered
in Bloomington, Illinois. GROWMARK is a North American ag
cooperative owned by local member companies and farmers, and
provides grain supplies, farm supplies, and grain marketing
services. I also appear before you today on behalf of the
Agricultural Retailers Association, as the Chairman of the ARA
Board of Directors. ARA represents agricultural retailers, who
supply farmers and ranchers with crop inputs, feed, equipment,
technology, and services that help to successfully manage their
operations.
The agriculture industry is experiencing supply chain
disruptions. We must act on both short-term and long-term
solutions and utilize a multi-pronged approach to mitigate
these disruptions. The importance of improving our
infrastructure, crop input production, energy availability,
access to labor, and regulations that work for rural America is
very clear now. Rural America's transportation infrastructure
needs improvement. Rural America contains many of the country's
natural resources, and is the primary producer of food, fiber,
and energy. Roads, bridges, highways, and waterways provide the
first and last links in the supply chain from farm to market
for all citizens in our country. We compete in a global
marketplace, and our infrastructure must be world-class and
efficient.
In short, ensuring an economically strong supply chain
infrastructure is critical to the health of the U.S. economy.
Waterways, ports on our coasts, and freight railroads are safe
and effective means of transporting commodities. Freight
railroads need to make track improvements to be in the best
position to deliver consistent, dependable service, while also
providing competitive rail rates to shippers. Our waterways
need new 1,200 locks, and more ports need to be capable of
offloading containers. Our growing supply chain challenges
pinpoint an immediate need for waterway, port, and rail track
upgrades to connect ag retailers and their customers to
domestic and international markets.
Trucking is vital to agriculture, and we depend on just-in-
time delivery of farm supplies and services to our customers.
Our country is experiencing a growing driver shortage, and
higher shipping costs. 48 states currently allow drivers to
obtain a commercial driver's license at 18, however, they are
prohibited from driving in interstate commerce until they are
21. The DRIVE-SAFE Act (H.R. 1745), legislation we support,
would create a two-step apprenticeship program to allow these
younger drivers to safely enter the industry. Hours of service
regulation should allow more flexibility for drivers working
within the food supply production system, along with
streamlining electronic logging device requirements that can be
a burden for small trucking companies.
Planning for the 2022 growing season is already underway.
Seed and crop protection products all rely on the supply chain
being discussed today. We feel part of improving the supply
chain involves the timely and science-based regulatory approval
process for biotechnology and crop protection products. The Ag
Retailers Association supports biotechnology and crop
protection products being assessed within the traditional U.S.
EPA science- and risk-based regulatory process. American
farmers and ranchers become more sustainable and strengthen the
food supply system long-term with science-based enhancements.
Reliable, diverse, and cost-effective energy sources are
essential for agricultural production and supply chain system.
Agricultural producers produce renewable fuels that include
ethanol, biodiesel, solar, wind, and gas from digesters. But
until renewable energy can meet all demand, traditional
domestic energy sources must be available.
The Census shows rural America continues to struggle to
grow its population, while the demand for qualified workers
increases. The current H-2A ag guestworker visa program is
broken and does not work for all of agriculture. We desire an
H-2A program that is simpler and more flexible.
The Ag Retailers Association urges Congress to continue to
explore solutions that improve the supply chain, and also
promote pro-growth economic policies. As a farm supply
retailer, I am confident that acting on these priorities will
help farmers improve production, and contribute to growing the
economy, while supplying the food, fuel, and fiber that our
citizens need. Thank you for your commitment to, and support
of, American agriculture, and I look forward to your questions.
[The prepared statement of Mr. Wells follows:]
Prepared Statement of Rod Wells, Chief Supply Chain Officer, GROWMARK,
Inc.; Chairman of the Board, Agricultural Retailers Association,
Bloomington, IL
Introduction
Good morning, Chairman Scott, Ranking Member Thompson, and
distinguished Members of the House Committee on Agriculture. Thank you
for allowing me to testify today regarding ``The Immediate Challenges
to our Nation's Food Supply Chain.''
My name is Rod Wells and I serve as Chief Supply Chain Officer for
GROWMARK, Inc. headquartered in Bloomington, Illinois. GROWMARK is a
North American agricultural cooperative serving local ag and energy
cooperatives, farmers, retailers, and businesses in the U.S. and
Canada.
I also appear before you today on behalf of the Agricultural
Retailers Association (ARA) as the Chairman of the ARA Board of
Directors. ARA represents agricultural retailers who supply farmers and
ranchers with products and services. These products include seed,
nutrients, crop protection products, feed, equipment, and technology.
Retailers also provide consultative services such as crop scouting,
soil testing, field mapping, custom planting and application, and the
development of nutrient management and conservation plans.
Agricultural retailers range in size from small, family-held
businesses to large companies and farmer-owned cooperatives with many
outlet stores. Large and small retail facilities are scattered
throughout all 50 states and provide critical goods and services, as
well as jobs and economic opportunities in rural and suburban
communities.
The agriculture industry is experiencing supply chain disruptions.
While there is no easy fix, any solutions require a multi-pronged
approach including, but not limited to, addressing issues of
infrastructure, crop input production and regulation, energy, labor,
and pro-growth economic policies.
Infrastructure
Rural Roads & Bridges--Rural America's transportation
infrastructure needs serious investment. Home to 60 million people and
playing a vital role in the U.S. economy, rural America contains much
of the country's natural resources, and is the primary source of food,
fiber, and energy. Roads, bridges, highways, and waterways provide the
first and last links in the supply chain from farm to market.
The roads and bridges that serve and connect our country's rural
areas face significant challenges. Inadequate capacity to handle
growing levels of traffic and commerce, limited connectivity, the
inability to adequately accommodate growing freight travel, and
deteriorating road and bridge conditions top the list. The nation's
rural roads and bridges have significant deficiencies due to
underfunding: 15 percent of the nation's major rural roads have
pavement rated in poor condition, 21 percent rated in mediocre
condition and ten percent of rural bridges rated structurally
deficient.
Railroads--Freight railroads are a safe and effective means of
transporting bulk commodities and ensuring an economically strong rail
network is critical to the health of the U.S. economy. Freight rail is
a vital link that connects thousands of U.S. manufacturers,
agricultural distributors, retailers, farmers, and energy producers
with consumers. Freight railroads need to make track improvements to be
in the best position to deliver consistent, dependable service while
also providing competitive rail rates to shippers. Modernizing the
Surface Transportation Board (STB) regulations will ensure that the
freight railway system works better for both the railroads and
America's shippers that rely on them.
The nation's 603 short line and regional railroads operate 29
percent of the nation's freight rail network. In four states, short
lines operate 100 percent of freight rail, and in 36 states they
operate more than 25 percent. For large areas of rural and small-town
America, short lines offer the sole method for shippers to connect to
the national rail system, helping businesses and employment stay local.
The Short Line ``45G'' Rehabilitation Tax Credit, first enacted by
Congress in 2005 and made permanent in December of 2020 as part of the
Consolidated Appropriations Act, has allowed short lines to privately
invest over $5 billion since its inception. Providing incentives for
these types of rail infrastructure investments is good public policy.
ARA believes similar financial incentives such as tax credits or grants
should be made available to agribusinesses that own private industrial
spur lines or trackage used to load and unload railcars at their
facilities.
Ports and Inland Waterways--Many of the agricultural products,
including essential crop inputs used to produce a sustainable food
supply and the production of America's farmers and ranchers, utilize
our country's many ports. Whether these products originate in America
or arrive from other countries, they are an essential part of supply
chain resiliency. Recently, Gene Seroka, executive director of the Port
of Los Angeles, testified before the U.S. House of Representatives'
Transportation & Infrastructure's Coast Guard and Maritime
Transportation Subcommittee on the port congestion issues stating, ``we
must revisit a national strategy that targets infrastructure investment
and supply chain performance to key industrial sectors of our economy.
Such a strategy should focus on exports of American products, but also
on procurement of essential goods for American businesses and
consumers. For example, we must reverse the impact that retaliatory
tariffs have had on our agricultural exporters. We must enhance their
connectivity to major trade gateways through infrastructure investment
and leverage digital solutions that make it easier for them to marshal
the equipment necessary to reach foreign markets.''
As often reported on the national news, there has been a serious
port backlog since earlier this year. Now more than ever it is
important for the Federal Maritime Commission (FMC) to act. FMC should
leverage its authority to limit the impact of rising demurrage and
detention costs to shippers and, eventually, consumers. We ask Congress
to review legislation such as the bipartisan ``Ocean Shipping Reform
Act'' (H.R. 4996) to address practices that are currently damaging U.S.
agricultural exports.
Additionally, America's inland waterways system provides the
lowest-cost, most fuel-efficient and environmentally friendly method to
transport products. Exports of agricultural goods make up 20 percent of
farm income and support more than one million jobs. In 2017, 70 percent
of U.S. agricultural exports, valued at $90.5 billion, traveled by
water. And every $1 billion in U.S. exports shipped through ports
supports 15,000 U.S. jobs.
The system of locks and dams that facilitate this transport
urgently needs extensive maintenance and modernization. Most were built
in the 1920s and 1930s and have far exceeded their 50 year design
lifespan. In 2017, 49 percent of barge vessels experienced delays, up
from 35 percent in 2010. These delays cost nearly $45 million annually
and adversely affect the price farmers pay for their inputs and earn
for their commodities.
The inland waterways system currently benefits from a successful
public-private partnership. Commercial users help pay for inland
waterway construction and rehabilitation through a 29 per gallon
diesel fuel tax paid into the Inland Waterways Trust Fund (IWTF). Under
the Water Resources Development Act of 2020, the IWTF funds 35 percent
of the cost of these projects while 65 percent is funded through the
Treasury.
However, we need additional investment to keep commerce flowing on
our inland waterways. GROWMARK and ARA support prioritizing increased
funding to complete the 17 Congressionally authorized inland waterways
navigation projects. In addition, a continued focus to ensure that
Harbor Maintenance Trust Fund dollars go towards their intended purpose
of dredging will also help to boost American competitiveness and
improve supply chain resiliency.
Rural Broadband--Broadband access is vital to rural economic
development, education, precision agriculture data transfer, health
care, and public safety activities. According to the Federal
Communications Commission's (FCC) latest broadband deployment report,
14.5 million Americans lack internet connectivity. However, a Broadband
Now study released in February 2020 estimates that as many as 42
million Americans do not have the ability to purchase broadband
internet. An FCC report from 2017 estimates it would cost $80 billion
to bring high-speed internet to the remaining parts of our country that
do not have access. Broadband connectivity links farmers and ranchers
to today's online markets. Without connectivity, rural communities can
be cut off from domestic and international supply chains. Given the
high number of communities that lack internet services, digital
connectivity is a direct need for supply chain resilience.
Crop Input Production and Regulation
Today, Americans have access to one of the safest, most diverse,
and most affordable food supplies in history. This is thanks in large
part to the efficiency, productivity, and innovation of U.S.
agriculture enabled by agricultural crop protection products,
fertilizers, seed protections, and biotechnology products. These
products are approved for use within the United States' robust science-
and risk-based regulatory system.
Agricultural retailers employ commercial pesticide applicators that
receive extensive education and training to apply pesticide products in
accordance with laws and regulations under the Federal Insecticide,
Fungicide and Rodenticide Act (FIFRA). EPA has financially supported
training of certified commercial applicators through state grants. The
programs generally cover Best Management Practices (BMPs) for safe
pesticide use as well as environmental issues like endangered species
and water quality protection. Thousands of agricultural retailers and
their commercial applicators have raised their professional status by
also participating in voluntary programs such as the Certified Crop
Advisor (CCA) program administered by the American Society of Agronomy.
Our industry is licensed and extensively trained to store, handle, and
apply Restricted Use Pesticide (RUP) products.
For healthy and productive growth of nutritious food, plants also
require essential nutrients. Fertilizers and bio stimulants serve as a
supplement to the natural supply of soil nutrients, build up soil
fertility to help satisfy the demands of crop production, and
compensate for the nutrients removed by harvested crops. Higher crop
yields are well documented with better crop and soil management.
Adopting nutrient stewardship contributes to the preservation of
natural ecosystems by growing more on less land with fewer inputs.
U.S. agriculture remains the leader in plant breeding innovation
due to clear, predictable, and science- and risk-based regulations.
Plant breeders continue to strive to provide solutions to new and
emerging challenges facing farmers, consumers, and the environment. Ag
biotechnology such as genetically modified organisms (GMOs) and gene
editing can help increase global food security. New innovations in
plant breeding provide benefits such as reducing CO2
emissions, dramatically increasing crop productivity, providing more
food to remote communities, reducing input load, and decreasing food
waste.
GROWMARK also strongly supports a science- and risk-based
regulatory system which fosters innovation, values the environmental
benefits that biotechnology enables agriculture to achieve, and
recognizes the long and safe track record of plant and animal breeding
along with overwhelming evidence of the safe use of genetic engineered
plants and animals. By protecting existing and emergent technologies
that enhance production, American farmers and ranchers become more
sustainable and strengthen the food supply long-term.
The Agricultural Retailers Association is concerned by recent
actions taken by the U.S. Environmental Protection Agency (EPA) to
revoke all tolerances for the insecticide chlorpyrifos. We believe the
actions by EPA are inconsistent with Federal statutes, the agency's own
extensive record on chlorpyrifos, and sound, science-based and risk-
based regulatory practices. This action by EPA will cause significant
harm to the food and agricultural industries and directly impact supply
chains. Other examples of disruptions to the marketplace include the
U.S. Court of Appeals for the 9th Circuit ruling issued in June 2020
that canceled the registration of three dicamba herbicides for over-
the-top usage in registered crops. The Federal court decision was
delivered in the middle of application season, well after seed and
pesticide product selection decisions were made by American cotton and
soybean farmers. If EPA had not allowed for these products continued
use during the 2020 growing season under their long-standing ``Existing
Stocks'' policies, there may not have been enough alternative products
available for agricultural retailers or their farmer customers.
Congress and EPA need to protect the agency's policy on ``Existing
Stocks'' of pesticide products if there are future cancellations to
prevent severe disruptions in the marketplace.
We are concerned with the onslaught of lawsuits filed by anti-
pesticide, non-governmental organizations (NGOs), especially in the 9th
Circuit, in an effort to secure bans on pesticide products that are
safe, essential tools used by the industry. A perfect example relates
to glyphosate, a widely used herbicide that controls broadleaf weeds
and grasses. It has been registered as a pesticide in the U.S. since
1974, reviewed and reassessed as safe, and not considered to cause
cancer (Source: Revised Glyphosate Issue Paper: Evaluation of
Carcinogenic Potential, EPA's Office of Pesticide Programs, December
12, 2017). NGOs seek the Federal courts, who have no scientific
expertise, to impose their decisions over the conclusions of career EPA
scientists and peer-reviewed scientific data.
We are concerned with potential future actions by EPA to ban other
essential crop protection products that will significantly harm crop
production as there will not be readily available alternative and
effective replacement products. This scenario may result in food
shortages and increased prices for American consumers.
Energy
GROWMARK and ARA also support Federal policies that increase
domestic energy production, resulting in reduced costs for crop input
materials manufactured in the U.S. Our nation must remain energy
independent by including oil, natural gas, and other domestic energy
supplies, such as renewable fuels like ethanol and biodiesel, in our
efforts to promote economic growth in the nation's ag sector and reduce
U.S. dependence on foreign sources of energy. Overall, we support an
``all of the above'' energy strategy and believe this approach is
necessary to support a resilient food supply chain.
According to a recent study conducted by Environmental Health &
Engineering, Inc., ethanol reduces gasoline's greenhouse gas emissions
by 46 percent. Additionally, by 2022, USDA anticipates that corn
ethanol's relative carbon benefits could reach up to 70 percent thanks
to continued innovation in the ethanol process.
ARA issued a commissioned study in October 2020 entitled,
``Economic Impacts to U.S. Biofuels, Agriculture, and the Economy from
Subsidized Electric Vehicle Penetration.'' The study examined three
scenarios for electric vehicle (EV) market penetration through 2050 and
their potential impacts on biofuels consumption, the agricultural
sector, and the greater economy. The three scenarios include:
1. Base Case: EV market penetration increases to 13 percent of
light-duty vehicle sales by 2050, following Annual Energy
Outlook Reference Case projections.
2. ICE Ban by 2050: EV market share reaches 100 percent of light-
duty and freight vehicle sales by 2050 due to a ban on
internal combustion engines (ICE).
3. ICE Ban by 2035: EV market share reaches 100 percent of light-
duty vehicle sales by 2035 and 100 percent freight vehicle
sales by 2040 due to a ban on internal combustion engines.
These scenarios were selected to present a full range of possible
impacts across the biofuels value chain and supporting supply chains.
The biofuels value chain includes farm seed, fertilizer, and other
inputs required for crop production, maintenance, harvesting,
intermediate transportation, and biofuels manufacturing. The ICE Ban by
2050 and ICE Ban by 2035 scenarios were designed to represent scenarios
where non-market policy factors, including a potential ban on the sale
of vehicles with an internal combustion engine, could require EV
adoption. Relative to the Base Case, this study found that in 2050:
U.S. light-duty and freight vehicle consumption of ethanol
and biodiesel could decline up to 90 percent to 1.1 billion
gallons and up to 61 percent to 0.8 billion gallons,
respectively
Corn and soybean consumption decrease by up to 2.0 billion
bushels and up to 470 million bushels, respectively.
Corn prices fall up to 50 percent to $1.74 per bushel.
Soybean prices fall up to 44 percent to $4.92 per bushel.
U.S. Net Farm Income decreases by up to $27 billion.
U.S. GDP declines by up to $26.4 billion, resulting in
cumulative GDP losses of up to $321 billion.
U.S. job losses could reach up to 255,300 in the year 2050.
These studies demonstrate that biofuels, like ethanol and
biodiesel, must continue to be critical pieces of a low-carbon economy.
According to the U.S. Energy Information Administration (EIA) biodiesel
is considered to be carbon-neutral because the plants (soybeans) that
are the source of the feedstock for making the renewable fuel absorb
carbon dioxide (CO2) as they grow (Source: https://
www.eia.gov/energyexplained/biofuels/biodiesel-and-the-
environment.php). All forms of domestically produced energy should be
fully utilized to develop and promote low-carbon emission vehicles as
it will help keep energy, manufacturing, food, and fuel costs low for
American consumers and ensure economic prosperity for America's
domestic industries. For these reasons, we oppose efforts to ban the
internal combustion engine as it would have an adverse impact on the
U.S. agricultural industry and rural communities.
Labor
The agricultural community is dependent on a sustainable workforce
now more than ever. Every farm worker engaged in high-value labor
intensive crop and livestock production sustains an average of two to
three off-farm jobs. With the added burden of a global pandemic,
employers and employees are strained even further.
The current H-2A ag guestworker visa program is broken and only
available for part of the agricultural industry. Additionally,
agriculture needs the H-2A program to be more flexible as it currently
requires the cooperation of multiple Federal agencies which can
complicate the program.
We support the use of vaccines to fight the spread of COVID-19 but
are concerned with the issuance of an Emergency Temporary Standard by
OSHA for businesses with 100+ employees as it has the potential to
create even larger labor shortages within our industry. Agricultural
retailers currently struggle to find workers for existing job openings.
Federal policies should provide flexibility for agribusinesses to
address this issue through increased educational outreach efforts and
other programs to increase the number of vaccinated workers.
Our economy is expanding quickly in response to the post COVID-19
business openings. Supply chains for consumer, industrial, and
agriculture businesses need to move more products in a short amount of
time and in higher volumes to keep pace with demand. Trucking demand is
outpacing the supply of available drivers. As noted above, road
infrastructure is important and truck deliveries are critical to keep
supplies on our retail shelves, raw materials to manufacturers, and
agriculture productive. A practical proposal with immediate results
would be to increase weight limits for trucks on roads to 88,000 pounds
from June 30-November 1 across the nation. Resupplying America would
boost the economy by ensuring raw materials and finished goods are in
the right place for purchase during this period of high demand.
Allowing higher payloads to resupply America's supply chains is the
right policy to consider because it would increase efficiency, reduce
costs, and lower emissions with fewer trucks in a short amount of time.
The increased weight on the roads would occur before most areas have
significant freezing and thawing. Increased inventory would be
available to consumers, easing price increases and providing inputs for
manufacturing and agriculture.
Seventy percent of the nation's freight is carried by commercial
trucks, yet as our economy strengthens, motor carriers have difficulty
sourcing the drivers they need to handle growing capacity. According to
a recent estimate by the American Trucking Associations issued October
25, 2021, the nation needs an additional 80,000 truck drivers
immediately--a shortage that is expected to surpass more than 160,000
by 2030. In many supply chains, companies are being forced to increase
prices to account for higher transportation costs. This will ultimately
result in higher prices for consumers on everything from electronics to
food.
While 48 states currently allow drivers to obtain a commercial
driver's license at 18, they are prohibited from driving in interstate
commerce until they are 21. The DRIVE-Safe Act, legislation we support,
would create a two-step apprenticeship program to allow these younger
drivers to enter the industry safely. Candidates would be accompanied
in the cab by experienced drivers for a total of 400 hours of on-duty
time with at least 240 hours of driving time. Trucks would be required
to be outfitted with the latest safety technology including active
braking collision mitigation systems, forward-facing event recording
cameras, speed limiters set at 65 miles per hour or less and automatic
or automatic manual transmissions.
The Farm-Related Restricted Commercial Driver's License (CDL), or
more commonly referred to as the ``Seasonal Ag CDL'' program, has been
an essential seasonal program for farm-related service industries since
1992. These industries have historically had a very strong
transportation safety record and it has not been diminished since these
Federal regulations have been in place. The Seasonal Ag CDL program has
helped promote economic growth for America's agricultural industries
serving the essential needs of farmers during the busy planting and
harvesting seasons. Due to challenging weather events, the increase in
crop production diversification, technological advances, and weight
increases in light duty pickup trucks and agricultural equipment over
the past several decades, it is necessary to modernize the Federal
regulations providing the framework for these state-administered
programs. The temporary shutdown of the state department of motor
vehicles offices throughout the nation during the height of the [COVID-
19] pandemic also caused major disruptions for farm-related service
industries and their rural communities.
Please support modernizing the Farm-Related Restricted CDL program
with the following reforms:
Provide more flexibility by expanding the total days allowed
to utilize Farm-Related Restricted CDL drivers up to 270 days
to accommodate for the longer seasons, which can fluctuate from
year to year due to climate change as well as more diversified
crop production. The state would maintain the ability to set
the seasonal periods these days could be utilized by the
industry.
Ensure the new 12 month seasons restart each calendar year
on January 1 to prevent any overlap of seasons from the
previous year.
Ensure Farm-Related Restricted CDL drivers can also operate
Class A commercial vehicles in recognition of the advances and
changes made to light duty pickup trucks, agricultural
equipment, and trailers over the past 30 years.
Eliminate the requirement for in-person seasonal renewal of
the Farm-Related Restricted CDL
There is a strong need for long-term modifications to this program
to ensure economic growth for our industries and their rural
communities while continuing to maintain a strong transportation safety
record. This essential seasonal CDL program is currently authorized in
24 states. The surface transportation reauthorization bill offers an
opportunity to enact needed reforms that can help provide necessary
transportation flexibility for farm-related service industries and
ensure there are no disruptions to America's agricultural production
and the supply chain.
The Hours of Service (HOS) agricultural operation exemption has
been vital for our industry to ensure ``just in time'' delivery of farm
supplies and other essential products and services to farm and ranch
customers. The electronic logging device (ELD) requirements highlighted
issues with the existing HOS regulations and the need to modernize the
agricultural exemption. While it has had the largest impact on the
livestock industry, there has also been an impact on farm supply
transporters and smaller trucking operations. To addresses these
issues, ARA requests support of legislation eliminating the HOS ag
exemption's planting and harvesting season provision. Over 30 states
already have a year-round ``planting and harvesting season''
designation. Eliminating this provision ensures the HOS ag exemption is
year-round for all states, promoting regulatory consistency and
alleviating unnecessary regulatory burdens highlighted by the ELD
mandate. We also request support for expanding the current air mile
radius of 150 air miles up to 200 air miles for farm supply
transporters following an FMCSA pilot program to collect safety data to
address continued industry consolidation and driver shortages.
These regulatory changes will help our nation's freight continue to
move while preserving the safety of our highway system.
Pro-Growth Economic Policies
The Agricultural Retailers Association sees a need to support and
advocate for pro-growth economic policies that will aid our members by
developing a more business-friendly marketplace in which to operate.
There are several barriers to entry within the American tax code we
would like to see changed to protect our freedom and license to
operate. These pro-growth policies will also positively impact our
nation's food supply chain and its resiliency.
Protecting current tax provisions is also paramount in promoting
growth. The estate tax has long been a detriment to our member's
business and, as such, we support its full repeal.
ARA also supports a workable sale and use tax collection system to
shield retailers and farmers from burdensome tax compliance
requirements and we continue to advocate for efforts to streamline
these requirements.
ARA recently signed onto a letter to Congressional leadership
regarding the need to preserve several tax provisions that would
support new and multi-generational farm operations, thus ensuring a
robust and dependable food supply chain. The letter noted that with
more than 370 million acres expected to change hands in the next 2
decades, tax policies will determine agricultural producers' ability to
secure affordable land to start or expand their operations. Highlighted
were three critically important tax provisions:
Stepped-Up Basis: Assets in agriculture are typically held
by one owner for several decades, so resetting the basis on the
value of the land, buildings, and livestock on the date of the
owner's death under a step-up in basis is important for
surviving family members and business partners to ensure the
future financial stability of the operation.
Like-Kind Exchanges: This provision allows businesses to buy
and sell like assets without tax consequences, thus helping
farmers and ranchers, who are typically ``land rich and cash
poor,'' maintain cash flow and reinvest in their businesses.
Sec. 199A Business Income Deduction: In order to maintain a
reasonable level of taxation for pass-through businesses, like
farms and ranches, it is critical to preserve Section 199A
business income deduction.
We also support a consistent corporate tax structure and oppose
changes to the current corporate tax structure. These provisions are
fundamental to the financial health of production agriculture and the
businesses that supply its inputs, transport its products, and market
its commodities.
ARA strongly advocates for the free and fair trade of agricultural
products, equipment, and crop inputs that are essential to food supply
chain resiliency. We believe this will create opportunities for
economic benefit for farmers, ranchers, retailers, and other members of
the supply chain. ARA members and their farmer customers purchase crop
inputs from both domestic and international manufacturers. While ARA
strongly supports the domestic crop input manufacturing industry, and
policies that will make them more efficient and competitive globally,
our primary interest lies in achieving competitive sources of products
with which our retailer and distributor members can best serve their
growers.
We have consistently supported reducing both domestic and
international trade barriers. The agriculture industry is heavily
weather dependent; thus, to ensure a strong U.S. food supply, farmers
require large volumes of agriculture inputs during tight time spans
during the planting and harvest seasons. Hence, it is necessary for the
U.S. agriculture industry to have a strong and steady supply of crop
protection products and fertilizers available to ensure adequate supply
and to avoid wild price swings in the market. Our policy position
supporting fair and free trade of agricultural products is a top
priority that includes foreign and domestic manufacturers alike and
treats imports and exports equally.
Conclusion
In closing, any long-term solutions crafted to address the
challenging disruptions to the food supply chain we face will only be
found through the continued partnership between the agricultural
retailer, their farmer customers, and regulating authorities.
America's farmers are among the most resilient people on the
planet, and they should be commended for their hard work and dedication
to feeding a growing world population. As a farm supply retailer, I am
confident that mitigating supply chain disruptions in our industry and
working to lessen regulatory burdens that hinder production, will
significantly contribute to a burgeoning economy.
Thank you for your continued commitment to supporting America's
agriculture industry and I look forward to your questions.
The Chairman. Thank you, Mr. Wells, and I want to thank
each of you for your very informative testimonies, and I just
appreciate your sense of urgency and understanding of what we
are doing. Our job here today is to keep our food supply chain
operative and functioning at the level that we really, really
need. And so, let me begin the questions.
I will tell you this, I am very, very worried. I am worried
that we could possibly have a major delay in our food supply
chain if we do not address this pressing issue of a need for
commercial truck drivers. It is an extraordinary profession,
and we are now pulling the covers off all of that to really--I
have magnified my deep appreciation for truck drivers. They
hold the key right now as to whether or not we will have a food
supply challenge and shortage. We do not have a food shortage,
but the supply is in the hands of our truck drivers.
So, I just want to stress to you the urgency that I feel
about this, because as Chairman of the Agriculture Committee,
first and foremost, our number one priority is to make sure our
people are eating, that our schoolchildren are getting their
meals. But I am hearing from our school boards, you all know
the story, the food may be there, but the utensils, something
like the forks and spoons--you mentioned something about the
type of paper and packaging that our meat processors have. All
of this is coming from places like China, and that is why I am
saying this is such an important issue here.
And so, let me start with you, Mr. Samson. You are with the
Trucking Association, correct?
Mr. Samson. Correct.
The Chairman. All right. We have a two-pronged problem
here. Number one--and it has come out, 15,000 driver vacancies
right now, but I have just heard that number is up to 80,000.
And then on top of that, I am informed that our truck drivers'
careers last less than a year for 90 percent of them. If this
isn't a barnburner of a crisis waiting to happen--and our
failure to address it properly could be detrimental to our
nation, and the world, because we supply food. And as you can
see, in Los Angeles, in Long Beach, 40 percent--those ports in
California bring in 40 percent of our trade, and our
commodities.
One of the other things I found out about this, as I am
getting into it, and this is a danger, but we will put this on
the back burner for now, but we are too dependent on China for
some very basics. Deere Tractor, I talked to them, they depend
on China for some of their equipment that they can't get. That
delays it. So, I just want to stress the importance of this
hearing, and I am moving--as I said, as we speak now, my staff
is meeting with the committee staffs of the Transportation and
Infrastructure Committee, the Education and Labor Committee,
and, of course, our Agriculture Committee, and Secretary
Vilsack is already moving on this. We have a little something
in the infrastructure bill that is a pilot for some of the
things I am talking about.
But share with me this answer--this question. What is it
that is causing this, because if we go get these drivers, and
don't address the fact that 90 percent of them don't last a
year--please tell us why that is happening, and what we must do
to fix it so that, as we recruit new drivers, we are also
moving simultaneously to address those issues of retaining
those drivers. And that is why I call this movement that we are
making jointly with the Agriculture Committee, and then we
bring in those departments as well--because the Labor
Department is going to have to be key to help us get out there,
and identify some of these drivers that may have quit that we
can identify, that have the license already, that we have a
need here, and could come and help us in our need.
So, I want to just bring those to you, and I want us to
leave here with an understanding that we are not going to let
this happen any way, any shape, to have a delay in our food
supply system. Why is it that we can't keep these drivers a
year, 90 percent of them?
Mr. Samson. I guess I will start with the driver shortage
issue. Of course, this is something that was pre-pandemic,
something that has been a systemic problem in trucking for
years, and the COVID pandemic just exacerbated the issue, and
that is why we saw an uptick, I believe, from about 55,000
short to 80,000 short. What we are doing within the industry,
we are trying to increase pay, of course, increase incentives,
increase flexibility. Of course, the over the road truck driver
could be a taxing position to have. We have a lot of
competition as well within other industries. The truck driver
is a great--a fantastic career, but then, all of a sudden, if
they need to stay home, or stay closer to family, then they
will go to an alternative construction, or other job in a
similar career path, as they would be for a truck driver.
And so, from a trucking industry, we are looking at, of
course, the DRIVE-SAFE Act (H.R. 1745). We are looking at
recruiting younger drivers right now. We miss that 18 to 20
year old recruitment. We can't go to high schools, we can't go
to the Future Farmers of America, and recruit them as an
original career. And so, if they come in at 21 or 25, they have
probably already had a career, and so if we are able to get to
them, educate them on the industry, maybe they buy in a little
bit more as we are moving forward, and build a career out of
that, as opposed to an alternative career. And so, there are a
lot of things going on, both military, women in trucking, urban
as well, and that is kind of been our focus, but retainment has
definitely been a big issue.
The Chairman. Yes. Thank you very much. And now I recognize
the gentleman from Georgia, Mr. Austin Scott, for 5 minutes.
Mr. Austin Scott of Georgia. Thank you, Mr. Chairman, and I
appreciate you having this meeting. I am going to focus on Mr.
Schwalls from Colquitt County, my district, with a few
questions.
I think a lot has been said here, but I do want to point
out, in my part of Georgia, Mr. Chairman, in southwest
Georgia's economic region, the unemployment rate is 2.8
percent, and that includes Colquitt County. And in Tift County,
which is just to the east of Mr. Schwalls's district, it is 2.3
percent.
And one of the things that we do have a problem with, and
the reason the unemployment rate is so low, which is a good
thing, but the labor participation rate is also down, and that
is a bad thing, and so I do think that the Federal Government
has made some of these issues worse with some of the enhanced
unemployment benefits, and other things that have been paid
out. And I do hope that since those enhanced unemployment
benefits have stopped that the labor force participation rate
will move back to a more normal level. But did I understand
you, Mr. Schwalls, to say that your price of fuel is up 48
percent?
Mr. Schwalls. Yes, sir.
Mr. Austin Scott of Georgia. Is that since January of this
year?
Mr. Schwalls. Yes, sir, that is what we are experiencing
currently.
Mr. Austin Scott of Georgia. So, it is costing Americans
more to get to the grocery store, as well as costing Americans
to get out of the grocery store, and certainly the increased
cost of fuel and transportation increases the cost of
everything.
One of my concerns in talking with the farmers back home is
products that we have always been able to get--you don't use it
a whole lot in--or I should say you wouldn't use as much as a
cotton grower, I don't think, but Roundup, for example. The
farmers that I know are being told that they need to go ahead
and make their purchases for next year this year if they want
the chemicals. You spoke to it a little bit, but could you
speak more to the crop protection products, and their
availability? And one of the things I want to point out to the
people that may be watching this that are not in ag production
is farmers have a window of time in which they have to apply--
whether it is a pesticide, or a fertilizer, or some other type
of chemical, you have windows in which you have to do
everything from plant the seed, to fertilize the crop, to put
the crop protection products there. Can you speak to that
supply chain issue, and the potential damage to the supply of
food for the American citizens?
Mr. Schwalls. Yes, sir, thank you. I think Mr. Cinco
alluded earlier, he was talking about the hardship of trying to
secure the products which you need for manufacturing on their
side, of course from us, from a production side. It was very
difficult and very hard on our business to try to secure
products earlier in the year, as we were not using those
products for, obviously, a great deal of time for crop being
made in the spring, and then through the summer and the fall,
but we were trying to secure those products to ensure that we
would have crop protection products.
People in the crop protection product business were telling
me, back as early as February, that there would be strains on
the supply chain. So, as we started trying to secure that, and
then, of course, we saw price increases coming after that. As
you mentioned a while ago, biphosphate, Roundup, for example,
is basically non-existent at this point. Many of these
chemicals that we are looking for: fungicides, bactericides,
those sort of things are getting harder and harder to find, and
it is becoming a longer and a longer period of time even if you
can find it. So, you have the issue of the crop protection
products being a lot more expensive, not being readily
available, and now it is getting to the point where they are
not available at all, or certainly not in the time period of
which to be able to make a crop.
So that is going to be an incredible strain--it is an
incredible strain that is going to continue to get worse, it
appears, the strain on being able to secure these products in
order for us to be able to produce the crops. So, obviously,
the less protection products we have, the less yields we are
going to have, and crop failures, and that is going to tax the
American farm, but also the American food supply chain.
Mr. Austin Scott of Georgia. Thank you for that answer.
And, Mr. Chairman, I am almost out of time, but I am--look,
when I go to the grocery store in Tifton, Georgia, there are
many times that I come home without the yogurts that my kids
want to eat, and I know what the impact of the price increases
has done to my family, and I certainly know that it is hurt a
lot of people very bad in this country. And so, I appreciate
you having this hearing, and I look forward to working with you
to help solve the problems.
The Chairman. Thank you very much, Congressman Scott. And
now I recognize the gentleman from California, Mr. Costa, who
is also the Chairman of the Subcommittee on Livestock and
Foreign Agriculture. You are recognized for 5 minutes.
Mr. Costa. Thank you very much, Mr. Chairman. Mr. Durkin,
in your testimony you talked about the importance at Leprino
Foods, that export 26 percent of their products. In California,
the number one agricultural state in the union, we export 44
percent of our agricultural products. Clearly, when you talked
about an example that you may lose some market share as a
result of this supply chain crunch, there is no guarantee you
are going to get that customer back, right?
Mr. Durkin. Absolutely. As I mentioned earlier, this took
decades of relationship building and--over time. We have no
idea whether we will be able to regain that customer, and our
hope is over time we will. The ability to be able to do that,
though, means that we need to be competitive. In order to be
competitive, we need to make sure that we have shipping rates
and prices that we can, obviously, go to our customer----
Mr. Costa. That is a good segue, because you also
referenced the importance of the bipartisan Ocean Shipping and
Reform Act of 2021 (H.R. 4996) that I have been working with my
colleagues on, and Representative Garamendi. And I think that
we need to look at this effort, this crisis that we are in, and
certainly we saw underlying tones of it when restaurants and
schools were closed last spring because of the pandemic. When
you take a complicated, complex food supply chain and you turn
it upside down, the disruptions can occur.
And the--now, one of the factors that--we have talked about
multiple factors that are causing the supply chain crunch that
we are dealing with, but also demand by American consumers for
products as this economy is beginning to come back. I mean, the
60 to 70 container ships that we see at Long Beach and Los
Angeles Port, they are telling me that--I mean, this is in part
because of the pent-up demand as a result of the pandemic and
other factors, and the economy growing.
To you, and to the other witnesses, I think we need to look
at this in short-term and long-term solutions. Certainly, the
issue in the short-term efforts, the 24/7 operations with Long
Beach and L.A. is a positive, but I think we ought to do that
with Oakland, don't you think? And we ought to do that with
some of other ports and harbors during this crisis. The
infrastructure package, that deals more with long-term efforts
to increase our capacity in those areas. On the Ocean Shipping
and Reform Act, do you put that in the long-term, or the short-
term? We would like to get that passed this year so the
Maritime Commission can deal with these containers that are
going back empty.
Mr. Durkin. That would be a short-term, absolutely.
Mr. Costa. Right.
Mr. Durkin. But we need to get it passed immediately.
Mr. Costa. Yes. And the task force that the President has
set up is helpful with the different disciplines, DOT, USDA,
the Trade Representatives. Chairman Scott talked about the
efforts to reach out with the corresponding efforts of the
other three committees that have jurisdiction in this area. I
think we have to be working together in a collaborative effort
to list both short-term and long-term solutions, and we have to
do it at the same time. Any of the other witnesses, Mr. Durkin
and others, have advice to give us on how we orchestrate that?
Mr. Samson. Congressman Costa, good to see you. I would say
that agency-wide we are working very closely with both USDA,
DOT, and I think having the committees of jurisdiction working
as closely would be extraordinarily helpful. I think, when you
are looking at the L.A./Long Beach port system and the 24/7, we
are running into bottleneck issues. As you continue down the
process, we are running into equipment/chassis issues, we are
running into driver issues----
Mr. Costa. And we have had those for a number of years, and
we are devising rail corridors that will help, but that is the
longer-term infrastructure package that will update our
capacity.
Mr. Samson. I think you are looking at communication
problems. I think the ship line has one goal, of offloading and
then heading out. I think the port itself has another goal, the
carrier has another goal, and the warehouse has another goal.
And I think, unless you have the communication throughout that
entire supply chain, and everybody on the same page, I think we
are going to continue to see those issues. But I think, to your
point----
Mr. Costa. And our products that are coming in and going
out. Mr. Durkin, you and I discussed about the perishable
nature, and they are not all the same.
Mr. Durkin. They are not all the same, Representative
Thompson [Costa], yes, absolutely, and you have concerns on
this. We will be able to get the product that--out of date in a
certain period of time, and obviously our customers are waiting
for that, and if they miss a window on that, it is an issue
that we have and they have.
Mr. Costa. Would any other witnesses care to comment? My
time is expiring here, Mr. Chairman, but I think that when you
hit on the collaboration of the other corresponding
jurisdictional committees, as well as the task force that the
President has set up, we ought to have a meeting together and
really divide these into short-term efforts and longer-term
efforts to figure out how we can do both at the same time to
address this crisis that all of us know is upon us.
The Chairman. You are absolutely right, Congressman Costa,
and that is why we are moving with all deliveries, feed--and,
as I mentioned, we are already in contact with Education and
Labor, and the Labor Secretary. We are already in contact--of
course, as you know, we are working closely with Secretary
Vilsack, and, of course, Transportation and Infrastructure.
Mr. Costa. Well, you have my complete support, and
Committee, and let us know how we can help you.
The Chairman. I thank you.
We certainly will, thank you. And now I recognize the
gentleman from Nebraska, Mr. Bacon. You are recognized for 5
minutes.
Mr. Bacon. Thank you, Mr. Chairman. I appreciate the time
today and appreciate all the panelists that are here, and their
testimony. My first question is to Jon Schwalls. You mentioned
fertilizers are up 35 percent. I have heard the same thing from
our agriculture producers in Nebraska, and what do you think is
contributing to these inputs being so much higher, and
fertilizer being probably the best example?
Mr. Schwalls. Well, what I am being told is the lack of
tech supplies, that we use a tremendous amount of tech
materials that are using crop protection products imported from
China. So, I am being told the lack of tech supplies coming in,
and then obviously--so there seems to be the same demand for
these products, but there is a very short side of supply.
Mr. Bacon. Thank you. It is a big concern in Nebraska, the
price of these inputs, so I am sure that is a concern for all
of our farmers right now, not just in Nebraska. My next
question is to Mr. Wells. You say 70 percent of our exports use
water, our agriculture exports. Can you talk a little about the
state of our lock system? Because I hear a lot of concerns on
that as well.
Mr. Wells. Absolutely. GROWMARK ships a tremendous amount
of crop nutrition production via the inland waterway system. We
have a number of facilities that are located on that inland
waterway system, and we are impacted quite a lot from high
water situations, from low water situations, where they are
having to dredge. We are also a big proponent of increasing our
lock system and repairing our lock and dam system: 1,200 locks
would be our goal. As they bring tows up the river, without
1,200 locks, they are breaking those tows. It just adds to the
time delay and the time lag for us to get products into our
facility, so those would be a few comments I would make on that
subject.
Mr. Bacon. I appreciate those comments. The research I have
done--you have Brazil rebuilding their locks, and they are
going to be triple the size of ours, so we could produce corn,
soybeans, beef and pork at a price more competitive than
anybody in the world, but if we can't--if our logistics adds to
the cost over our competitors, that is going to cut into our
trade, so I think it is important to put some priority on the
lock system on our--in our ports. It is--been a proponent of
that.
Finally, I would just like to transition to our trucking
side of this. An 80,000 shortage of truck drivers, that is a
grave concern. I know a lot of our trades are in the same boat,
whether it is welders and what not, and I could go on and on.
Could you again talk a little about some of the things we could
do to incentivize folks to get into the trucking industry? You
mentioned it a little bit, but I would love to hear a little
more.
Mr. Samson. Sure. Yes, no, we have been working on
industry-wide incentives, trying to figure out how to increase
driver pay, increase flexibility, provide them a schedule that
may be a little bit more family friendly, benefits, bonuses.
And, of course, we are also trying to work on the younger
drivers, bringing them in. We have done--there are a lot of
high schools right now that are looking at CDL programs. We
have been working closely with FFA. I know they have almost
700,000 FFA students that are part of the system.
And so, we have been reaching out to the younger set. We
have always been reaching out on the military side, trying to
get more women in trucking, trying to reach out to those folks
that are in the urban communities, really educating them that
this is a really--this is a fantastic career, this is a
fantastic opportunity, and this is something that we have been
pushing on--and the image of the industry as well. We have
really been pushing hard. Agriculture does that very well on
their side, but from a trucking standpoint, we have also been
showing them that this is a valuable career path, and something
that should be looked at.
Mr. Bacon. What impresses me in Nebraska, a lot of the
trucking companies will pay folks to go through the training,
with health insurance, and then you have a great job when you
come out, and I think that is a model for a lot of our trades
right now that we could build on. Now, one of the things that
concerns me is that we have two percent unemployment in
Nebraska, we have only about 61 percent workforce
participation, and that is sort of true nationally. In your
view, are there Federal policies that are inhibiting folks from
getting back into the workforce? We are sitting at 61 percent,
it used to be around 67 percent, 68, if I have my numbers
right, and yet we only have two percent unemployment in
Nebraska. I know it is under five nationally, roughly. Are
there things the Federal Government is doing that is inhibiting
folks getting back in the workforce, in your view?
Mr. Samson. I think it has been difficult to figure out
exactly why they have stayed out of the workforce. There has
been incentives industry-wide--or sector-wide, not just in
trucking, but all places. We are starting to see an increase in
hourly wages, and we still haven't seen a lot of those workers
come back. And so, we have heard a handful of things, but
haven't quite been able to put our finger on the pulse of
exactly what is keeping these people outside of the current
workforce.
Mr. Bacon. Well, thank you very much for your time, and Mr.
Chairman, I yield back.
The Chairman. Thank you, sir. And now I recognize the
gentlewoman from North Carolina, Ms. Alma Adams, who is also
the Vice Chair of our Committee on Agriculture, you are
recognized for 5 minutes.
Ms. Adams. Thank you, Mr. Chairman. Thank you to the
Ranking Member as well for hosting the hearing today and thank
you to the witnesses for your testimony. The COVID-19 pandemic
has highlighted a number of underlying issues with our supply
chain, but perhaps the clearest, the fragility of our food
supply chain. The pandemic has also amplified the importance of
having a durable and an adaptable food supply chain, one of the
most complex yet important logistics programs that we need for
our sustainability.
As we heard from our witnesses today, some of the
challenges our supply chain continues to face are congestion at
ports, and driver and labor shortages, and while these
shortages are affecting the entire country, we must not forget
the impact that they have on our school districts, and our food
service institutions. These institutions continue to struggle
to provide children and adults with adequate food as they
respond to supply chain disruption.
Mr. Cinco, in your testimony you mentioned that bakers are
often providing baked goods to the Federal feeding programs,
such as school breakfast, lunch programs, SNAP, and WIC, so can
you elaborate a little bit on how the various supply chain
disruptions could impact bakers' ability to continue to serve
that program?
Mr. Cinco. Yes. Thanks, Congresswoman. The impact of the
specifications for the ingredients for the school products
makes it difficult to get the specific ingredients you have to
have. Durum flour, for example, comes from North Dakota, and
the crop was 50 percent less than what was expected. The price
has gone up almost to double. It is hard to get, it is hard to
make, and until those specifications get adjusted or moved, I
think we are going to have some issues with supplying the
schools.
Ms. Adams. Okay. So, Mr. Ferrara, the COVID-19 pandemic
continues to impact the ability of labor to prepare food for
school districts, for restaurants, retail, and institutional
food service settings, such as hospitals and prisons, so what
policy measures can address labor shortages in the
institutional food sector?
Mr. Ferrara. Was that for Mr. Ferrara? I am sorry, ma'am,
we have a----
Ms. Adams. Yes. Yes, Mr. Ferrara. Yes.
Mr. Ferrara. Okay. Yes.
Ms. Adams. Yes.
Mr. Ferrara. Yes, ma'am, I think this is going to take a
full approach. There is not going to be one single bullet item.
I do think we need to change the conversation. There is dignity
of work, and dignity in working in a supermarket. You think of
the different career paths, chefs, bakers, technology, customer
service, there are so many different opportunities that I think
we need to continue to focus on educating our young people,
educating others that maybe are sitting out of the workforce
that these are great jobs and great opportunities to come back
and to work in stores.
Particularly for retail, there is a tremendous amount of
flexibility. Whether you are looking for full time or part
time, it could be really attractive to those folks who are
looking for a little bit more flexibility in their lifestyle.
Ms. Adams. Right. Mr. Durkin, USDA has stated that the
COVID-19 pandemic exposed a food system that was rigid,
consolidated, and fragile. So, what was this experience, was it
your experience, and can you elaborate a little bit based on
your own company's experience?
Mr. Durkin. Yes. I mean, COVID-19 actually had a
significant impact; however, I would say, a testament to our
organization and all of our workforce, that actually we were
able to get through the pandemic in a very, very positive way.
We actually would say there wasn't one customer order that we
did not--that did not miss. We were confident in that. It
continued to face some challenges. Like the rest of the
panelists--my co-panelists on this, we have some labor
shortages that we certainly are dealing with, but, from a port
issue standpoint, that has actually been our biggest challenge,
going forward.
And I view this--and, as I said earlier, to--using the
Chairman's words, this is--exports are in a crisis, and any
help that the House Agriculture Committee, and this body, can
help on that, I think will be really, really important, and
useful for the entire----
Ms. Adams. Thank you. Thank you. Mr. Samson, in your
testimony you mentioned that there is currently an 80,000 truck
driver shortage. According to current trends, that gap could
double by 2030, so what factors do you attribute to the
shortage of truck drivers, and how does that compare to the
pre-pandemic environment?
Mr. Samson. I think, quickly, we have an aging workforce,
which is one of the big issues, and the problems that they ran
into with having to deal with the COVID pandemic drove a lot of
those that were close to retirement towards retirement. I think
we are having an issue with trying to bring these younger folks
in is a big deal that we are currently focused on. And so,
there are a handful of things that we are trying to do to
retain and recruit, as the Chairman had expressed earlier, but
it is a difficult environment right now.
Ms. Adams. Thank you, sir. I am out of time. Mr. Chairman,
I yield back.
The Chairman. Thank you very much. And now I recognize the
gentleman from Tennessee, Mr. DesJarlais. You are recognized
for 5 minutes.
Mr. DesJarlais. Thank you, Mr. Chairman, and I thank all of
you for being here today to discuss the supply chain shortage.
I want to focus a little bit, though, on the mandates, and how
that is impacting our shortage of workers not just in the
trucking industry, but on the railroads. CSX has a mandate
coming on November 8. We have the Federal mandate slated to
take effect on November 22, and, Mr. Samson and Mr. Wells, how
helpful would it be if these mandates were delayed, pushed
back? And then I also want to talk about natural immunity.
Mr. Samson. Sure. Just quickly, I just want to make it
clear that the trucking industry is not anti-vaccination, we
are anti-supply chain inefficiency, and what we have heard from
a lot of our carriers is you have some very large carriers that
have vaccine hesitancy in their drivers. And let us just say 50
percent of their drivers are not vaccinated, and we have heard
80 percent of those 50 percent will never become vaccinated.
And so, we are looking at the potential of them leaving larger
companies to go to a company that is under 100 drivers, or they
have the alternative to leave the industry altogether. And so,
we are looking at that as it compounding--it negatively
significantly compounding the driver shortage issue, and
growing that, which is of great concern to our industry.
Mr. DesJarlais. All right. And I have Big G and Titan
Trucking in my district in Shelbyville, Tennessee, and they
have been sounding the alarm as well. I have heard numbers 40
percent, you said 50 percent, and these are educated people.
They have been through the worst of the pandemic. Here we are,
the Delta variant is subsiding, we have been 18 months into
this, we have had first responders, frontline workers, police
officers, our military personnel, border agents, I mean, just
all walks of life that have made it through the pandemic.
And I am pro-vaccine, I am vaccinated, but it is not right
for everyone, and thankfully we have excellent therapeutics,
and monoclonal antibodies, which can keep you out of the
hospital 70 percent of the time. We know that the deaths with
this pandemic, 95 percent have occurred in people over 50. You
start looking at the younger age groups, and I can understand
some of their concerns about the vaccine and some of the side
effects.
Plus, we don't know how long that the vaccine actually
works. We know that--I am due for a booster. I had Pfizer back
in November. I am not 65, so we know that the vaccine
efficiency does wane with time, but natural immunity, on the
other hand, if we are not afraid to follow the science, which
we shouldn't be, that is what this whole thing has been about,
according to the CDC, Dr. Fauci, and others, we need to look at
the studies coming out of Israel, and Britain, and other
European countries that show natural immunity to be superior to
the vaccine.
I was on a Fox show the other night where the host said
that, yes, but they said that the natural immunity only lasts
16 months. Well, guess what, they have been tracking it 16
months, so at 18 months they will probably say 18. At 2 years,
they may say 2 years. Bottom line is SARS-1, that happened 20
years ago, those people are still immune, so why aren't we
looking at natural immunity, and counting that as the same as
being vaccinated? It just doesn't make any sense. And I get
that they want to get as many people vaccinated as possible,
but what you are telling me is we could have a catastrophe here
in a short time, in terms of supply chain, if up to 40 or 50
percent of your truckers leave. And Mr. Wells, do you agree
with that, in terms of----
Mr. Wells. Yes. We are, yes. We are short of workers at
this point in time. We have, I believe, around 290 openings
today just in Illinois, Iowa, and Wisconsin for our area; but,
mandates, such as a vaccine mandate, we are really concerned
that it will lead to more openings. We operate a lot in rural
America, as you well know, and it is hard to find labor in
rural settings to begin with. They may be a little more
reluctant, and so--I heard a study repeated on the radio the
other day that they expect potentially up to 33 percent of the
workforce that are unvaccinated to leave the workforce.
Mr. DesJarlais. Yes.
I think it would be helpful for you guys if you issued
letters. I have written letters on behalf of TVA, Arnold Air
Force Base, that deal with hypersonic weapons. You can't
replace some of these skilled people. You can't just replace a
trucker overnight. And so, I think if we could ask, at the very
least, for a pause in this mandate, push it back after the
holidays, let us see how the pandemic turns into an endemic,
and look at the new drugs that are coming out, consider natural
immunity, and we just need some more time. This hard mandate
just feels like it is going to create a disaster, almost like
we saw in the withdrawal from Afghanistan. We need a
contingency plan, so I would urge you guys to write letters to
the President, the Administration, and ask at the very least
for a pause so we can look at this. Let us follow the science.
People aren't afraid to. I don't blame people for looking
at things skeptically, but we can handle the truth. We just
need to know the truth and thank you guys. I know I am out of
time. Thank you, Mr. Chairman, for your indulgement.
The Chairman. Thank you. And now I recognize the
gentlewoman from Connecticut, Mrs. Hayes, who is also the
Chairwoman of the Subcommittee on Nutrition, Oversight, and
Department Operations. You are recognized for 5 minutes, Mrs.
Hayes.
Mrs. Hayes. Thank you.
The Chairman. You may want to unmute, Mrs. Hayes.
Mrs. Hayes. I am sorry. Thank you, Mr. Chairman.
The Chairman. Sure.
Mrs. Hayes. Thank you, once again, for holding this very
important hearing. I have heard of the immense daily impact of
global supply chain disruptions from constituents all over my
district. 90 percent of Connecticut restaurant operators report
paying more for food. Connecticut Costco stores imposed a one
per customer limit on paper towels and toilet paper in early
October due to disruptions in shipments, and school districts
have reported continued anxiety of supply chain disruptions
interfering with their ability to feed children during the
school day. These trends are disturbing, but they can be fixed.
When faced with empty grocery store shelves and struggling
producers in 2020, we tackled the issue with emergency
policies. Our COVID-19 response bills provided direct payments
to agricultural producers, established grants for farmworkers,
meat packing workers, and frontline grocery workers, invested
in and expanded processing capacity for small producers.
Additionally, the USDA announced that they will use a total of
$2 billion to address supply chain issues nationally and in
schools. This week I joined the Ocean Shipping Reform Act,
which would also help address global disruptions.
While all of this has worked to mitigate what could have
been a more dire situation, we still clearly have more work to
do. In the testimony today we heard how a lack of labor
availability is at the core of industry disruptions. Of course,
we must ensure our agricultural supply chains are resilient,
stable, and fortified for the future, but we cannot do so at
the expense of workers' dignity and compensation.
So, Mr. Ferrara, in addition to grocery store owners
raising wages, offering overtime compensation and sign-on
bonuses, you recommended that Congress invest in workforce
training programs for workers entering the grocery industry.
Can you go more into detail into how that would benefit workers
looking for long-term stable employment?
Mr. Ferrara. Yes, Congresswoman, and I'm glad you mentioned
what our members have done, over 93 percent have increased
wages, bonuses, provided other benefits to their members. We
have a tremendous opportunity--when you think of the grocery
store, there are so many different departments within that
store that are specialized, and we have opportunities to help
train bakers, to help train chefs, to help train deli workers,
florists, meat cutters in our stores. We cut meat in our stores
still.
These are skilled jobs, they are high demand, and it is
really a tremendous opportunity for us to get to folks,
particularly local--excuse me, young folks, to get them into
the workforce with a skill that will stay with them, and can be
very, very beneficial throughout their career. And we would
gladly work with you and the other members to be able to do
that.
Mrs. Hayes. Thank you. On my other Committee of Education
and Labor, I have been intensely focused on career training
programs, technical programs, that would address some of the
very things that you have just said. Additionally, a lack of
access to H-2A workers has impacted dairy farms across the
country, especially those in my district. Earlier this year we
voted to pass the Farm Worker Modernization Act (H.R. 1603),
which would help address the H-2A bottleneck, and improve
workforce protections for H-2A workers. Mr. Durkin, can you
explain how impediments to accessing H-2A visas have affected
your members, particularly small dairy farms?
Mr. Durkin. Yes. Obviously, the labor shortage is a
significant impact across the country, and dairy farmers are by
no means exempt from that, so clearly anything that we can do
on that end to support our farmers. We don't own any of the
farms personally. We supply all of our milk--get all of our
milk through the DFA and co-ops across the country, and we--
they are valuable supporters of us. And anything we do, we say
it all starts with milk, and so anything we can do to help the
farmer be more successful on their end is a benefit to us.
Mrs. Hayes. Thank you. And, last, I am deeply concerned
about reports of disruptions to school food deliveries across
Connecticut and the nation. Mr. Cinco, you mentioned in your
testimony that several of your members may no longer be able to
supply baked goods to schools due to global disruptions. In
your opinion, how can we strengthen local supply chains to
prevent such catastrophic disruptions?
Mr. Cinco. Well, Congresswoman, I think we need to worry
about the transportation of ingredients. We can't do anything
about the weather situations that cause disruptions in durum
flour, but if we could get the material here, we could make it
and distribute it. It is just very difficult to get it here at
this point. Other than that, I would say that is about the
extent of that.
Mrs. Hayes. Well, thank you for your input. I think that is
what we are all trying to do, to lessen the disruptions, and
open up access to the supply chain. My time has expired, Mr.
Chairman. I yield back. Thank you.
The Chairman. Thank you, Mrs. Hayes. And now I recognize
the gentleman from Illinois, Mr. Davis. You are recognized for
5 minutes.
Mr. Davis. Thank you, Mr. Chairman. I think this
stakeholder conversation is a very important one for us to
have, and we have to try to continue to mitigate the ways
Americans are actually being crushed by high prices on gas,
groceries, natural gas, and to no fault of any of the
industries that are represented here today.
Every sector is being crushed beneath the weight of this
Administration's rampant spending agenda that is driving high
costs and inflation. There is a shortage of everything from
semiconductors to shrimp paste right now in this country. And
when we look at this problem holistically, there is an obvious
worker shortage that--as all of you have testified, and as my
colleagues have continually brought up, there is a worker
shortage that is contributing greatly to our supply chain
issues. There are approximately 11 million work ready adults,
certified by their state workforce agencies, who are receiving
SNAP benefits, but could start working immediately to fill some
of the 10.6 million jobs that are open today. Chairman Scott
mentioned it. Mr. Samson mentioned the thousands of truck
driving jobs that are available.
We have to look under our jurisdiction to what we can do to
invest in our SNAP Education and Training Program to get these
families that are receiving benefits trained for the jobs that
we know are open. And, frankly, we tried that, when we were in
the Majority, during the last farm bill, and some of us were
called evil for saying if we don't do it then, when the economy
is great, when will we ever do it? Now we see the failure of
that failed policy is that we don't have enough workers trained
to address this new supply chain crisis, and this
Administration seems to want to do nothing about it.
Now, as we look--we can shift our workforce development
programs, especially in the industries that all of you
represent today, and we can fill these jobs, we can put this
piece in the puzzle. But I want to start with Mr. Wells, since
I know him the best--I would like to start by asking you, what
do you think we can do to maybe work with our SNAP Workforce
and Training Program to pair up our community colleges in
places like Bloomington and Normal, and be able to get people
trained to take the jobs you mentioned are available at
GROWMARK just a few minutes ago?
Mr. Wells. Yes. Actually, we are reaching out to community
colleges in a lot of the areas that we do business. We have
technology that we purchased recently that allows them to, for
instance, virtually drive a spray machine, and so--they are
very high-tech machines, and so, Congressman, we are working
very diligently in those areas, and see that as an opportunity
to source that level of labor, so we would be happy to engage
in that.
Mr. Davis. Great. Anybody else want to tackle that issue?
Mr. Ferrara?
Mr. Ferrara. One of the opportunities, Congressman, in the
grocery business, retail and wholesale, is we will train you.
On the job training. Get us in the--our distribution center,
get us at our stores, we will teach you to drive a forklift, we
will teach you to slice meat, we will teach you to be a baker.
We talk about truck drivers, some of our members will pay for
trucking school, for those that go through that. One of our
members told us yesterday that three of their truck drivers
made over $150,000 a year. We need to be talking more about
that, and those kind of careers that can get people into these
jobs, and really making great wages for their family.
Mr. Davis. Well--and you mentioned, you know--and your
industries employ a lot of our blue-collar workforce. Don't
underestimate how many blue-collar workers actually have
student debt. They went to college, they incurred debt, and
they didn't get a degree, and now they are working in
industries that have shortages right now, and they are making
good money at that.
But there is a new benefit that all of us, Republicans and
Democrats passed in the CARES Act (Pub. L. 116-136) that allows
employers to pay down student debt and have that debt tax-free
for their employee up to $250. This is a great recruitment and
retention tool that many of the companies that you all
represent ought to actually take advantage of. You don't have
to fill out some grant paperwork. You don't have to wait for
appropriations for a program to apply for. This is actually
using the same provisions as the Tuition Reimbursement Program
that many of your companies that you represent have used for
years. Take advantage of this. If you need more information, go
to my website, rodneydavis.house.gov, and you will be able to
see some information on this student loan repayment program.
But get employers engaged. This is a new program that you could
all take advantage of. And I have to go to another hearing, so
I am going to yield back.
The Chairman. Thank you. And now I recognize the gentleman
from Illinois, Mr. Rush. You are recognized for 5 minutes. Mr.
Rush, you are recognized. You may need to unmute. No sound?
Voice. Okay. Well, go to Ms. Pingree while he works out his
technical issues.
The Chairman. Okay. If word can get to Mr. Rush, we will
allow him time to work out those communication difficulties,
and we will come back to him. Staff, let me know when he is
available. And we will now recognize the gentlewoman from
Maine, Ms. Pingree, for 5 minutes.
Ms. Pingree. Thank you very much, Mr. Chairman. Thank you
to all of the witnesses for being with us today to talk about
such an important topic, and I really appreciate all of the
answers that you have been giving us. I will bring up a couple
of questions.
For Mr. Ferrara from the National Grocers Association,
about consolidation, I really appreciated your comments in the
testimony about how consolidation has exacerbated supply chain
issues. We all saw the impacts of this in another highly
consolidated sector, in meat processing, early in the pandemic
when a small number of very large meat plants shut down,
significantly reducing processing capacity and disrupting the
supply chain nationwide. Could you expand a little on--about
how consolidation in the food and agriculture sector, including
grocery retail, is affecting the supply chains, and do you have
any recommendations that you would make to improve competition,
and level the playing field for small and independent
businesses?
Mr. Ferrara. Yes, Congresswoman. As we have seen the most
dominant players get larger, their suppliers have to get larger
to be able to just compete with them and engage with them, and
that does leave a lot of the local and smaller regional folks
maybe not at the most competitive advantage to be able to
compete. One thing about independent grocers is that we are so
local, we are so connected to those local food systems, to
those local producers, that we were able to take advantage of
that, quite frankly, during the pandemic.
We certainly felt the impacts of the meat shortages during
those few weeks, but I think we had an advantage in, one, we
have butchers in our store. They are cutting meat. We were able
to work with other suppliers. A lot of our members were able to
work with local producers, local ranchers and meat packers, to
be able to get supply, and to keep their shelves full. I think
it is an area where it is a huge advantage for independent
grocers to work with local producers. They are tied in so
strongly, and it is an area that they can differentiate, but we
do need to have a focus on really how the dominant players in
the marketplace are influencing the full supply chain, and that
includes the impact on local producers.
Ms. Pingree. Yes. Thanks for your answer. I think it is a
really important focus for this Committee, and one that does
come up, and I appreciate your remarks about being able to
purchase more locally because you have that connection. We
certainly saw that in a state like Maine, where there was great
demand for buying more locally, and I think that is also an
important part of the investments that we need to be making, is
making it possible for more food to be sold locally.
I guess I will have anybody on the panel answer my second
question. The agriculture sector is, in particular, on the
front lines of climate change, and we have seen the impact of
more frequent and extreme weather events. Just a few weeks ago
Hurricane Ida destroyed crops and livestock, and they took key
crop input production facilities offline. The drought out West
has had similar devastating impacts. Mr. Cinco, you mentioned
some of the challenges with durum wheat, which was dramatically
affected by the drought, the ability to get that. So, while we
are here today talking about trucking shortages, labor
shortages, some of those things in the supply chain, it is much
harder to impact the weather issues that are dealing with our
food supply, and our availability, and that is something that
doesn't appear to be going away in the future. Mr. Cinco, I
don't know if you want to comment on that, or anybody else,
just about how we factor that into these future supply chain
challenges.
Mr. Cinco. There is going to have to be some formulation
changes, there is going to have to be some technological
advances in the food industry. As I said before, gluten is a
very short commodity right now, and most of my suppliers are
coming up with enzymes that reduce the usage of gluten in the
facility, so we have gone from 25,000 pounds a week down to,
like, 12,000 or 13,000, which is helping us. Even though you
are paying for an enzyme, at least you can produce, and you
don't have to fight the lack of gluten in the world. So, I
think technology, going forward, is going to help for the
baking industry itself.
Ms. Pingree. Yes. That is an interesting perspective.
Anybody else who has been talking to us about supply chain
issues and availability want to weigh in on this issue of
weather that is going to continue to be unpredictable, and how
we attempt to plan around that?
Mr. Wells. I believe, on the biotechnology side, for row
crops, certainly there has been tremendous advances in
biotechnology. There is a lot of talk about developing more
heat-resistant hybrids of corn, more drought-resistant hybrids,
and so I think it is important that we, again, utilize that
technology to the advancement of the industry, and to feed the
country.
Ms. Pingree. Yes. Resistance, and crop resistance, and all
of those kinds of things I think are an important part of the
research going into the future, so thank you for that. I am
over my time, but I really appreciate all of you being here
with us today, and I yield back, Mr. Chairman.
The Chairman. Thank you, Ms. Pingree. And now I recognize
the gentleman from Georgia, Mr. Allen. You are recognized for 5
minutes.
Mr. Allen. Well, thank you, Mr. Chairman.
Can you hear me okay?
The Chairman. Yes, we can.
Mr. Allen. Good. Thank you. And thanks for having this
hearing today. This is very critical. We need to have a sense
of urgency with this issue, and we need an all of government
approach, because we have talked about this now for months, and
we talk about solutions, that sort of thing, and we are talking
top-down solutions. We are talking about spending more money,
and all these other ideologue--that really don't address the
problem. And, of course, we continue to do the same thing, and
expect a different result, and we know what that is.
So, my concern is that we could solve this problem, but we
can't solve it under the current template, meaning that,
whether it is incentivizing people to go to work, for example,
we have 25 million work capable people on the SNAP Program
right now that would enjoy a great opportunity to make $150,000
a year. They just need to be trained up. We have ten million
people sitting on the sidelines, for whatever reason, because
of loan forgiveness, and all these other things, or some
government stimulus program, they are not motivated to work.
So, what we have done is created this whatever, utopia, you
want to call it, and now we have a huge labor problem. We have
a Labor Department that won't even allow legal programs to work
for--to get people in here. We have solved our labor problem
for generations with immigrant labor. And so here we are, and
we can't even get those programs to work. The Labor Department
is creating havoc with that.
So, somewhere--and I want to hear from every witness.
Somewhere we have to do this from the bottom up, rather than
the top down. And what I want to know is what do we need to do
in the--the fastest way to do it is the Executive Branch, and I
will give you an example. In the 1980s the air traffic
controllers pretty much went on strike, and it shut down the
airline industry. President Reagan immediately--it got his full
attention, he addressed it, and he fixed it. And, much to the
chagrin of the union, but, again, you have a situation where
the country was at stake, and he did it with Executive Orders,
which is his privilege in the event of an emergency. We have an
emergency here.
So, what I want to hear from the witnesses is what do we--
and Congress moves entirely too slow, but where do we need to
put pressure on the White House to either relax union
jurisdictional rules, pause regulations, whatever we have to do
to fix this problem and get this economy moving again. And, I
will start, Mr. Cinco, with you, and go through the entire
panel.
Mr. Cinco. Congressman, we could use people that just want
to be here. The 24/7 work/life balance, so for another sake I
am using it, is very difficult for us, but the fresh bread that
needs to go to places can't be stored for days. So, we need to
find a way to incentivize weekend work, or extra shifts, or
things like that. Like, people don't want to work midnights.
People--there are a lot of jobs out there where people can go
to places where they don't have to work midnights, they don't
have to work the weekends. It is very difficult for us to keep
people here around the clock. That would be somewhere to start.
Which we do that, but it becomes financially tough on a
bakery of our size to pay extra money. I mean, bread is a
commodity that everybody buys, and the increase that we would
pay is going to increase to the end-user, and it is going to be
detrimental to our survival, so to speak.
Mr. Allen. Yes. Mr. Wells, I am sorry. I am out of time
here. But anyway, I think you need to share that with this
panel. As we go forward, what do we need to do to correct this
situation immediately and fix this problem? And I think if we
put our heads together, and we do it bottom up, we will get it
done. Thank you, and I yield back, Mr. Chairman.
The Chairman. Thank you, Mr. Allen, and you are absolutely
right. We have to move out here right now, and get this problem
solved. The gentleman from Illinois, Mr. Rush, you are
recognized for 5 minutes.
Mr. Rush. I certainly want to thank you, Mr. Chairman. This
has been a very outstanding hearing, and I glad about it. Mr.
Chairman, I have heard from stakeholders in my district, and
around our nation, about the unsustainable and dramatic cost
increase due to issues in the supply chain. I am currently
drafting a letter to the FTC, asking them to immediately begin
to investigate and review price gouging in the supply chain.
Mr. Durkin, you mentioned that for U.S. dairy businesses,
procurement prices are up between 20 to 30 percent. And, Mr.
Wells, in your testimony you describe how the port backlog is
resulting in rising--and retention costs to shippers, and
eventually to consumers. Mr. Durkin and Mr. Wells, for your
industries, can you expand upon the extent to which your
members have suffered large cost increases, and more
importantly, is price gouging in the food supply chain a
problem that the Federal Government should be seeking to
address? Why, or why not?
Mr. Durkin. Absolutely we are having challenges from a cost
standpoint, and I would argue, in my 40 years in business, it
has been unprecedented, in terms of--across the board, where
the increases are happening. Focusing on the export side of it,
as I mentioned in my testimony, we have seen increases going up
not only on the freight costs going across, but then demurrage
charges that actually--booking will get rolled--we will get
charged on those bookings or on those rolls, and it will
happen, and we have no idea that a booking has been rolled, and
we get charge after charge after charge. So, a $5,000 bill
turns into a $20,000 bill. So, is that actually impacting us?
Absolutely.
Mr. Rush. Mr. Wells?
Mr. Wells. Congressman, we routinely face demurrage charges
with the nature of our business. As you know, agriculture moves
extremely quickly, and when weather windows allow us to
operate, we need to operate, and so it leads to a lot of
congestion, and has for years. The prices for products that
farmers pay for have gone up considerably. I would point to a
convergence of factors. Feedstocks, natural gas, which is a
primary piece of--and nitrogen production has gone up.
Transportation has gone up for reasons that we have talked
about today. I can't point to any instances where I can say
price gouging occurred, but I could tell you that it is of
great concern to our members, and to our farmer-owners, the
rising costs that they are paying today.
Mr. Rush. Thank you. I recently met with members of the
National Confectioners Association, where we discussed supply
chain issues. While Chicago confectioners have the same supply
chain problem that other food manufacturers do, they bear an
additional burden. That is because the USDA rigidly controls
the import of sugar and is slow to allow adequate supplies to
enter the U.S. even when they are needed. We are seeing the
highest sugar prices in many years, and yet--at the same time,
USDA steadfastly claims there is enough sugar on the market. To
be frank, my constituents feel differently. That is--Mr. Cinco,
do you agree with me that it is time to finally reform our
sugar policies, and if so, what reforms do you recommend?
Mr. Cinco. Yes, you are very correct, Congressman. The
sugar is at a high price. We are seeing upwards of 20 percent
increases in granulated sugar. The beet sugar that we are using
out of Michigan is all dependent on the crops, as we referred
to before, depending on the weather, and how the crop reacts.
That is a very important part of how much we have in the
country. So, if their crop is good, it seems to be less of a
problem. When their crop is bad, USDA doesn't let us import.
There is a hearing coming up, speaking about sweeteners, in
mid-November about honey, about how much we are going to import
of that, so that is going to be the next problem on the
sweetener side that is going to be a price gouge, I guess, as
you said before. But yes, we need to look at how we import
that.
Mr. Rush. Thank you. Mr. Chairman, thank you so much. I
yield back.
The Chairman. Thank you, Mr. Rush. I appreciate it. And now
I recognize the gentleman from Pennsylvania, our Ranking Member
Thompson. You are recognized for 5 minutes, Mr. Ranking Member.
Mr. Thompson. Thank you, Mr. Chairman. Congress has a job
to do to address many of the issues that are being brought up
to our attention today, however, action by the Administration
to provide regulatory relief, or what I would say would be
regulatory flexibility, would have the swiftest impacts on the
current bottlenecks in the supply chain. And I am going to
start with Mr. Wells. Mr. Wells, what immediate action can the
Biden Administration take, through USDA or other Departments,
to provide regulatory relief, or regulatory flexibility, and
mitigate the current crisis?
Mr. Wells. One of our biggest challenges is in the
transportation sector, as many have talked. I think there are
some things that can be done with potentially raising weight
limits for transportation that would allow more product to be
transported at one point in time. We talked about hours-of-
service exemptions. We talked about the air miles, increasing
air miles from 150 to 200 miles. Those would all be some
immediate impacts on the transportation side of the business,
where we face tremendous pressure.
Mr. Thompson. Mr. Wells, thank you for those very concrete
recommendations. I want to note to other members of the panel
that may have any suggestions for what this Administration
could do immediately, whether it is USDA, or another agency
department, for increased regulatory flexibility.
Mr. Durkin. I mean, from the standpoint of--we talked about
the Ocean Shipping Reform Act, and what we need to do there.
That is something that has to get done and get done
immediately. And I know the bill is out there, but when we
follow kind of the timing on this, the delay in terms of
getting it approved by the House, and then going to the Senate,
my concern is what can be done very quickly on that, and the
same thing on the 24/7. The Administration put a lot of focus
on that, but that is not a law, it is not an Executive Order,
and that needs to be done immediately as well.
Mr. Thompson. Yes. We saw, throughout 2020, with the Trump
Administration, a significant amount of flexibility was
exercised through waivers because we were in a health crisis,
but we are in a significant crisis when it comes to impediments
to the food supply chain, so point well taken. Biden
Administration might want to look at some of the--that
flexibilities--similar flexibilities exercised previously. Any
other panelists have--go ahead, Mr. Ferrara.
Mr. Ferrara. Yes, sir. I would also add a reinforced hours
of service waiver. That has been something the Trump
Administration and the Biden Administration have both been very
flexible on, but we are going to need to continue to have that,
and even a longer-term waiver is important. The other is the
WIC Program, the Women, Infants, and Children's. With the
supply chain challenges we are having, if there are shortages
of certain WIC package items, I think it is very important that
we are quickly, emphasis on quickly, providing the flexibility
so that those participants can get the item that they need that
is available in the store, that they are not in a situation
having to go without those items. So, I think that is something
that could be done quickly.
Mr. Thompson. Very good. Anyone else? Go ahead, Mr. Samson.
Mr. Samson. I would just like to add on that the hours-of-
service flexibility piece and the emergency declarations were
definitely helpful, both on the wait side and the hours-of-
service side. But you get into the port as well, and what used
to be four to five turns from a truck is now down to three
because of the detention time that they are waiting in line.
And so being able to pause a clock, whether it is in the port
or if it is going around an urban area, is nice to be able to
try to limit the congestion that they are actually sitting in.
Mr. Thompson. Thank you. I see this crisis every bit as
dangerous as what we experienced with the plague of 2020,
because this is an assault on our economy, and an assault on
getting access to nutrition. The WIC Program is a great example
of that, and I would hope the Biden Administration would rise
to the occasion, much as we saw the previous Administration do
throughout 2020.
Mr. Durkin, I just want to circle back. I really--your
testimony highlights, as you refer to it as the export crisis.
Can you provide just an estimate of the cost that this crisis
is to your business, and the dairy industry more broadly?
Mr. Durkin. Well, from our standpoint, I talked about the
incremental freight and storage charges that we have incurred,
and clearly it is in the millions of dollars, there is no doubt
about that. What can't be measured is the potential loss of
customers that not only we have, but really the dairy industry
as a whole. So--we are a large purchaser of milk, we are a
large part of the dairy industry, but you can multiply our
numbers by hundreds, and then you really kind of get into the
impact of what it is having on the overall dairy industry,
which is significant.
Mr. Thompson. I think, Mr. Chairman, we have some really
good folks who are pending for confirmation at USTR,
specifically in the agriculture area. It would be great if we
could get them confirmed, and, quite frankly, they go to work
working with our trading partners, and our trading partners put
pressure to--well, put pressure on our trading partners to make
sure they are not taking back these storage containers empty,
but full of good, American-produced agriculture commodities.
So, thank you, Mr. Chairman.
The Chairman. Yes. Thank you, Ranking Member, and you are
absolutely right. Now I recognize the gentlewoman from New
Hampshire, Ms. Kuster. You are recognized for 5 minutes.
Ms. Kuster. Thank you so much, Mr. Chairman. Today's
hearing topic hits close to home for my district, and my
region. Northern New England isn't an area you can easily pass
through on your way to someplace else. We are at the end of
many delivery lines, and it must be very deliberate to get to
us. The vast majority of goods not already produced in New
England have to be trucked into our region, and, of course,
there is a lot of labor and time required to do just that. So,
these realities have long contributed to higher prices for some
goods. The pandemic supply chain disruptions have exacerbated
the challenges we face.
I do appreciate, in the grand scheme, our nation's food
supply chains are incredibly efficient and resilient, and the
steps we took with the COVID relief packages in 2022,
especially the American Rescue Plan this year, have gone a long
way to help supply chain stakeholders, from farmers all the way
to grocers, remain solvent, and weather these very challenging
times. Nevertheless, it is clear it will take food supply
chains a long time to recover. I want to make sure my
constituents, especially those who struggle with hunger and
food insecurity, are able to access and afford nutritious food.
This takes on added meaning as we head into the holiday season
with our families.
To ensure that happens, while also not shortchanging our
farmers and frontline workers all along the food supply chain,
is very challenging, but it is a balance we must strike. One
important thing we can do, and I am seeing this happen with
grocers and co-ops in my district, is buying and sourcing
locally wherever possible. A silver lining of the pandemic has
been heightened consumer interest in supporting local
agriculture and producers with food choices.
Mr. Ferrara, from your position with NGA, I am curious if
you are seeing your members increasingly working with local
food producers, and sourced from regionally connected
distributors, and what can we do to help foster these
relationships?
Mr. Ferrara. Yes, Congresswoman, thank you for the
question. Again, this is an area that independent grocers
really take upon very seriously. It is an area how they
differentiate from their chain competition. They are local,
they know their local producers, they know the local farmers,
and, quite frankly, customers come to their stores to be able
to source those local items from local producers. But I think
we really need to look at the supply chain and ensure that
those local producers continue to have a chance, because we are
going to continue to see more consolidation, and more influence
from the largest power buyers across this country, and it is
really important that those local producers have an outlet for
their products, and the independent grocer is the perfect
outlet for that.
We need to make sure that the industry is competitive, and
that the anti-trust laws are enforced, so that those
independent grocers can continue to serve those communities,
like your district, and can serve those customers who need
access to nutritious and a wide variety of foods.
Ms. Kuster. Thank you so much. Now, shifting gears
slightly, stakeholders in my district have been sharing with me
examples of backlogs, where food and value-add products
themselves are not in short supply, but packaging for them is
hard to come by. Mr. Durkin, could you comment on what
challenge is your company, or IDFA more broadly, still seeing
in terms of packaging shortages, and have you been developing
strategies to mitigate packaging supply challenges, or even
minimize packaging, as we move forward?
Mr. Durkin. I mean, obviously there we have been--there
isn't probably an input item we haven't had a challenge with
this year, so packaging is a good example of that. We have had
certain challenges where we have had to work with our suppliers
to try to get that in place. We have avoided certain things,
but there has--come down to situations just really in the last
couple of weeks where we have had to change out production
schedule because of delays in receiving our packaging.
What we have also seen, as we mentioned earlier, and the
panelists have also said this, is the inflationary component of
this as well, so all of our packaging costs have gone up. And,
to your point, we have been, and continue to work from a
sustainability standpoint to reduce the amount of--obviously
cardboard, as an example, and other packaging-type materials to
make sure that we can--are good corporate citizens in that
regard. But in the near-term, that availability is still a
challenge, and we are working with our suppliers to try to
eliminate that.
Ms. Kuster. Well, thank you. My time is coming to a close,
but I am very grateful to the panel, and to everything we are
doing, to work together to ensure that we have a safe, healthy,
accessible, and affordable food supply chain for all Americans
as we head into the holidays. So, thank you very much. With
that, Mr. Chairman, I yield back.
The Chairman. Thank you very much as well. Now I recognize
for 5 minutes the gentleman from South Dakota, Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chairman, and before I ask my
questions, I just want to thank Mr. Durkin. Sir, in your
testimony you highlighted the bill that I have with John
Garamendi related to the ocean shipping reforms that haven't
taken place for 30 years, but are much needed, so I just wanted
to say thank you.
Clearly, these supply chain problems are a terrible
problem, and they are rippling from almost every segment of the
American economy. It is good to hear a lot of agreement on some
of the things that might help. Mr. Wells, in your testimony you
mentioned the power of unlocking all of these safe 18, 19, 20
year old drivers, and how much that could alleviate the
shortage of drivers in the trucking industry. Mr. Ferrara, you
noted that every industry has these shortages, but that getting
these young truckers on the road really would help. Mr. Samson,
you estimated that we are short 80,000 truck drivers, and you
suggested that this pilot could unlock opportunities, perhaps
as many as 3,000.
You gentlemen probably know this, but I am leading a letter
that has 55 signatories that is calling on DOT to expedite
their reconsideration of a Trump Administration rulemaking.\2\
It would take just exactly the action that you gentlemen
highlighted, getting these safe drivers, who are already
driving intrastate loads into the interstate system. What I
want to ask of Mr. Wells, Mr. Ferrara, Mr. Samson, what are
your thoughts on the long-term--and clearly the pilot is
helpful--what are the prospects for long-term reforms, and to
what extent could they help with our long-term supply chain
weaknesses? Let us start with Mr. Wells.
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\2\ Editor's note: the letter referred to is located on p. 144.
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Mr. Wells. Yes, this is a good start. Obviously, the
earlier you get folks into the industry, the better chance you
have for them to develop a career out of it. So, while this is
a short-term fix, it also could yield long-term results in the
fact that those drivers, those youngsters, would tend to stay
in the business longer. So, I think they are both part and
parcel.
Mr. Johnson. Yes. I think Mr. Samson will correct me if I
am wrong, but I think the average age that somebody begins
truck driving is in their 30s, and so getting people connected
younger, presumably, would help them make better careers even
earlier. Mr. Ferrara, any thoughts on long-term prospects?
Mr. Ferrara. Yes, absolutely. We need to get into high
schools. We need to get into--not everyone is destined for
college, and everyone wants to be weighted down with college
debt, and these are good paying--these are great jobs, great
careers, and let us get to these young folks early. Let us make
sure they are exposed to these opportunities in their community
and give them the tools and resources they need at the right
age so that we can get them involved early on, and we can give
them the tools they need to be very successful in their
careers.
Mr. Johnson. Yes, because these truck drivers--this is the
glue that holds the American economy together. Let us get more
safe drivers out on the road. Your thoughts, sir?
Mr. Samson. First, I want to thank you for your Ocean
Shipping Reform Act legislation. We have been intimately
involved in that, and believe it is going to have extraordinary
impact to kind of start to loosen the logjam. As far as the
driver issue goes, we have worked with FFA. They have 700,000
folks that are part of FFA. We went out to their meeting,
explained there are not 700,000 agriculture jobs, but there are
jobs that go and work with agriculture, whether it is
transportation, or whether it is working in a warehouse, and
giving them this viable, fantastic career option is a great way
to kind of educate these young kids, and get them into the
industry. And so, I think the DRIVE-SAFE Act is a foot in the
door. I think we have additional opportunity that we can build
on, but, as Mr. Ferrara said, getting into the high schools,
getting into these younger folks before they get too much into
their career option, gives them a choice that they wouldn't
regularly have.
Mr. Johnson. Thank you very much, gentlemen. Mr. Chairman,
I just want to thank so many of my colleagues who have gotten
on the Under-21 letter that I am circulating, and so many that
have gotten on the Ocean Shipping Reform Act that Mr. Garamendi
and I are pushing. We can do so much more together than we can
on our own. Thank you, sir, for your leadership. I yield back.
The Chairman. Yes. Thank you very much, Mr. Johnson, and
you are absolutely correct, and I want to commend you for the
leadership you are providing on this issue as well. And now I
recognize the gentlewoman from Illinois, Mrs. Bustos, who is
also the Chair of the Subcommittee on General Farm Commodities
and Risk Management. You are now recognized for 5 minutes, Mrs.
Bustos.
Mrs. Bustos. All right, thank you so much, Mr. Chairman,
and I really appreciate you holding this very timely hearing
today. I want to thank all of our witnesses for your testimony
also. Let me start by saying, Mr. Wells, welcome to a fellow
Illinoisan. It is great to have you here with the Agriculture
Committee. Now, in your testimony you mentioned the dire state
of disrepair that our rural roads and our bridges are in, and,
believe me, I know exactly what you are talking about. I have
this 14 county, 7,000\2\ mile district, and when I am driving--
whether it is Joe Davis County, to the far northwest corner, or
whether it is down to Mercer County, one county south of where
I am, I am driving a lot of miles over these roads and these
bridges, and see the desperate need for revitalization.
Obviously, it is not just you and I who experience how bad
our hard infrastructure is. I hear it over and over again from
our family farmers, who are really just trying to get their
goods from one end of the district to the other, from one part
of the state to the other, or whether it is--to get their
commodities over to the Mississippi River, whether they are
crossing the river to go into Iowa, whether they are sending
their commodities down the river through our locks and dam
system.
And really, with each year that goes by, our roads, and our
bridges, and our locks, and our dams, you look back--especially
the locks and dams built during the Depression Era, but
everything is getting older and older, and it becomes that much
more difficult for our ag producers to get their goods to
market. So, Mr. Wells, can you speak on the impact that the
bipartisan Infrastructure Investment and Jobs Act (Pub. L. 117-
58), the $150 billion investment in that for roads and bridges,
or the nearly $20 billion investment in our waterway
infrastructure, how will that impact our farmers in a region
like ours, since you know Illinois well?
Mr. Wells. Yes, thank you, Congresswoman. We support that
Act. As you so eloquently stated, the roads and the bridges in
Illinois--I travel a lot across the Midwest, and other areas,
and I have to say that ours win the prize, potentially, for
being in disrepair. As you mentioned, the locking system is
critical to the flow of goods and services to our customers,
from fertilizers coming upriver, as you know, to grains going
back down the river. So, we are supportive, we think that will
be a great start, and we appreciate the support on the
infrastructure.
Mrs. Bustos. Absolutely. Can you talk a little bit about
how these investments in our infrastructure will translate into
food and agricultural supply, that the supply chain investments
are--and what we are facing with our supply chain issues right
now?
Mr. Wells. Yes. It--you know, farming is very time
sensitive, right? And so, as we ship products upriver, it is
imperative that we have adequate locks and dams to get products
to the right place at the right time. Some of our locks are not
very far away from a catastrophe that would just totally stop
transportation on the river, and would lead to critical
shortages of fertilizer products, and the same going downriver.
We rely heavily on that river system to get products to the
market, to get products to the Gulf, and so any breakdown in
that system could be catastrophic to our producers and our
farmer-owners.
Mrs. Bustos. Yes, to the tune of billions of dollars. I
have a minute 20 seconds left. I would like to take the rest of
my time to address some troubling issues that were raised in
testimony today. I certainly agree that the issues that our
entire ag and food supply chain face are serious. We know that,
we are seeing that. I look forward to continuing to work with
those on this panel, our witnesses, our colleagues on the
Agriculture Committee, and, of course, with the Biden
Administration to find solutions in a timely and an effective
manner.
But, we have heard from our tremendous panel of witnesses
about a bunch of issues that our food and our ag supply chain
face, including trucking, that Mr. Johnson was just asking
about, shipping slowdowns, I mean, global commerce, increase in
input prices, the labor shortages that we are all hearing
about. I do find an issue with the Renewable Fuel Standard part
that was talked about earlier. I think it is shortsighted.
Intentionally undercutting demand for domestically produced
biofuels would pull the rug out from beneath our corn and our
soybean growers and create a whole new cascade of supply chain
issues in our food, fuel, and fiber sectors.
So, I just want to say this Committee needs to focus on
solutions for the wide array of issues that we are discussing
today, rather than on stopgap measures that could end up doing
more harm than good, and I just wanted to make sure that I
addressed that. With that, with my 11 seconds over, I will
yield back. Thank you so much.
The Chairman. Thank you, Mrs. Bustos. And now I recognize
the gentleman from Indiana, Mr. Baird. You are recognized for 5
minutes.
Mr. Baird. Thank you, Chairman Scott, and Ranking Member
Thompson. I really appreciate having this hearing. And, I
really appreciate all the witnesses here. I mean, you bring the
ideas, and you cite the main parts of our supply chain that
have been disrupted in the last year or so, and so that is
really beneficial to us trying to make decisions, so I thank
each and every one of you for being here and sharing your
concepts with that.
But, Mr. Schwalls, in your comments, you mentioned the
increasing costs and shortage of inputs like fertilizers and
crop production tools, and I can appreciate that. These
disruptions are very concerning to me, particularly as I
similarly continue to hear from our farmers in my district, who
are concerned about the increasing input costs, and the
decreasing margins, and unfortunately compounding the supply
chain troubles, we now hear that the Administration and the EPA
have begun revoking some of the key crop protection tools and
the pesticides for the U.S. agriculture.
And so, as Mr. Wells mentioned in his testimony, in August
the EPA made an overly conservative decision to revoke the
approval of chlorpyrifos for use on food products, and
unfortunately, the decision was made despite the agency's own
findings, and that the product does not pose potential risk for
concern and backed up by U.S. Court of Appeals ruling. So, Mr.
Schwalls, can you share your perspective about--and this is
just one example, but how the impact of regulating this
pesticide, as well as others, will further compound the supply
chain issues for producers? You care to elaborate on that?
Mr. Schwalls. Yes, sir, thank you, chlorpyrifos is a very
important chemical used in the ag industry, from pecans, to
onions, to corn, cabbage. It is widely used, and has been for
30 or 40 years. The main food my family eats is--comes from
the--our--from our farm, and chlorpyrifos is a chemical that we
do use. It is a crop protectant that we have been using for
years and years. So, while I obviously do not feel like it
poses a potential risk of concern, and it ended up--the fact
that my family is eating the food produced on a farm that is
using chlorpyrifos, now I do err on the side of caution, but I
follow the science and the research.
For our company, we constantly run trials on different
seeds, growing practices, and crop protection practices, so any
changes made by the EPA would need to be trialed and tested on
the farm level to see what the result of those changes would
have on efficacy, crop quality, nutrition, and yields before we
would need to make a transition to any other crop protection
products.
Mr. Baird. So, I appreciate your comments, and you know I
am a very science-based individual, and I think that is
important in the decision-making process. I am not sure that we
used the appropriate science to make those kinds of decisions,
and so if anyone else--any one of the other witnesses would
like to make a comment in this regard? I think I have about a
minute and 20 seconds left, so you can make your comments.
Mr. Wells. Well, I would just add that farm plans are made
well in advance of the growing season, so growers are sitting
down and making those plans today, and so having consistent
science- and risk-based methods of evaluating those products to
ensure that we have a steady supply and access to them is
really critically important. Uncertainty, marketplace
disruptions, just make it very difficult to plan, and in some
cases, there may not be alternate products that fit the need
that the growers have for the product that was evaluated, and
potentially canceled.
Mr. Baird. Thank you. I have about 30 seconds left. Anyone
else? If not, I really appreciate your thoughts and your
perspective, and I appreciate you being here, testifying to
this Committee. And with that, Mr. Chairman, I yield back.
The Chairman. Thank you, Mr. Baird. And now I recognize the
gentleman from Arizona, Mr. O'Halleran. You are now recognized
for 5 minutes.
Mr. O'Halleran. Thank you, Chairman Scott, and Ranking
Member Thompson, for holding this important hearing today. And
I am sitting here looking at my remarks, and then I thought,
what a surprise. We are surprised that we don't know that our
ports haven't been in good shape for the last 20 years? Are we
surprised that the truck drivers across this country--that we
have had a shortage even before the pandemic? What else have we
been surprised about? That our roads are not in good shape? We
as a Congress, we as a country, have to start looking forward
aggressively, making sure we don't deal with just a crisis, but
looking forward into our future.
The pandemic has tested our food supply chain. Thanks to
the work of many companies, and their essential workers, we
were able to get through that. There were some stocked shelves
that weren't stocked in a while. We also had to bring the
National Guard in, but it happened, and people did not have to
starve to death in our country. I am concerned that if we do
not address the potential choke points that have emerged in our
nation's food supply in the coming months, we remain at risk
for potential shortages during future national emergencies.
And also, it is not just about food. It is about everything
that goes into the core of allowing farms and the agricultural
industry to work. The pandemic showed that our supply chain is
overly dependent on foreign adversaries, like, China. Moving
forward, we need to ensure that our supply chain is secure, to
ensure that we do not see disruptions and delays in getting
Americans the food and other necessities that we depend upon.
I am also very concerned about the increased food costs we
are seeing. This impacts families, it impacts restaurants, it
impacts the fabric of our communities. These problems are
compounded for Americans who live on Tribal reservations or in
rural communities. Congresswoman Bustos highlighted the roadway
system. The cost of traveling right now because of gas prices
is a tremendous cost to rural areas and Tribal lands. For
instance, nearly 25 percent of Native Americans are faced with
food insecurity. 15 percent of rural Americans are food-
insecure as well. Price pressures will only further harm these
rural and Tribal communities, in which most of Arizona's first
district is comprised of. It already is struggling to assess
healthy and nutritious food to feed their families.
Americans who live in rural and Tribal communities are
already prone to pre-existing health disparities like diabetes.
Access to high quality food is absolutely critical in these
areas, and I would like to work with the panel on some other
solutions on these issues.
Mr. Durkin, southern Arizona has a number of dairy farms,
that I know supply many American dairy producers. Can you talk
through some of the supply chain issues that you are seeing in
the entire dairy industry, from the farmer to the end consumer?
Mr. Durkin. Yes. Well, the supply chain issues that we have
talked about, I, again, express all the perspectives that my
fellow panelists have had. Everything from the trucking side,
to--we have had issues just recently where we have had to defer
some milk coming into our plants because of unavailability to
have truck drivers available. You take the truck driver
availability, and then the equipment unavailability, per se,
are all interrelated, when even you then get to the port issue
that I focused on heavily at this hearing. When that equipment
gets tied up, that causes backlogs in the entire industry, so
it follows through the entire supply chain. So, whether it is
an equipment issue, a personnel issue, that--all that--it just
is a circular thing that you don't seem to be able to get out
of. So, the issues that we have talked about, and the solutions
that my fellow panelists have also talked about, and myself,
are clearly needed, and needed now.
Mr. O'Halleran. Are you surprised at all that we are in
this situation, based on the years of addressing the import and
export markets, and not doing it correctly, and also the state
of the infrastructure in our country?
Mr. Durkin. So, I would say I am surprised to a point, that
it is as deep of a crisis that it is actually at. We have
started to raise the issue back at the first of the year,
probably even a little bit before that, as we started to see
things happening, but I would argue we are at a point where--I
know things were talked about, and I was on a panel discussion
with--just a couple weeks ago on this specific issue, and they
had the head of the Long Beach Port on that panel, and actually
he had recommended 24/7 actually back a couple of years ago.
So, this is something that we foresaw coming in. Obviously,
nobody saw a pandemic that was about to hit us, so that clearly
has exacerbated the issue, but certainly there were warning
signs that this was on its way.
Mr. O'Halleran. Thank you very much, and, Mr. Chairman, I
yield back.
The Chairman. Thank you, Mr. O'Halleran. And now I
recognize the gentleman from Ohio, Mr. Balderson. You are now
recognized for 5 minutes.
Mr. Balderson. Mr. Chairman, thank you very much, and I
want to thank all of you for being here today, and I want to
thank Chairman Scott and Ranking Member Thompson for doing this
important hearing. My direction goes towards Mr. Samson. Mr.
Samson, I hope everyone participating in this hearing
understands just how important the DRIVE-SAFE Act is, as it
serves to address both the supply chain crisis and the ongoing
shortage of qualified truck drivers. I was proud to offer this
bill as an amendment during the Transportation and
Infrastructure Committee's markup of their transportation bill
last Congress, and also this Congress. It is clear that the
trucking industry needs our help, but I am hoping you can touch
on what ATA and the industry is doing to recruit and retain
truckers on their own. And I know you have spoken a little bit
about it, but if you could just give a couple other things,
that would be great.
Mr. Samson. Thank you, Congressman, and thank you for your
support of DRIVE-SAFE Act, something that we have been working
closely with your office and others to try to recruit these
younger folks into the industry. I think we have touched on it
a little bit today, but we are trying to incentivize not only
new drivers to come in, but also retain, and the Chairman noted
the high turnover rate at the beginning of the hearing. We have
benefits, we have higher salaries, we have flexibility. We are
really attempting to educate those that are coming into the
industry how great of a potential career that this is, and so
we are working closely with them in order to do that.
Something we haven't touched on today is a significant DMV
backlog of CDLs that we are trying to loosen up, and get that
process started to get it back operating at the top efficiency,
and so that is another piece that we have not quite touched on,
but I think is very important here as well.
Mr. Balderson. That is great that you did that, and we are
going to touch on that in just a second, but I do want to do a
follow up, and just make sure everyone is aware, the Wall
Street Journal did a video on their website yesterday that
discussed the benefits and bonuses that trucking companies are
offering to new and existing employees, and I encourage
everyone to watch that.\3\
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\3\ Editor's note: the video referred to is retained in Committee
file.
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Mr. Samson, as you just started to state there, during the
onset of the pandemic the Trump Administration acted quickly to
put in place a variety of waivers for CDL and CLP holders to
ensure trucks were able to deliver critical supplies, such as
PPE and medical equipment, and food on time. Can you discuss
some of the waivers you felt had the biggest impact in ensuring
timely delivery of goods over the pandemic?
Mr. Samson. Of course. Yes, no, we had a handful of ones
that were very positive towards the industry on obtaining CDLs.
There were certain things that were waived from the DMV
standpoint that allowed us to get quicker access to those, and
now, since then, we have continued to see the backlog start to
pile up. But during the process, we were able to obtain CDLs a
little bit more efficiently. Some of the other declarations
that were put out there, one of them, of course, was on the
weight side. They were allowed--provided the states to increase
weights to get certain products from A to B, which, of course,
with a driver shortage, with an equipment shortage, that
allowed us to increase our productivity over the course of the
pandemic as well.
Mr. Balderson. Okay. And my follow up to you, do you think
extending some of these waivers through the duration of the
supply chain crisis would be helpful?
Mr. Samson. I do, and I think my colleague Mr. Ferrara
would agree, especially on the foodstuff side of things, the
livestock side of things. We know we have had a gas and oil
issue as well, and so far throughout the pandemic it seems like
these have been extraordinarily helpful to the industry, and
also come across as very safe and efficient so far as well.
Mr. Balderson. Thank you for your responses, Mr. Samson.
Mr. Chairman, I yield back my remaining time. Thank you.
The Chairman. Thank you very much. And now I recognize the
gentleman from California. Mr. Carbajal is recognized for 5
minutes.
Mr. Carbajal. Thank you, Mr. Chairman, and thank you to all
the witnesses being here today. The COVID-19 pandemic has
disrupted every aspect of our lives, and has created supply
chain disruption, as many of you have touched on, including
container shortages and shipping delays. The agriculture sector
is especially impacted by these delays, including producers in
my Central Coast District. As Chair of the Transportation and
Infrastructure Subcommittee on Coast Guard and Maritime
Transportation, I am actively exploring ways to address this
issue with my colleagues.
Mr. Schwalls, have you been forced to take on certain costs
or losses associated with crops arriving in poor condition due
to delays and congestion? And what types of policies from the
USDA or Congressional action would be helpful, from your
vantage point, to address these added challenges in the market
for fresh, frozen, and processed fruits and vegetables?
Mr. Schwalls. Well, thank you. Yes, sir, we have a lot of
challenges with the supply chain that--and it has caused
disruption, and caused a loss of crop and yield. And when you
consider the fact that all of the agricultural costs go in
and--on an acre basis, and all of the returns come back on a by
the box, or by the ton, or whatever particular commodity it may
be--so it is--the input costs are pretty much identical,
regardless of the yields. So, when we are able to have a better
crop utilization, obviously it lowers the impact of the costs
of the product that is being grown, and also the amount of land
that is required to grow that crop.
So, we think that there is a tremendous amount of
opportunity, looking forward, for food security and safety for
the American public for--utilize different things like fresh
frozen, fresh prepared, where we could add shelf life and
stability to the food supply chain. Many of the commodities,
especially in the fruits and vegetables industry, those are
seasonal commodities, so they are not readily available.
Someone was thinking earlier, a Congresslady, I believe, about
buying local and locally sourced, and that is true, but there
is a tremendous amount of time of the year where products are
not available local. They are only available in the areas
where, obviously, they have a growing season at that time.
And the crop utilization during those times could be spread
out a lot to cover the rest of the year, because there is a lot
of waste that goes in as--where the--a situation where,
essentially, unless the product is flawless, especially not
being able to use on a retail basis. And--so we are having to
find--subvert areas to use that, such as food service, which we
all know that that had a massive increase during COVID, and it
is--that industry is still greatly off today. So, we need to
re-look at how are we utilizing the products that are being
grown now, the crops that are being grown, and how to further
increase the shelf life and the--so that we can take an
approach that gives greater security to food stability for the
people of the nation.
The Chairman. Does the gentleman have additional questions?
Mr. Carbajal. Yes. I am sorry, I was muted. I just wanted
to say thank you to Mr. Durkin for meeting with me this week,
and I appreciate him being a witness today. Mr. Durkin, I know
you have already addressed these questions, but if you can
expand on them a little bit more, I would appreciate it. How
long has ongoing port congestion affected food and agriculture
trade involving either U.S. imports or exports, from your
vantage point?
Mr. Durkin. Yes. I think the impact is that--as I mentioned
just a few minutes ago, it has gone back--we noticed the
increase back in the, what I would call late 2020, when it
started to really see the impact, and really became acute right
at the end of the year to the beginning of the year of 2021 and
has gotten continually to get--what I call worse, and
maintaining.
The unfortunate part about this is, given the current
situation from a--operating from a--whether from a shipping
reform--things that we are looking to do in the Ocean Shipping
Reform Act, as well as, I know, the 24/7, we are 6 to 12 months
out before any of those things will have an impact on our
ability to reduce the backlog on those ports. That is the
concern. My hope is that the Committee, and obviously Congress,
is that we can enact some of these things either through other
types of bills, or Executive Orders, or what we need to do to
address the situation immediately.
Mr. Carbajal. Can you also touch on how your company has
been personally impacted with increases in transportation
costs, and how it is affecting your market share in other
countries?
Mr. Durkin. Yes. We are actually seeing--basically talking
about millions of dollars. We saw, in 2021, a $25 million
increase in terms of our freight and transportation costs. That
is going to be another $25 million going into 2022. Throw on
top of that the potential loss from a customer standpoint,
given the inability to get some of our products to our
customers. That is the concern. Short-term abilities on the
freight and storage, the longer-term impact to not only us, but
the rest of the dairy industry, on ability to--losing customers
to potentially other dairy exporting countries.
The Chairman. The gentleman's time has expired. I now
recognize the gentleman from Texas, Mr. Cloud. You are now
recognized for 5 minutes.
Mr. Cloud. Thank you, Mr. Chairman, and I do appreciate
your comments at the beginning of this hearing to highlight
that we are leading the world in ag, and that we have a great
nation. We certainly do. The U.S. ag industry leads the world,
really, in innovation over the last year. As we have seen the
inputs decrease, and the outputs increase, that is a wonderful
thing not only for the industry, but just for the world's food
supply at large. In spite of that, we are looking at what some
people have called the most expensive Thanksgiving ever.
Mr. Schwalls, you mentioned in your statement some of the
costs that you are seeing. Could you kind of relay that to us
again, some of the costs you are seeing, and what you are
dealing with?
Mr. Schwalls. Yes, thank you very much. Increase in costs,
the main components--we have three essential costs in the fruit
and vegetable industry, from our perspective. We have a growing
and production cost, then we have the packing cost, and then,
of course, we have the transportation cost. The vast majority
of the products that we sell to retailers, we deliver. So, we
do absorb a tremendous amount of that cost. A lot of the
products that we are selling are on contract with programs
where the prices are locked in, and we take into account the
cost of the transportation prior to that. But there is no way
to track those numbers now, and so we have to absorb the
increase in the transportation costs----
Mr. Cloud. Right. Yes, go ahead.
Mr. Schwalls. Sorry. So, we are absorbing the
transportation costs. Then, as far as the field input costs,
fertilizers being--are moving--we had another six percent
increase, I believe it was yesterday, on fertilizers. Those are
currently up 35 percent year to date. The extra products up 25
percent, with fuel being a massive increase force at 48
percent.
Mr. Cloud. Right.
Mr. Schwalls. We need some significant areas, obviously,
and the majority of this stuff is affected directly by
transportation. If we could have----
Mr. Cloud. Yes. You mentioned fertilizers 35 percent, crop
protection products 25 percent, fuel 48 percent, mulch and drip
tape 35 percent, packing supplies 30 percent, refrigerants 20
percent, freight 40 percent. It occurs to me that the vast
majority of those things, probably 80 percent of it are either
products or byproducts of the oil and gas industry, and we have
seen, for the last few months, really, an attack against the
oil and gas industry here in the United States, while promoting
it overseas, even begging OPEC to produce more. I think that is
kind of a backwards approach to it. It is important that as we
continue to move towards a cleaner air, cleaner water, brighter
future, that we do so in a sensible and responsible way, and
not one that increases food costs for our families.
I wanted to talk a little bit about the trucking issue. It
has been talked about a lot, but one little thing I wanted to
key in on is that I noticed that California, they have
implemented a law restricting gig workers and independent
contractors. This has notably--my understanding is that it has
reduced the workforce, specifically truckers in California.
They are also considering moving everything away from diesel
trucks in short order. I am curious about what this would do.
Right now, we have a major Federal investment in the ports in
California, we have a major Federal investment in the highways,
under the assumption that we are going to be using these ports
not only for the region of California, but as a gateway to the
food supply and resources for the entire nation, and it is
curious to me that California would present a stranglehold on
the U.S. economy in that way, and that might be something worth
a discussion later on.
But I wanted to ask--I think, Mr. Cinco, you had mentioned
in your testimony the vaccine mandates, and some of the issues
were involved in that when it came to workforce right now. We
have a number of issues with workforce. Some have been
discussed already, some of the policies implemented under COVID
that have kind of outlived their usefulness in keeping workers
at home. Could you speak to that, please?
Mr. Cinco. We are very fragile with our workforce right
now. We have shut down lines specifically to--when you are
short people, we just scavenge lines together and shut lines
down. I think if these mandates come into effect now, before
the holidays, it is going to make it even worse. This is, like
you said, the most expensive Thanksgiving in history, and to
make bread, and buns, and things for actual Thanksgiving,
stuffing bread, stuff like that, we are not going to be able to
produce a lot of that product if they have these mandates
because we, like, every other industry, have--40, 50 percent of
our workforce is vaccinated, and the rest of them are not. And,
as I have heard before, I don't think there is going to be a
lot of people running to go get vaccinated if you get mandated.
So that is just going to cut into our workforce, and make the
fragileness expire.
The Chairman. Thank you. The gentleman's time has expired.
I now recognize the gentleman from California, Mr. Harder. You
are recognized for 5 minutes.
Mr. Harder. Thank you, Mr. Chairman. I want to begin by
thanking Chairman Scott and Ranking Member Thompson for hosting
this hearing on the critical issues around our food supply
chain, and thanks also to all of our witnesses for joining us.
I represent California's Central Valley. We are the fruit
and nut basket of the world, and we make our living selling our
produce in every corner of the globe, and that means we
actually have to be able to actually get our products there so
they can be consumed around the globe. So today I would like to
focus my remarks and questions primarily on the portion of the
supply chain that has been top of mind for every one of my
producers, processors, and distributors.
For the last few months, I have been closely monitoring the
disaster unfolding at our ports. In 2 months alone last year
shippers rejected more than 177,000 crates of American
products, instead sending empty shipping containers back to
China to be filled with Chinese goods. When I talk to farmers
and ranchers in my community, they tell me it is taking weeks
longer than normal to get their products onto a truck, to the
port, and onto a ship. Each one of those delays hits their
bottom lines at a time when they simply can't afford it.
And to make matters worse, ports like the one in Long Beach
are seeing huge backups in part because they have local rules
that prioritize beachfront views over actually getting crates
in and out of the door every day. All of that together means
the farmers and ranchers in my community, really the backbone
of our entire economy, are losing money every single day. When
the supply chain fails, it hits our community first, and it
hits us the hardest. That is why I am working with my
colleagues, and Representative Garamendi on his bipartisan
bill, to update our global shipping regulations to combat
China's influence on international shipping, as well as working
with the letter of my Agriculture Committee colleague, Mr.
Dusty Johnson, that urges the Department of Transportation to
implement the Congressionally authorized Under-21 Commercial
Driver Pilot Program to get more truckers onto the roads.
So, my first question is for Mr. Durkin. Mr. Durkin, as the
President and CEO of Leprino Foods, which I know well, given
their presence in my district, it would be helpful to hear
directly about how the dairy industry specifically has been
impacted with the ports and supply chain backups in California.
What has been the biggest challenge, and where exactly could
Congress be a better partner to you?
Mr. Durkin. Yes. The biggest challenge, obviously, is
getting all of our products loaded onto a ship, and getting out
to all the countries, and to our customers where we need to
have that put. Everything from having a right, as we talked
about, from a trucking standpoint, getting it to and from the
ports, but when we have bookings that get rolled multiple
times, as I put in my testimony--and one, as an example, we had
over 100 bookings this past year that were rolled 17 times.
That created a 5 month delay, not just weeks. At this point we
would be happy with weeks, but months it actually really turns
into significant issues for not only Leprino, really the dairy
industry as whole.
And I know that working with California dairies who,
surprise, supply a lot of our milk in the State of California,
they are running into the same issues as well, so clearly the
Ocean Shipping Reform Act, and what it has done in terms of
putting guidance over the empty containers that go back,
obviously, and the demurrage fees and excess charges that
happen would be significant, and a big help for both dairy
companies, as well as all of agriculture, so we are excited
about that, and anything we can do on the 24/7--but our biggest
concern, really, is the timing of this. As I mentioned earlier,
we noticed this issue back in January, where it really got to
be a significant issue. We are now really getting to where this
is almost a year later, in terms of this. So anything we can do
to get that Ocean Shipping Reform Act passed quickly would be
helpful.
Mr. Harder. Thank you. I agree. Urgency is imperative here.
It has already taken a lot longer than it should have. Thank
you for that. My second question is for Mr. Samson. Mr. Samson,
I am very glad you are here to share your testimony and
demonstrate how important it is not just to grow and sell our
ag commodities, but to get them from point A to point B, and
beyond. Anybody who lives in our area, and drives down I-5, or
Highway 99, every day knows how important trucking is to our
region. I have heard from you that we have 80,000 drivers short
of where we need to be right now.
In my district we have programs that actually train
students so they can graduate directly from high school into
the trucking business, but they can't actually take a lot of
jobs because they are not eligible until they are 21. I don't
think that makes a whole lot of sense. As I said, I am working
with my colleague, Dusty Johnson, to try to make sure that we
are reforming these Federal rules. But I would love to hear
from you about what else we can do in Congress to address the
shortage that we are seeing in the trucking industry.
Mr. Samson. To give you a quick example--and thank you,
Congressman--out of your district, we have a handful of great
members out of the Central Valley, and earlier this summer,
when they started harvesting carrots and other produce out of
the Southern Valley--or the Central Valley, they were running
into, of course, the driver shortage--and getting the products
harvested and to the processing plant. And so, we were working
with Governor Newsom, and Caltrans, and this body as well, to
try to see if we could get some increase in truck weights just
until we got through that harvest period.
And so, we constantly are trying to focus on what can we do
in the near-term as we know these commodities are either
harvested in short order, or they are going to be tilled back
under, and left behind. And so, we try to figure out how we can
best focus on these as we are moving forward, and we were able
to do that outside of your district as well.
The Chairman. Thank you. The gentleman's time has expired.
Now I recognize the gentleman from Iowa, Mr. Feenstra, for 5
minutes.
Mr. Feenstra. Thank you so much, Chairman Scott, and thank
you, Ranking Member Thompson, for holding this hearing today on
the national food supply chain, and the concerns that we have.
I represent the 4th District in Iowa. This is probably one of
the largest ag industries in our nation. We are number one or
two when it comes to soybean and corn production. And, with
that, I would like to address a concern regarding fertilizer
costs.
This has been brought up already, but I would like to ask
Mr. Wells, some of our farmers who have been able to guarantee
fertilizer availability for next planting season have also
reported prices being quoted to them that are six times higher
than 2021. Mr. Wells, can you shed any light on the main
factors that are driving this dramatic increase, and is there
any way that we can mitigate this as we move forward?
Mr. Wells. Yes. Speaking specifically to a couple of
products, nitrogen and phosphate, one of the feedstocks and one
of the catalysts to make the products are natural gas, and, of
course, everyone knows the impacts to the energy complex. We
have talked about that. Natural gas has skyrocketed in price,
and it directly impacts the prices of those particular
products. And so, if you take into account weather--Hurricane
Ida shut down a significant amount of production in the State
of Louisiana, which took tons out of the marketplace,
transportation costs, getting things in a timely fashion, it
has just been--I hate to use the term perfect storm, but it has
been a perfect storm of high input costs, high transportation
costs, shutdowns. There have been a number of turnarounds
related to COVID that were delayed that took tons out of the
market, so there are a number of factors that have led to the
increase in prices.
Mr. Feenstra. Absolutely, and that is what we are seeing,
and my greatest fear is what this does for the future, when you
have our producers putting in their corn and soybeans this
spring, obviously, that input cost goes directly to them, but
it also then--hopefully it will--through the commodity prices
will get--will increase, and then that cost gets passed on to
the consumer. Do you also see these mitigating factors--I mean,
is this a concern for you also in what you see as we move
forward in the food supply chain?
Mr. Wells. Can you state that again, please?
Mr. Feenstra. Yes. I was just wondering, if you look at
future yields, and future crop production, and things like
that, I mean, is there a concern where we are--have such
increased costs when it comes to fertilizer?
Mr. Wells. Yes. Obviously, anytime you have dramatic
increases in costs for the farmer, it leads to widespread
concern. Farmers, as has been stated, buy at retail and sell at
wholesale, so they are kind of caught in the middle of all
that, and so they have to accept prices given to them on the
retail side. Yes, we are concerned about that.
Mr. Feenstra. Yes. It is very significant, I agree. I want
to address a comment made earlier by Mr. Cinco regarding the
Renewable Fuel Standard and biofuels impacting soybean oil
prices and availability. You think about over the last decade,
soybean production and processing capacity has grown
dramatically, significantly. In fact, October, the WASDE Report
forecast soybean production at 4.4 billion bushels. That is up
74 million bushels from the year before, based on the higher
yields. While our farmers are projected to produce a record
crop this year, the biodiesel and renewable diesel industry are
using approximately the same amount of soybean oil that they
did compared to last year at this time.
So, my question, Mr. Cinco, is, were your comments
subjective? I mean, it seems like you are going after the
biofuel industry, and I would need to ask you that question,
why?
Mr. Cinco. Actually--so the way it is for me, I buy soybean
oil twofold. I buy it on the market commodity, and then there
is the basis, which is the transportation, refining, and all of
that. Last November, typically for us it is 10 a pound. It
went to 54 . You cannot get quotes from vendors that you don't
do business with, competitive quotes, because they don't have
the capacity to do that. They are telling us the shortage will
be the next 6 months for sure. The refining capacity is at a
premium right now.
The refiners are actually going to build more capacity, but
it is not supposed to go online until 2023. They are telling us
that next year is going to be a terrible year. My prices of
soybean oil have tripled from----
Mr. Feenstra. I guess thank you for those comments, but I
see it a different way. I mean, biofuels obviously, just like
everybody else, have dramatic input costs, transportation and
all these things, and I just don't think that we need to wreck
an industry that is providing a great----
Mr. Cinco. I am not saying to wreck it, I am saying delay
it, because right now there are companies that I am hearing
that have booked their soybean oil for the quantities that they
need for a quarter, and they want it on June 3, but it is not
showing up until June 6 because there is no drivers, the
refining capacity they are----
Mr. Feenstra. Yes.
Well, I appreciate your comments, Mr. Cinco. Thank you so
much, and these are all big issues. And I am obviously very
passionate about the ag industry, and how it affects Iowa.
Thank you, Mr. Chairman, and I yield back.
The Chairman. Thank you. Now I recognize the gentlewoman
from Iowa, Mrs. Axne, for 5 minutes.
Mrs. Axne. Thank you, Chairman Scott, and I want to echo
the words of my fellow colleague from Iowa, Representative
Feenstra, in talking about our farmers. So, before I get to my
questions for our witnesses here, I would like to ask for
unanimous consent to submit an op-ed from American Soybean
Association CEO Stephen Censky. Mr. Chairman?
Voice. Without objection----
The Chairman. Without objection. I am sorry.
[The op-ed referred to is located on p. 137.]
Mrs. Axne. Thank you. Mr. Censky's op-ed corrects the
record on some misconceptions about soybean oil production. I
want to let folks know, as Representative Feenstra said, our
farmers are working hard to harvest a record soybean crop this
year, producing more soybeans with less land and energy use,
and we will continue to meet the needs of consumers to feed and
fuel the world. And now the new markets for domestic soybean
oil are translating directly into new investments in soybean
crush capacity across the Midwest, which means more money in
rural economies, like those here in Iowa, and more return for
Iowa farmers, and more protein and oil for use by America's
food processors. So, any suggestion to reduce the amount of
biodiesel blended in our nation's fuel supply isn't based on
facts, and will work against, unfortunately, our farmers, our
rural communities, and our climate objectives.
Now, I am thankful to the Chairman for holding this
hearing, as the effects of COVID-19 pandemic continue disrupt
our nation's supply chain, leading to bottlenecks, and, of
course, to delays and uncertainty. As consumer habits have
shifted in response to the pandemic, we have seen a drastic
increase of imports into the United States, which has been
overwhelming our supply chain, and exacerbating infrastructure
issues.
I strongly urge my colleagues to support the Infrastructure
Investment and Jobs Act because it is a bipartisan legislation
to help us provide significant and long overdue investments in
our crumbling infrastructure. And as many of our witnesses have
testified, this legislation will address years of
underinvestment, and allow us to meet the needs of the future.
So, I appreciate the President's leadership in developing the
Build Back Better agenda to help grow our economy, and create
good paying jobs. Our witnesses have also pointed to specific
legislation before this Congress that will address specific
issues within the supply chain, and I look forward to hearing
more about that.
So, Mr. Durkin, my question--as my State of Iowa is our
nation's second largest exporter of ag products, I am concerned
about how some foreign-owned shipping companies are essentially
dictating trade. They are bringing in imports into our ports,
but yet they are leaving with empty ships, without our products
being exported on them. This is very contrary to standard
import/export trade. Can you elaborate on your testimony on how
the Ocean Shipping Reform Act can address this problem, and
other solutions that we might act on here in Congress?
Mr. Durkin. Two of the key components of that shipping
reform bill, one is that it would put a limit on terms of the
empty containers that are going back. There was always a
portion of that did go back--given the import/export imbalance,
but that number was at around ten percent prior to COVID, and
now we are at 70 percent, so there clearly is an issue that has
kind of escalated to a point--where I call this, obviously, is
a crisis. And then the second component of that is when those
orders get rolled, and we lose those bookings, as I mentioned,
there are fees from--demurrage fees, and other excess charges
that us, as well as other companies, have to handle. And I
notice--that is a big component--a second component of the
Ocean Shipping Reform Act that would help.
And, again, I can't emphasize enough how quickly--if we can
get this thing--get it kind of--I know it has bipartisan
support, how quickly we can get this bill passed and approved,
and I think that would be a big help.
[The information referred to is located on p. 185.]
Mrs. Axne. Thank you for that, and really appreciate that.
Now, my second question, Mr. Samson, you noticed in your
testimony the trucking industry needs about 80,000 more drivers
to meet demand. I will tell you, I always have Iowans in my
office on this issue. We know these are tough jobs, but they
are critical to our nation. So, can you expand to us here what
the industry is able to do to recruit workers so that we can
better support those efforts?
Mr. Samson. We are understanding that there is an aging
workforce. We are understanding that COVID had a strain on the
industry, an industry that really showed up, and kind of
provided--that--they were heroes during the COVID pandemic.
What we are trying to do is go out and recruit younger drivers.
We are trying to diversify the workforce. We are trying to
bring in those from the military. Women in trucking has been a
big piece as well. That percentage continues to grow,
incentivized through monetary, or benefits, or flexibility, and
so there are multiple things that we are trying to focus on to
make sure that we get these drivers into the industry, but then
we also keep them as well, we retain those employees as well.
The Chairman. Thank you. The gentlelady's time has expired.
I now recognize the gentlelady from Illinois, Mrs. Miller, for
5 minutes.
Mrs. Miller. Thank you, Mr. Chairman. I have a question for
Mr. Ferrara. Mr. Ferrara, in your testimony you mentioned that
you have advocated for the government to help your member
stores attract talent. How do you--or do you know offhand how
many employees your member stores lost due to overburdensome,
unconstitutional vaccine and mask mandates? And furthermore, do
you think it would be helpful for the Federal Government to
halt Federal COVID vaccine mandates and mask mandates?
Mr. Ferrara. Congresswoman, first thing I would say is, we
do, as an industry, support vaccines. We were a big part of
helping get those vaccines into communities, and, of course,
prioritizing our workers. The concerns that we have, for any
mandate, particularly going into the holidays, are one, how is
this going to be implemented, the impact, of course, it will
have on our workforce, who is going to be responsible for
testing, how are we accessing those tests, who is paying for
the test, and then, of course, the penalties that these
businesses could be fined, upwards of $13,000 in OSHA
penalties. So that is obviously a concern up and down the full
supply chain.
I think our industry, again, has been very proactive in
working toward incentivizing, and helping get those workers
vaccinated, done clinics at their stores, at their distribution
facilities, and we are committed to continuing to do those.
Mrs. Miller. Okay. Thank you. And, Mr. Cinco, in your
testimony you mentioned that an experienced workforce is
leaving your industry at an alarming rate due to issues facing
the world, new issues. Can you tell me how the COVID-19 vaccine
mandates and mask mandates have impacted your workforce, and
also, can you tell me how unemployment benefits, which have not
had work requirements since March of 2020, how have they
impacted your workforce?
Mr. Cinco. So, the mask mandate issue, as I mentioned
before--we are very fragile with the amount of people that we
have, and if the masks and everything keep getting mandated, we
are going to have less people showing up, because there is 45
to 50 percent of us are vaccinated. We are not against
vaccines, but we can't force it on our employees. At the
holidays, it will be a complete catastrophe for us if the
mandates are there.
As for the unemployment benefits, I think it affected us
because the wage difference between somebody who wasn't working
and the actual pay that they would get if they were working
didn't seem like it was fair. So, the difference between the
two didn't measure up to what they were actually having to do
in the bakery.
Mrs. Miller. Yes. Yes, I agree. And, Mr. Wells, China is
the leading producer of agriculture chemicals, and now with the
ongoing trade, economic and defense tensions between our two
countries, would you please describe the risk that U.S. farmers
face from disruptions of critical production tools, and then
also how can we begin to mitigate against this risk?
Mr. Wells. Disruption in these critical production tools
can, obviously, lead to delayed planning. If crop protection
products are late to the market, it can obviously impact the
control of weeds, and weeds compete with crops, and can reduce
yields. And so, from multiple standpoints, it can lead to
reduced productivity and reduced profitability, by extension
for farmers, and it could also lead to higher food prices if
less is produced. And so that would be most impactful,
obviously, on people that can least afford it.
Mrs. Miller. Yes.
Mr. Wells. I think we can mitigate the risk by crafting
policies that promote trade and ensure regulatory certainty for
those who produce these pesticide products. The importance of
good trade relationships can't be overlooked, as well as the
certainty of the U.S. EPA's regulatory approval process that I
touched on earlier. So those are some things to mitigate, and
some of the impacts they could have.
Mrs. Miller. Okay. Thank you. And I represent a highly
productive district in Illinois, Illinois District 15. We
produce a lot of soybeans, and, actually, my family, we are
soybean producers, and it is actually--this is an alarming
situation that we are in. Thank you so much. And I----
The Chairman. Thank you. The gentlewoman from Washington is
now recognized, Ms. Schrier, for 5 minutes.
Ms. Schrier. Thank you, Mr. Chairman. Well, supply chain
dysfunction made worse by the pandemic was first brought to my
attention over a year ago by hay farmers in Ellensburg,
Washington. Since then, I have been in frequent communication
with growers and exporters all around the 8th District, and
even around the country, about these issues that they are
facing, and I am hearing it from my colleagues as well. It has
become more apparent to others.
For more than a year, these farmers have shared with me how
pandemic conditions, but also the behavior, the really bad
behavior, of foreign-owned shipping carriers, you could almost
refer to them as a cartel, are hurting their industry. They are
threatening export markets, they are threatening relationships
that have been built up over decades with foreign purchasers,
and the costs and the availability of transportation to both
domestic and export markets continue to be a big challenge for
wheat, cherry, apple, pear growers, hay growers in my district.
I would mention that, even with trucking, some growers in my
district have said that the cost for a truck to the East Coast
has more than doubled in the last year, and others say that the
cost to move fruit just to a port to be loaded on a ship for
export costs as much as the entire trip did just about a year
ago. And a lot of you know this, because you are living it.
There has been some discussion about the Federal Maritime
Commission, and, Mr. Wells, in your testimony you talked about
how it could be doing more to alleviate the backlog at our
ports. I was wondering, because sometimes it feels like they
just don't have the teeth to do what they need to do,
especially since we have no American shipping companies to
compete, I was wondering what teeth you think the Commission
has, what more they can do to enforce rules, and in addition to
the Ocean Shipping Reform Act of 2021, which I am proud to
support, what else can Congress do to help?
Mr. Wells. Yes, great questions. Frankly, I probably need
to get back with you, Congresswoman, on that. I am not up to
speed fully on the maritime and the port, given my central
Illinois background. But if I could get written comments back
to you, I can address that question at a later time.
[The information referred to is located on p. 190.]
Ms. Schrier. That would be amazing. Does anybody else have
comments about that, as to, like, what--where is our leverage?
What specifically can the Federal Maritime Commission do?
Mr. Durkin. Well, obviously--Congresswoman, this is Mike
Durkin. I think the--we--there are a fair amount of goods that
come into the U.S., obviously, from an import standpoint. Our
inability to--we--if you look at it from a leverage standpoint,
there is clear leverage, so--with all the imports that are
coming in, and I still think there is an opportunity, with the
Ocean Shipping Reform Act, to make sure that those containers
that aren't going back--when you think about 70 percent of
those containers going back empty, it just is really hard to
understand how we can let that happen; and, then, again, when
that happens, and we have no control over that, and then fees
are then charged to the exporting company as well, therein lies
the double thing.
Ms. Schrier. Okay.
Mr. Durkin. So if you looked at, as I mentioned earlier,
from 2020 through 2022, our freight and storage costs will have
doubled, as a company, in 2 years. That is the effect that this
is having.
Ms. Schrier. It is unbelievable. And those D&D fees, they
can't contest them, or they will be blackballed by the
industry. I wanted to touch on two more items really quickly.
One is I just wanted to talk about the school food supply. Over
the past few weeks my office has heard from schools, and
parents, and local officials throughout my district about
insufficient food stocks in schools, and the inconsistent
supply of school lunches. I just got an e-mail from my son's
middle school the other day saying, ``Hey, we don't have enough
food, if you can just send your kids with lunches, that would
be so much better, it would take the pressure off.''
The Washington State Office of Superintendent of Public
Instruction raised similar issues and said that it could take
up to a year for them to get the funds from the USDA's recent
$3 billion announcement regarding supply chain issues, and so I
just wanted to state that in upcoming weeks I will be sending a
letter to USDA with some questions about how we are going to
implement this, and make sure we can actually get the food to
our kids.
Last item I wanted to touch on was that I have heard a lot
of hyperbole--I believe it is hyperbole, as a physician--about
vaccine mandates, and how people are just going to fall apart,
and they won't do their jobs if you ask them to do that. We
have looked at police departments, we have looked at airlines--
the mandates do work, and--even though all the crying wolf
about how we thought we were going to have thousands of police
officers in Washington State who would leave their jobs, it
ended up being 35.
And so, I just want to kind of pull the air out of that
argument and say that it would be a real bummer if a truck
driver carrying all those turkeys to market got COVID mid-
transit, and then couldn't work. And my colleague said you
can't just pull a trucker out of nowhere. It is a really big
deal to make sure that our workforce stays healthy and can do
their jobs. With that, I yield back. Thank you.
The Chairman. Thank you. And now I recognize the gentleman
from Alabama, Mr. Moore, for 5 minutes. Mr. Moore, you may need
to unmute.
Voice. If Mr. Moore is not ready, go with Mrs. Fischbach.
The Chairman. If Mr. Moore is not ready, we will work with
him until he gets ready. And now I recognize the gentlelady
from Minnesota, Mrs. Fischbach, 5 minutes.
Mrs. Fischbach. Thank you Mr. Chairman. I appreciate the
opportunity, and I do appreciate the conversation, and about an
issue that is so important right now. And we just had some
awesome questions and discussion today, but I just had a
question for Mr. Cinco. You noted that high input and commodity
costs are affecting your business, and we see inflation across
the board in all of the commodities. Farmers' cost of
production is increasing alongside everyone else, and they are
doing what they can to ensure that their product gets to
market.
Much of this is due to the bottlenecks in the supply chain,
that we have been hearing about today. It appears that most
commodities have increased in costs, but the increase in
wholesale sugars' costs have been much less than other
commodities. Is that your observation?
Mr. Cinco. Yes, that is correct. Soybean oil has about
tripled, gluten has gone up three times what my contracted
price was because of the supply--lack of--lack thereof. Sugar's
gone up about 15 percent. The other commodities, like yeast and
things like that, most of the input I am getting is it is 10 to
12 percent, basically all because of freight. It is drivers
that--they don't--can't get drivers, they want to make sure
that you can get the product. So I am hearing 10 to 15 percent
on those commodities, but it is strictly--their argument is
strictly freight. Sugar is 15 to 20. It is a little higher, but
it is not, compared to the rest of them, flour, oil, gluten.
Mrs. Fischbach. And you mentioned a couple, and I am just
wondering, which one have you seen the greatest increase in
costs?
Mr. Cinco. Soybean oil.
Mrs. Fischbach. I need to get my pencil ready.
Mr. Cinco. Soybean oil.
Mrs. Fischbach. Okay.
Mr. Cinco. Gluten--during the mid-part of the year I got
force majeure on a contract that went from 80 to $2.65. Next
year's contract is $1.35.
Mrs. Fischbach. Okay.
Mr. Cinco. So it spiked, then it came back. Flour has gone,
with all the processing fees, from 18 a pound to 28 a pound
starting in January. My new contract in January will be 28 .
Mrs. Fischbach. Okay. All right. Well, thank you very much.
And I think I am just going to kind of open this up for
everybody, and anyone who would like to chime in, the current
hours of service emergency declaration from the Federal Motor
Carrier Safety Administration has allowed flexibility to ensure
that disruptions in the supply chain are minimized. The current
declaration ends on November 30. What are the potential impacts
on the supply chain on everything from cattle processing to
stocking grocery store shelves, if anyone wants to chime in on
that one?
Mr. Ferrara. Congresswoman, this is Greg Ferrara with the
Grocers, I will take the first stab at that. It has been an
incredibly important tool. While I was talking with our member
wholesalers yesterday, I was just remarking that the
flexibility that this has given them has allowed them to get
orders that otherwise might have been left on a distribution
center dock to the store as they managed the complete--the lack
of--uncertainty around whether freight is coming in and when
freight is going out. So, it effectively means that there are--
able to get product to the stores--to the store shelves, and
that they are able to be as efficient as they can.
And, of course, what has been really great about this is
really it has been done in a safe way, and so we would continue
to ask for the flexibility, and for that to be extended for as
long as possible, so that we could give some certainty to our
distributors. Jon?
Mr. Samson. And just to add briefly to that, Congresswoman,
especially from a foodstuff standpoint, since we are seeing
these supplier issues, these backups, we still are seeing some
scant shelves at the grocery store. Could potentially even
broaden this to look at school shipments and deliveries to the
schools that we are seeing, not being able to properly stock
their meals for the children, and so I think it has been a
great tool to provide flexibility for those that are hauling
both food, and from the livestock side as well.
Mrs. Fischbach. Well, thank you all very much. And, unless
there is someone who wanted to add something else, Mr.
Chairman, I will yield back my remaining time, and thank you
very, very much.
The Chairman. Thank you very much. And now I recognize the
gentlewoman from Virginia, Ms. Spanberger, who is also the
Chair of the Subcommittee on Conservation and Forestry. You are
now recognized for 5 minutes.
Ms. Spanberger. Thank you so very much, Mr. Chairman. And,
as we have heard from our witnesses today, the impacts of the
coronavirus pandemic continue to reverberate throughout the
U.S. economy, global supply chains, and our agricultural
sector. And if there is one thing that we have learned from
this experience, it is that the U.S. supply chains lack
resilience, and are not adequately prepared for the kind of
disruptions that occurred.
Certainly, we couldn't necessarily have anticipated all of
the disruptions that we have seen over the last year and a half
because of the pandemic, but we have to ensure and recognize
that disruptions in the future are possible, and we have to
ensure that this--disruptions on this scale never occur again.
So, while there is really no silver bullet, making our
agricultural and food supply chains more resilient really
requires addressing a multitude of factors that have caused
some of these bottlenecks. It is a priority for consumers, it
is a priority for those represented among our witnesses today,
and, frankly, it is a priority from a national security
perspective.
So many of the factors that we are looking at result from
decades long trends that have been exacerbated by the pandemic,
including industry consolidation, and changes in the
composition of our workforce, and there has been a fundamental,
at times, mismatch between the labor needs of an employer, and
the available labor. And as a Member of this Committee, I am
keenly aware of these challenges, and I have been working hard
to address them. So, the availability of labor across our food
supply chain has long been a challenge with significant
economic and national security implications. That is why I was
a proud original cosponsor, and proud to vote for the Farm
Workforce Modernization Act (H.R. 1603), a common-sense
bipartisan bill that would reform our broken immigration
system, and ensure our agricultural sector has the workforce it
needs. And I would hope that the U.S. Senate will pass this
bill without further delay.
I am also deeply concerned about the difficulties posed by
our overburdened freight infrastructure and workforce, and so,
to that end, I was proud to cosponsor H.R. 4966, the Ocean
Shipping Reform Act. This legislation would help reduce port
congestion by giving Federal Maritime Commission the authority
to levy fines against ocean carriers that refuse to take U.S.
exports on return trips from port. Really, without a robust
freight workforce and infrastructure, America cannot compete
globally. And, to that end, I was proud to support the creation
of an Under-21 Commercial Driver Pilot Program to empower those
18 to 21 that want to enter a career in truck driving to do so,
and I urge the Department of Transportation to prioritize the
implementation of this program. Likewise, I am also encouraged
by the Senate-passed Infrastructure Investment and Jobs Act,
which contained similar provisions to recruit and train truck
drivers, while making long-term investments in our highways,
bridges, rails, ports, and other freight infrastructure.
So, for all of the panelists, before I ask any additional
questions, it does seem that we have a bit of a consensus
across the panel, so I do want to ask each of our panelists
whether they agree that Congress should prioritize passing the
provisions that invest in our truck driver workforce, and
invest in our aging infrastructure, such as those contained in
the bipartisan Infrastructure Investment and Jobs Act. And, to
be very clear, I am not asking about the whole piece of
legislation. I am just asking if you think we got it right on
the truck driver workforce piece and recognizing the need to
invest in our infrastructure.
Mr. Schwalls. Yes, ma'am. There is a tremendous need for an
increase and investment into trucking in general. I think there
could be further--we discussed today education, recruiting
truck drivers at a younger age, and use of CTA programs at the
high school level to try to recruit those truck drivers where
they could actually get into the industry before they are 21
years old. I think there are other--certainly other things
could be done, and I have heard a lot of discussion today about
things that could affect the trucking industry, but currently a
thing I think that deters truckers and--from getting into the
industry, or staying in the industry--I believe we need a
moratorium on e-logs, such as we had back during COVID-19, to
mitigate some of the costs in the ship lanes and time delays,
and relax some DOT regulations for non-egregious violations.
I think there is certainly a possibility to allow a lot of
these--in the system for at least 2 to 5 years so trucking
companies could afford to invest in added infrastructure. And
also, as far as the--concerned, allow more double trailers on
interstate and state roads to be able to help unclog the ports
and the distribution centers that are there. And all in all,
decrease regulations that interfere with supply chain
logistics. I don't believe that any regulations should deny
people from the--food security.
Ms. Spanberger. Thank you very much. And, Mr. Wells, I will
go to you.
Mr. Wells. Yes, in the essence of time, I would agree, 100
percent. I think Jon hit on a lot of key points, and we would
agree with him.
Ms. Spanberger. Mr. Ferrara?
Mr. Ferrara. Agreed.
Ms. Spanberger. Mr. Durkin?
Mr. Durkin. We agree.
Ms. Spanberger. Thank you. Well, I have so many other
questions, but I am really appreciative of your time, Mr.
Chairman, I am appreciative of this Committee, and I want to
just thank all of our witnesses for your work in making sure
that you are bringing light and clear understanding to so many
of the supply chain issues that our country is facing.
Certainly, I think you have commitments from so many of our
Agriculture Committee Members to continue working on this
issue, addressing the bottlenecks--addressing the reforms that
need to occur, and again, I just thank you for your time and
your testimony today.
The Chairman. Thank you, Ms. Spanberger. And now I
recognize the gentleman from Alabama, Mr. Moore, for 5 minutes.
Mr. Moore. Thank you, Mr. Chairman. Can you hear me okay
now?
The Chairman. Yes, I can.
Mr. Moore. We were having some issues here in the office,
but I think we have them worked out. So, Mr. Wells, I want to
ask a question real quick. I would like you to elaborate a
little bit on your answers you gave to Congressman Bacon, and
on one of the points you made in your testimony regarding the
use of inland waterways. In my home State of Alabama, we are
fortunate to have over 1,200 miles of inland waterways, which
we use to transport approximately $1.5 billion in freight every
year, and support about 200,000 jobs in that region. In your
testimony you described a need for extensive maintenance and
modernization of our locks and dams, right alongside the need
to address congestion in our ports. Can you go into a little
more detail regarding the need for strategic investment in
these areas, and what improvements should we prioritize to
alleviate future challenges to our supply chain?
Mr. Wells. Sure. Well, the port congestion I think speaks
for itself. I think we have all seen pictures of containers
stacked at ports. Regarding the inland waterway system,
GROWMARK would move roughly 1,500 barges a year on the inland
waterway system, Mississippi, Ohio, Illinois predominantly. As
I stated earlier, the need for regular maintenance, many of
these locks and dams were built in the 1920s and 1930s with a
50 year useful life. They have exceeded that, obviously, today.
They are at real risk, many of them, of failing on us, and so
failure of that lock and dam system, any one of those, would be
potentially catastrophic to the movement of goods up and down
that river, from grain, to fertilizers, to coal or other
products.
When tows come up, they have to be broken if they are less
than 1,200 locks, and so that just takes time. They have to
disassemble them, push them through, get the other half, push
them through, reassemble them. And so, the need for repair and
replacement is high, and we are at great risk of really
impact--further impact to the supply chain.
Mr. Moore. Thank you, Mr. Wells. And I might add, you guys
find this probably unusual, but I actually have my CDLs, and
have a company, and so I have been having a hard time finding
drivers. It is across the board out there. And, it is
interesting, I talk to my superintendent all the time, we
actually put out advertisements to interview, and out of ten
you might get maybe six that answer, and then one that shows up
for the interview, and then the rate that they want to receive
in salary almost puts the freight cost--you know, it--we just
can't adjust that quickly in this part of the world.
This isn't a question, but I think it is worth mentioning.
State governments have had a hand in addressing this issue for
some period of time, and Congressman Cloud mentioned during his
time, at the Federal level we can do what we can, but when
states like California are passing laws that cover thousands of
independent drivers and contractors with red tape, they only
add to the problem in our supply chain. I actually had a call
with a friend of mine this morning that is a CDL driver, and
they moved from California, these independents, because of some
of the requirements. It didn't make sense for them to work in
California. So, there are some things we can do, and I hope we
will continue to pursue reducing government regulations to
increase--decrease costs, I should say.
So, with that, Mr. Chairman, I have a little time left, but
I will just yield back, and I appreciate the witnesses for
their time today.
The Chairman. Thank you very much. And now I recognize the
gentleman from Florida, Mr. Lawson, for 5 minutes.
Mr. Lawson. Thank you, Mr. Chairman, and welcome other
witnesses to the Committee. Mr. Samson, you spoke about the
importance of improving communication between supply chain
suppliers to avoid a supply chain breakdown and provide
Congress and Federal regulators a better understanding of how
to provide effective and meaningful relief. At the risk of not
sounding like a broken record, if possible, could you tell us
again what your ideal communication system would look like, and
what steps should be taken by Congress to incentivize the
communication network?
Mr. Samson. So briefly--thank you, Congressman. Briefly, I
just want to go back to the breakdown, March 2020, of our COVID
pandemic. The communication that we were able to establish
along the supply chain, everyone from growers, through
processors, into the grocery or the manufacturing side, had the
same goal in mind, and so the communication, once established,
was fruitful. We were able to go through and have a good
conversation, figure out how to make things more efficient
moving forward, and minimize or eliminate food waste.
Now, the communication that we have currently in our food
supply breakdown doesn't have everybody looking towards that
same direction. And I think I had mentioned this earlier today,
but the fact that the ocean liners have a certain agenda of
what they want to accomplish, the ports have their own issues
that they are dealing with, and then the carriers, all the way
to the warehouses. And so I think the communication is
extraordinarily important to get everybody on that same page,
and I think some things, like the Ocean Shipping Reform Act,
will assist in pushing the carriers in that direction. I think
being able to get the warehouses--if the port is operating 24/
7, the warehouses need to operate 24/7, or else you are going
to run into those constant bottleneck issues. So I think in
order for us to actually work together and fix this issue on a
communication side, everybody has to be speaking towards the
same direction, and I don't think we are getting that right
now.
Mr. Lawson. Okay. Did anyone else care to comment on that?
If not, I will go to my next question. Clearly, and hearing
most of the discussion today, we are talking about the
situation that we have with truckers and truck drivers, and
things that can be recommended. Here in Tallahassee, at the
community college, they set up a program to train truck
drivers, which I think is very significant. But I hope that
someone on the panel can tell me, in their perspective, what
they think of--because when I calculate--since March of last
year--that might come up to as much as $3,600, or $4,000.
What do you think has caused the problem--because that is
not enough money for them to survive--for so many of them to
leave the industry? And this is one of the things that I am
asking to the panel, because there has to be something that is
going on, other than the amount of money that they have from
stimulus dollars, for their families. Because I know, for
example, that I had a young man that I coached when I was
coaching basketball, and he is still a truck driver, and I had
the opportunity to talk to him, and--but I couldn't get a clear
picture. And before my time has run out, I would like to see
what can I hear from the panel?
Mr. Wells. I guess, from a trucking standpoint, it has been
difficult for us to pinpoint why we are not seeing more
interest. We are getting carriers that are paying for the
training itself. We are getting grant money, state grant money,
that is able to provide for these drivers going through these
different college programs. We are getting the younger high
school education in there as well, and we are still not quite
sure--there are other alternative careers out there that have a
similar path and similar pay structure, and so that is one
thing that we see as competing with what we are trying to do
here, but it has been difficult to really pinpoint that.
Mr. Ferrara. Congressman, only other thing I would add is I
think that a lot of people are jumping around. You can go get
$18 an hour to make a burrito right now, and I think there are
a lot of people who are jumping around. They may not be working
this week. They can pick up gig jobs doing Uber or Doordash, or
whatever it is. There are just a lot of opportunities out
there. We need to help people focus on careers so we can get
them focused on the long-term.
Mr. Lawson. Thank you very much. Mr. Chairman, I yield
back.
The Chairman. Thank you very much. And now I recognize the
gentleman from California, Mr. LaMalfa, for 5 minutes.
Mr. LaMalfa. Thank you, Mr. Chairman, for having this key
hearing at a key time here on our supply chain, and what that
means for all American consumers. Covered a lot of good info
today. I think we still really need to drill right down to what
is it we can do that would be the most effective, the most
immediate, relief for what is going on at the ports, and the
whole chain of getting these products out, and that bottleneck
down, and getting things to the store shelves, whether you are
talking about the context of Christmas, or just in the general
terms of keeping food on the shelf, and perishables from going
bad, waiting to go--whether it is for export or, when you are
talking trucking, just in general around the country.
So, some of the things we talked about is--or thinking
about too is, as a California Member, we deal with things to an
extra degree. We have AB-5, which was also attempted to be
passed here, known as the PRO Act (H.R. 842, Protecting the
Right to Organize Act of 2021), which basically is--really
zapped owner/operators of trucks. The California Air Resources
Board phasing out trucks that are older than 2011 engines or
2010 model trucks. The DMV has a 2 month backlog at least on
getting truck drivers licensed. We have what was mentioned a
couple times, I think most recently Ms. Spanberger, on getting
more people that are the--age 21 requirement, get them down to
the age 18 requirement so they can do intrastate trucking, the
hours of service. We need some flexibility on that.
We need to have whatever we can do at the Federal level,
and our governors and our state level folks look at some of
these issues and say, can we at least put a variance on this
for a period of time to get caught up, you know? Weight limits
on trucks, can we put a variance on that for a while to deal
with just getting through the backlog, because we are all being
harmed by what is going on. It is really harming our economy,
and the people that produce these products, and we are going to
see, as it has been talked about earlier in the Committee, a
shift of where these products are going to come from. So let me
talk to Mr. Durkin about this.
You spoke earlier about your markets, basically, and people
will shift to buying things from EU, or from New Zealand,
Australia, wherever--whoever can supply this. Please emphasize
that a little bit for this Committee.
Mr. Durkin. Yes. There are three primary dairy exporting
countries. It is ourselves, the U.S., the European Union, and
New Zealand. And I gave an example in my testimony where we
have had the--again, the one customer where that actually--has
actually incurred significant air freight charges because they
can't get it to--on a boat, and there is an expectation on
there that we pay for that, which we will be unable to do. We
are trying to do the best we can, and--with some pricing
there--to kind of mitigate that, but the costs are significant.
The most concerning thing over the long-term is the loss of
that customer. And, again, going to European Union, as they had
indicated, and this will not be the first. It will just be the
start of this, and that is my concern on this.
Mr. LaMalfa. What does the loss of that customer actually
mean to an American consumer, do you think?
Mr. Durkin. The loss of that is, obviously, millions of
dollars in product that we were able to come back. But now what
is going to happen, from an American consumer standpoint, it is
going to increase supply in the United States, per se, but it
is going to drive pricing down to--make it very volatile, and
what you are going to see is actually lower milk prices for the
dairy farmer. That is also our concern, because the big part of
growth for dairy farmers is actually going to be exports.
Mr. LaMalfa. So, the dairy farmer won't be around very long
at that rate?
Mr. Durkin. It is a concern on our end for the viability of
the dairy farmers.
Mr. LaMalfa. When we are talking about the issues at the
ports, once again, you mentioned earlier that the costs of a
freight train I think was $5,500. Just to use that container to
fill with product, but, things that are out of your control,
the detention and demurrage fee, you said was up to $20,000,
right?
Mr. Durkin. That is correct.
Mr. LaMalfa. And that is something you don't control,
right?
Mr. Durkin. That is out of our control.
Mr. LaMalfa. Is that something you even anticipate until it
happens?
Mr. Durkin. We cannot--you--until it rolls, and you get the
actual invoice, you don't know that you are actually incurring
those charges, and we have actually had to hire temporary
people to actually go and research those charges to try to go
back to the carriers to try to get rid of that, but it has been
a challenge.
Mr. LaMalfa. This is a lot like surprise medical billing,
you get a surprise bill on your demurrage.
Mr. Durkin. That is a good analogy.
Mr. LaMalfa. Yes. Okay. Do you ever feel like it is your
fault for that, or is it just--because it is more out of your
hands with the shipping, and the loading, and all that, isn't
it?
Mr. Durkin. Absolutely not our fault, because we have the
goods on time, at the port, ready to go. As we talked about,
there are challenges on getting containers, as well as chassis,
there, but we have worked very hard to be able to do that.
Mr. LaMalfa. You mentioned too that you--was it 70 percent
of ships leave the U.S. with empty containers, or in some cases
no containers, because they have left them on the dock because
they are in a hurry to get back?
Mr. Durkin. Correct.
Mr. LaMalfa. Has the 24/7 port order helped to change that
situation any?
Mr. Durkin. The 24/7 port order was a suggestion for the
ports to work towards that.
Mr. LaMalfa. Suggestion?
Mr. Durkin. Suggested.
Mr. LaMalfa. So, it is not in place yet?
Mr. Durkin. Correct. It is not in place yet. And there--I
think the reality of this is--I know they have a union
negotiation--the--labor negotiations coming up in the
springtime, and they will have to get--probably work through
that. They will have to hire people, and obviously train
people. In our mind, this is 6 to 12 months out at best.
The Chairman. The gentleman's time has----
Mr. LaMalfa. My time is out, but I would hope the panel, in
other questions, would you emphasize what things we could be
fixing right now to get results right now in other questions?
Thank you.
Mr. Durkin. Yes.
The Chairman. Yes. And if you could provide those in
writing back to him, we would appreciate it. Thank you. And now
the gentlelady from Louisiana, Ms. Letlow, is recognized for 5
minutes.
[The information referred to is located on p. 188.]
Ms. Letlow. Thank you, Mr. Chairman, and thank you to the
witnesses for your time and testimony here today to discuss the
important issues our agriculture industry is facing in the food
supply chain. As I travel throughout the 5th District and the
state, I continue to hear the many concerns of our farmers,
ranchers, and agriculture retailers. A common theme, one that
has also been highlighted throughout this hearing, is the
ongoing and constraining labor shortage, not only with domestic
workers, but within the H-2A seasonal workforce as well.
Specifically, one crawfish peeling plant in Louisiana applied
for 190 H-2B workers, but were ultimately denied because the
cap was met within the first few days of implementing the 6
month application period.
While this not an unknown circumstance in recent years, the
shortage of seasonal workers for agriculture processing is
catastrophic for our farmers, that rely on these operations to
process their perishable harvested crops. Compounding this
issue, if our employers can't find domestic workers to fill
jobs, then we need these seasonal workforce programs to work
for our agriculture industry in a sufficient and efficient
manner.
In addition to labor, it is also essential that our farmers
are equipped with the tools and machinery necessary to have a
successful planting season and harvest. From fertilizers to
herbicides, as well as parts for farm equipment, the farming
community has experienced an increase in prices, delays on
delivery, and lack of availability. All this to say we are not
just looking at one impactful challenge. While these supply
chain issues affect our farmers, they also affect the consumers
and the greater U.S. economy. At the end of the day, this is a
national security issue, and one we should not take lightly.
I have heard from many growers in my district who are
troubled by shortages of major herbicides used on tens of
millions of acres. Several of these chemicals have seen prices
nearly double in recent months. Many are also concerned with
reports that the U.S. Environmental Protection Agency is
considering a label change ahead of the next growing seasons
that could pull the rug right out from under farmers. If
growers order seed and chemicals expecting certain use
conditions, and because of EPA label changes, now have an
entirely different product registration to work with, it might
not meet their needs. Many could have to entirely switch to new
seed and chemical varieties.
Mr. Wells, from the retailer perspective, how is the
herbicide and seed market currently, and what impact might it
have if EPA does make a significant label change ahead of the
2022 growing season?
Mr. Wells. Yes, I would characterize the herbicide industry
specifically with a couple of key actives, glyphosate and
glufosinate, as being very disrupted right now. A lot of that
production, as has been discussed, comes from China. We have
some domestic production, actually, in Louisiana, but those
farm plans are being made today, and any disruption--we sell a
lot of herbicide and seed systems, and so you buy the seeds,
the herbicide is used along with it, and so disruptions on one
side of the supply chain directly impact the other side of the
supply chain. One of our concerns is if there is a disruption
from an EPA ruling of some type that takes a tool away from us,
is there another tool that is effective against the weeds, or
whatever we are trying to control with the first.
Ms. Letlow. Thank you so much, Mr. Wells. Mr. Chairman, I
yield back.
The Chairman. Thank you very much. And now we have reached
the conclusion of this hearing. I can't--is there one other? I
am sorry. The gentlelady from Florida.
Mrs. Cammack. Forgive me, Mr. Chairman.
The Chairman. My deepest apologies to you, Mrs. Cammack.
You are now recognized for 5 minutes. Thank you.
Mrs. Cammack. Thank you. Thank you, Mr. Chairman, and thank
you to all the witnesses for appearing here today for this most
important topic. I am a little shocked that, 11 months in, we
have been dealing with these issues, and we are just now
getting to them, but, nevertheless, I am very excited to have
these conversations, so I am going to jump right in.
Mr. Ferrara, your testimony speaks to the government
helping your member stores in attracting talent. As you know,
there are a myriad of workforce development programs in
existence, including those that help very specific populations,
i.e., SNAP recipients, homeless veterans, et cetera. If you
held the pen to recalibrate these programs, how would you go
about doing so?
Mr. Ferrara. Congresswoman, we actually just held a seminar
with some of our members through our foundation to attract
folks with disabilities into our industry, and it was very well
attended. I think the most important thing is we need to give
our grocers, and our wholesale distributors as well, a lot of
tools in the toolbox, because every community is different, and
their needs are different. And so, to make sure that we have
access to as many of these different programs and resources,
and that they are easy to use and easy to implement, I think
that is another thing that is very important. I think that can
go a long way to making a dent in the challenges we are facing
today.
Mrs. Cammack. I appreciate that, and we are very excited to
work on ways that we can put more tools in the toolbox. And,
throughout the year I have put forward measures to move funding
away from the more handout-based SNAP programs and towards
workforce development programs, however, what we have seen with
the Majority, and this Administration--and they have made it
very abundantly clear, that its policy towards SNAP--recently
that was highlighted by the fly-by-night Thrifty Food Plan
update, with no data backing, that they were perfectly content
with paying Americans to stay home, and, quite frankly, that is
very frustrating, disincentivizing Americans from working. I
was called cruel and heartless in this Committee for suggesting
that we work to find ways to mobilize, and incentivize, and
encourage Americans to get back to work, and that has been very
frustrating, especially when we have so many that are begging
for help and ways that we can get people back on their feet.
So, I am going to shift a little bit here, and hit
something that is very close to home for me. Mr. Wells, you
mentioned in your testimony the need for free and fair trade of
agricultural products, equipment, crop inputs, that are
essential to supply chain resiliency. I share your concern here
greatly, because most recently the International Trade
Commission had considered restricting the import of urea
ammonium nitrate solutions, which is a critical input for many
of our producers. Now, what would the impact be if the
International Trade Commission, under this Administration, bans
the import of these nitrate solutions, or other imported
inputs? Can our domestic production under this Administration,
with the increased red tape and regulatory environment,
realistically pick up the shortfall in a way that does not
impact our producers and consumers on either end of the supply
chain?
Mr. Wells. Yes. Well, obviously I wouldn't want to
speculate regarding the ongoing investigation I think that was
just filed not long ago. I am doubtful there will be a ban on
the product, perhaps duties. We have had one other situation
come through.
Currently U.S. producers, they have really upgraded their
capacity over the last decade. There has been significant
investment in the nitrogen space. It all depends on what
products they want to produce in what ratios, but technically
there is enough production to meet the U.S. UAN demand, the
urea ammonium nitrate demand. I think the biggest concern of
the retailers that I talk to is the ability to get the products
shipped where they need to be, and particularly on the coasts,
the West Coast and East Coast, and what the cost of doing so
might be.
The sense is it is probably less costly to come from
offshore destinations. Time will tell, we will see, but I think
the big concern, again, is just the shipping conditions of
getting the product in the right place at the right time.
Mrs. Cammack. Well, I appreciate that, and we will be
continuing to monitor this, and we do have great concerns about
the regulatory environment, and how that is going to impact
domestic production. And obviously, this is an active
investigation.
Before my time expires, I do want to associate myself with
Representative Fischbach's comments. Mr. Cinco, you had made
some statements about high sugar prices, et cetera, and I would
just like to say I need to emphasize the importance of a
domestic production of our sugar industry. It is critical. We
cannot rely on foreign imports, and so I would like to
associate myself with Representative Fischbach's comments. And,
Mr. Chairman, with that, I yield back.
The Chairman. Thank you, Mrs. Cammack. And now, this
reaches the end of our discussion here. The points that you all
have made have been illuminating, and it has opened our eyes to
much of what we were only dimly aware getting into this. But we
have to have two trains running here, gentlemen, and I think
that that would be the conclusion of what we have heard. Two
trains running, we need. We need a long train running, and we
need a short train running. We can discuss the recruitment,
working with the 18 year olds, getting young people involved,
long-term. What we have to be concerned about now, though,
gentlemen, is how and where we can get commercial licensed
drivers in the trucks now.
And so, in my concluding statement, I want to ask this
question to you. How can we do that? Now, I had an uncle who
was a truck driver, and I can tell you that truck drivers are
very unique individuals. It takes a special kind of person to
do this task, but they are like a brotherhood, a fraternity,
and I want to ask--perhaps Mr. Samson, I think you are with the
trucking, is it possible that we can work with the Teamsters?
We have to bring--the Teamsters are the unions for the truck
drivers. What role is there, if there are truck drivers out
there already with the license, that perhaps are in between
jobs, or they left, but now that we have this crisis here--and
let us call it what it is. I thought 15,000, but you have
informed me 80,000 commercial drivers short. We have to respond
to this now.
What about our military? There are veterans who have
experience with long haulers. My Lord, if you know what our
military and our soldiers do, they have the talent, they have
the experience of driving these huge vehicles, hydraulics, 18-
wheelers, that move tanks and artilleries on the battlefield.
The other thing is so many of our young people find that they
are accustomed to the automatic transmission. Man, when you get
into truck driving, it takes a special kind of training. The
gear shifting, the movements. So, is there a way we can reach
out to veterans' organizations, find individuals that may be
able to help us in the short-term? This is an immediate crisis.
Finally, we do without a lot of things, but, gentlemen, we
cannot do without food. And if there is anything that we never
need a shortage of in supplying to the American people, it is
food. So, tell me, is there a way we can reach out, involve our
military, involve our Teamsters, who know drivers, who may have
left, can assist us in locating them. We need immediacy here.
This is the way we make sure that we never have a food
shortage.
And then we have to do the recruiting. We have the young
people coming in, but we need drivers now. Can you assist us
here with coming up with a way? We have the Labor Department,
we have Federal, we have the Congress of the United States in
our hands, where we can appropriate necessary emergency money
to use as an enticement, as a reward, as a bonus for those who
may come out of retirement, who are young, but taken early. Our
Teamsters know who these people are. I work with Teamsters. It
is a brotherhood, and they call it that. They could be helpful.
Our veterans, who fought in the wars, they would be helpful.
There are people out there who will come and help us in our
moment of need. We need to identify these sources, and put us
here in Congress to work, to provide whatever you need to get
these commercial licensed drivers into these trucks so we will
never face a food shortage in this country. And make sure we
are capable of assisting, so that there is never a food
shortage anywhere in the world. Food is our most important
industry. I say that all the time, because there are a lot of
things, as I said, we can deal with, but we can't deal without
food. You talk about pressures, you talk about turmoil, that
would bring it. So, we have put our Paul Revere hats on here
today, we have sounded the alarm.
Before I close, could you respond to that? Have any motions
been made to that? I can assist you with that. I worked with
the unions, the Teamsters. They are ready to work with us. I
have worked with veterans' organizations over the years. They
would be ready to help us. They have the experience. Many of
them already have the commercial driver's license. What can we
do to engage them to come help their nation at a time where we
need help the most?
Mr. Samson. And that is extraordinarily important, and I
think we need to look at all options, like you said, I mean,
all options on the table. From a military perspective, we have
been engaged, understanding that they have that background of
the large machinery, trying to streamline their ability to get
into the industry. And I believe we have been successful at
that, but there is a lot more that can be done. And I think, as
you mentioned, all options are on the table, crisis mode, to be
able to go out and recruit and bring those in from a diverse
array of different areas around the U.S., and internationally,
but it is extraordinarily important. It is something that we
focus on, on a daily basis and realize the importance of it.
The Chairman. And have you been in touch with the
Teamsters?
Mr. Samson. I believe we have, yes, and we have members
that work through the union side as well, and so----
The Chairman. Good.
Mr. Samson.--correct.
The Chairman. Good. Well, please, if there is anything that
this Committee, and us here in Congress, can do to help your
forward progress with getting a hold of people who can come and
help us now, please call on me to help you, call on our
Committee, and the Congress of the United States. We cannot, we
must not, and we will not ever have a food shortage in our
nation. All we have to do is go to work and prepare for the
storm before the hurricane is raging.
With that, under the Rules of the Committee, the record of
today's hearing will remain open for 10 calendar days to
receive additional material and supplementary written responses
from the witnesses to any question posed by a Member. Thank
you, God bless you, this hearing is adjourned.
[Whereupon, at 2:09 p.m., the Committee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Letters by Hon. David Scott, a Representative in Congress
from Georgia
Letter 1
on behalf of matthew ott, president and chief executive officer, global
cold chain alliance
November 3, 2021
Chairman Scott, Ranking Member Thompson, and Members of the
Committee:
Thank you for holding a hearing on challenges facing the nation's
food supply chain. I am submitting this testimony on behalf of GCCA's
members, designated essential businesses, who are working tirelessly to
ensure that consumers have reliable access to safe, high-quality food
across the United States and globally. GCCA represents all major
sectors of the cold chain and unites partners to be innovative leaders
in the third-party temperature-controlled logistics industry. The cold
chain refers to the temperature management of perishable products to
maintain quality and safety from the point of slaughter or harvest
through the distribution chain to the final consumer. GCCA is committed
to forging a universally strong cold chain where every product retains
quality and safety through each link. Through its four Core Partners,
GCCA represents more than 1,100 companies in 85 countries who serve the
food industry by providing third-party, temperature-controlled supply
chain services.
The cold chain serves as a crucial link in the supply chain, as our
members ensure the food safety, security, and reliable access to over
213 billion pounds of perishable food annually. While parts of the
country shut down, GCCA and our members realized the vital role our
industry plays for the integrity of the food supply chain and remained
open and operating throughout the pandemic.
GCCA appreciates the opportunity to provide testimony on challenges
and opportunities for strengthening the food supply chain for the
future. GCCA has identified major issues and trends currently impacting
the food supply chain and offers recommendations including:
Support for workforce development initiatives and policies
to address labor challenges across the food supply chain.
Regulatory flexibility to address current and future supply
chain disruptions and shifts in consumer patterns.
Improved FSIS policies and capacity including increased FSIS
personnel, identifying alternative methods for achieving
veterinary signatures and revision of the ``50 mile'' rule for
import establishments.
Increased support for continued development and
implementation of supply chain technology, including the
strengthening of cyber security across the food industry.
Utilization of COVID relief programs and funds to assist
food supply chain companies in mitigating pandemic related
expenses and strengthen their operations post-pandemic.
Below are additional details on the key issues our industry has
identified for consideration:
Labor Constraints
The pandemic has placed strains on the labor market, causing major
challenges to our members. Our members have faced a labor shortage
during this pandemic making it difficult to meet growing demands. To
stay operational, our members have been paying overtime and premium pay
rates to those who are willing to work and in addition many have hired
outside labor, which often comes with a hefty price tag.
Even as lockdowns ease, finding labor has continued to be a
challenge. While facilities have increased the starting wages and
adjusted the pay of experienced workers along with the minimums
increase, many people are choosing not to work in cold environments,
even for more money and benefits, over unemployment or working in
unskilled positions. This is driving many companies to look at
automation systems, which require automation technicians and additional
specialty training in fields where there is not yet a developed pool of
workers.
In addition, GCCA is concerned about the OSHA Emergency Temporary
Standard (ETS) requiring COVID vaccinations and testing for companies
with 100 or more employees and the potential impact it could have on
the food supply chain. Given the already existing labor challenges our
industry faces these new requirements under the ETS would place
additional strains on the supply chain. The potential of labor
shortages in our industry, and for our members' partners across the
food industry, could dramatically increase as employees may exit to
avoid these new requirements. To alleviate these concerns, we encourage
the Administration and Congress to explore the opportunity to provide
an exemption for those companies within the food supply chain to ensure
our country and the world has reliable access to safe and high-quality
food.
Supply Chain Capacity and Infrastructure
The food supply chain is interconnected and disruptions in one part
of the chain have ripple effects upstream and downstream. It is
important that the infrastructure of our ports for both imports and
exports be modernized and automated to prevent the slow down or
stoppage of commerce. Supply chain infrastructure for cold storage
capacity is reliant on planned cycles of food producers harvesting
produce and proteins. Supply chain disruptions continue to cause
challenges to the efficient flow of import and export containers. In
addition to negatively impacting the efficient movement of food through
the chain, these disruptions to container availability and flow are
also resulting in significant per diem, detention and demurrage charges
outside of the control of our members. The disruption in flow of
containers is also leading to added fuel and energy costs to keep
refrigerated containers at the proper temperature to preserve food
safety and quality while our members wait for the supply chain to move.
In some cases, our members have been forced to use refrigerated
trailers to be used for storage, as opposed to transportation, to hold
product destined for export that has not been able to move do to port
congestion. Supply chain disruptions have also caused increased costs
related to critical materials and inputs and led to much longer lead
times in procurement.
The food industry continues to experience significant challenges at
port terminals. One of the major issues is a lack of land used to
return empty containers. Currently, imports are exceeding exports on
the west coast and in some cases, containers are returning to Asia
empty, even though there is a large quantity of U.S. product destined
for export that needs access to the containers. Predictable and
consistent access to refrigerated containers will be critical to
ensuring an efficient food supply chain in the future.
There are also challenges regarding the capacity for refrigerated
transportation equipment. Current build times for key equipment are
backed up to next year and prices are increasing due to raw material
sourcing, component delays and current [COVID] restrictions. Trailer
manufacturers are having to slow their lines down due to lack of
availability of components needed to build the units. Raw material is
not stable in pricing, so it is difficult for manufacturers to provide
pricing to their customers. Demand is high and the lines are closed out
for the entire 2021 year. These issues will continue to place a strain
on the food supply chain.
It is important to note that industry cannot build a supply chain
specifically designed to handle a pandemic, as a significant percentage
of the cold chain capacity would be idle during normal times. Instead,
we should look for ways to build flexibility and collaboration within
supply chain to meet potential disruptions in the future. Both
government and industry will need to work together to build flexibility
and cooperation to fill those gaps in a state of emergency.
Shifts in Consumer Buying Patterns
Challenges with recent food supply disruptions presented by the
pandemic were not due to a shortage of food in the U.S. Rather,
disruptions were largely caused by consumers shifting how and where
they were purchasing food.
Grocery (retail) and food service (restaurants) are the two main
channels by which consumers access food. Both channels have very
different requirements as to size of packaging, preparation, and
distribution supply chain channels. According to a National Restaurant
Association (NRA) report in January 2020, 51 percent of the U.S.
Consumer dollar spend was at restaurants in 2019. At the beginning of
the pandemic, the U.S. experienced what seemed like shortages in the
grocery stores for two main reasons (1) abrupt shifting consumer buying
patterns (2) surge buying.
In a matter of days, the U.S. consumer shifted from purchasing 50
percent of their food from restaurants to nearly 100 percent from
grocery as the nation sheltered in place. Restaurant and grocery have
two different channels (customer/vendor relationships) that do not
typically crossover.
One of the challenges related to shifting consumer patterns is that
current packaging practices are very different between food service and
retail. For example, food processors package specifically for
restaurants in much larger quantities such as 20 pound packages, while
packages for retail are usually much smaller, such as 2 pound packages.
In many cases, product in 20 lbs and 50 lbs packages could not be used
for retail and sat idle in cold storage facilities. This created the
illusion of food shortages. Even today, some cold storage facilities
have restaurant product that is still sitting in their warehouses.
We appreciate USDA and FDA providing regulatory flexibility to
facilitate some shifting of product from food service to retail during
the pandemic. We recognize there are some regulatory and even private-
sector limitations to how product can be redirected. However, the
future ability to redirect food products between channels will be
imperative to mitigate the impacts of shocks to the supply chain.
Development of allowances in standards/regulations for low-risk
food items to be converted from bulk to retail packaging during
emergency situations could limit shortages, reducing waste and lost
product. This could be done by building packaging option capacities at
the food processor that transforms the food to have the capability to
shift restaurant (bulk) packaging to consumer packaging so that they
could shift to the different channels Grocery/Restaurant if needed. The
issue could also be addressed at the end of the supply chain, where
distribution centers or grocery stores could breakdown restaurant
quantity packaging to consumer packaging.
Another challenge to the food supply chain was surge panic buying.
It is important that U.S. consumers have confidence in the food supply
chain and that product will reliably be on the shelves. Surge buying
creates a bubble that takes time for food production and distribution
to catch up. The problem is compounded as once shelves are bare, the
consumers continue to surge buy when available which creates additional
bubbles. Better end-to-end supply chain visibility would help provide
stakeholders, government, and consumers the confidence in the cold
chain distribution.
The shift in consumer patterns also impacts refrigerated
transportation. Within cold chain transportation, equipment in
distribution to the grocery and food service is very different in
specifications and design. The workhorse of grocery is a 48 to 53
refrigerated trailer, as opposed to food service distributors that may
require a 28 or 36 refrigerated multi-temperature trailer to
distribute multiple stops in smaller areas. When these two channel
competitors attempt to work together, the smaller refrigerated trailers
due to their capacity make them harder to utilize in the grocery
business. These two very different distribution channel segments will
need to continue to communicate and work with one another to help
ensure efficient asset utilization in the future.
Food Supply Chain Technology
Further advancements in supply chain technology and logistics need
to be explored and implemented. Due to sourcing efficiencies that have
been gained and supply chains getting longer, supply chains have become
more vulnerable to disruptions. The lengthy and complex networks of
contemporary supply chains make them difficult to regulate and manage.
This is compounded with a linear disconnected supply chain of one up,
one back where data resides in individual company systems that cannot
be shared in the supply chain ecosystem. Visibility will be key to
building a more resilient cold chain.
Digitization can be an important step to increasing the resiliency
of the supply chain. The process would include marking, digitizing and
utilizing data at the product level across the supply chain. The use of
IoT markers, like RFID can automate the process without physically
engaging the product, as well as provide economic benefits and improve
visibility to the supply chain. This visibility would allow supply
chain stakeholders to provide real-time inventory data, understanding
when and where to surge or transform a product and provide consumer
confidence in the supply chain to reduce future panic surge buying. In
addition, the ability to scan and retrieve documents can remove
friction along the supply chain.
With the increased reliance on technology across the food supply
chain, the threats to cyber security become even more challenging. GCCA
members ranging from single facility companies to companies with
locations worldwide have been targeted with cyber-attacks. Those
attacks, coupled with high profile incidents involving the meat and oil
industries highlight the risks to the supply chain. GCCA encourages
Congress and the Administration to work with industry to develop
additional resources to assist the food industry in strengthening cyber
security.
Limitations of USDA-FSIS Policies and Staffing
Staffing levels of FSIS personnel represent another capacity
challenge for the cold chain. We greatly appreciate the dedication and
commitment of FSIS employees during the pandemic to maintain inspection
operations. However, even before the pandemic, our members have
reported that an increase in FSIS inspection capacity would enable
increasing in exports and imports of meat and poultry.
We urge the Department examine the possibility of increasing the
number of FSIS inspectors who can support exports and imports across
the country. We also recommend that inspectors be authorized to handle
both export and import inspections. The current lack of inspection
capacity is leading to inefficiencies in the supply chain. For example,
some members have given up attempting to unload and inspect containers
in the same day. As a result, they unload the container, palletize the
cargo and put it away in the freezer to be presented for inspection at
a later time when an inspector is available. This adds significant
costs and inefficiencies to the supply chain.
We strongly recommend that FSIS reexamine the current ``50 mile''
rule that limits import inspections to facilities within 50 miles of a
port of entry. This policy limits the number of available facilities to
move product for inspection and creates significant bottlenecks at the
ports moving cargo in and out.
Eliminating or modifying this policy would increase food supply
chain capacity and throughput, thus strengthening the resiliency of the
supply chain and helping alleviate congestion.
The availability of Federal veterinarians to sign export documents
is another limiting factor for supply chain efficiency. While GCCA
appreciates FSIS efforts to facilitate greater usage of electronic
means for processing export documents, some countries maintain the
requirement for wet signatures by veterinarians. In some cases, members
drive over 150 miles each way to secure signatures, pay costly couriers
to transport documents for signature, or utilize overnight shipping
services. The current system places a strain on both industry and
agency resources, creates delays, and causes costly inefficiencies.
GCCA urges FSIS to work with countries to eliminate/modify wet
veterinarian signature requirements and examine alternative methods for
meeting signature requirements to improve the efficiency of exports
through the food supply chain.
USDA Pandemic Relief Program Opportunities
GCCA members experienced, and continue to experience, significant
added expenses as they work to maintain the viability of the food
supply chain. GCCA has been encouraged by the potential funding
opportunities that USDA has announced in the forms of loans and grants
to food logistics companies to help strengthen the food supply chain
for the future. However, additional details and implementation of the
programs have yet to be released. The financial impacts of the pandemic
have placed major constraints on the ability of our members to invest
in facility improvements and capacity expansions. Resources were
shifted away from capital budgets to address the extraordinary expenses
incurred responding to the pandemic. Loans and grants should be made
available as soon as possible to provide viable capital options so
these companies can strengthen their infrastructure to meet future
supply chain needs.
Thank you for the opportunity to provide testimony on behalf of
GCCA and its members across the cold chain. The food supply chain has
shown great resiliency throughout the pandemic, thanks to the efforts
of essential workers. However, there are opportunities to address
challenges and strengthen the food supply chain for the future. We
stand ready to support Congress as it reviews the food supply chain and
considers new policies, especially as you begin to craft the next farm
bill. Please let us know how we can be a resource and support these
important efforts.
Sincerely,
Matthew Ott, CAE, CMP President & CEO.
Letter 2
on behalf of graham owens, co-chair, government affairs committee,
national industrial hemp council; president, delta agriculture
Hon. David Scott,
Chairman,
Committee on Agriculture,
U.S. House of Representatives,
Washington, D.C.;
Hon. Glenn Thompson,
Ranking Minority Member,
Committee on Agriculture,
U.S. House of Representatives,
Washington, D.C.
Dear Chairman Scott and Ranking Member Thompson,
On behalf of the National Industrial Hemp Council (NIHC)--the only
Washington, D.C.-based trade association in the hemp industry with a
mission to protect consumer safety, the consumer's right to know and to
create a hemp economy that works for everyone--I respectfully submit
these comments for the record for the November 3, 2021, hearing
entitled ``The Immediate Challenges to our Nation's Food Supply
Chain.''
Producers of industrial hemp are dedicated to utilizing hemp and
its natural environmental qualities to employ sustainable farming
methods that will enable the United States to produce plant-based foods
and animal feeds for generations to come. Regenerative agricultural
practices and hemp's natural soil-building and carbon-sequestering
properties will provide new tools for American Agriculture to deliver
food for a growing population and bring stability to the Food Supply
Chain in the United States. To this end, we applaud the Committee for
holding this hearing and your ongoing leadership in ensuring all
Americans have access to the food they need without compromising the
health of American farmland.
One particular issue--and solution--we wish to draw this
Committee's attention to is the ongoing global feed and grain shortage,
which has been largely caused by worldwide drought. Congress has the
opportunity to alleviate this situation through the utilization of our
country's increasing supply of hemp grain and fiber (hereinafter
``hemp''). As outlined in detail below and in Appendix A, we urge
Congress to work with the appropriate regulators to authorize
industrial hemp for use as a feed ingredient for animals not intended
for human consumption or the creation of animal byproducts for human
consumption--especially in the short-term to address the global feed
shortage.\1\ We further urge Congress to designate funding to better
enable hemp producers and researchers to study the effects of hemp-
based animal feed on livestock and animal products intended for human
consumption, which, under this proposal, would still require approval
by the U.S. Food & Drug Administration's Center for Veterinary Medicine
(FDA-CVM) to ensure all safety standards are met.
---------------------------------------------------------------------------
\1\ Nat'l Feed Consortium, Hemp Animal Feed Proposal Overview
(2021) [Appendix A].
---------------------------------------------------------------------------
Doing so would not only provide much needed relief to American
farmers struggling to feed their livestock, but would also create jobs,
support American farmers, and provide consumers access to healthy,
affordable food.
A. Congress Must Act Now to Address Global Animal Feed Shortage
While Americans have only recently started to notice the increased
prices of basic food staples like eggs, poultry, meat and milk, the
writing has been on the wall for a long time among our nation's food
suppliers. The winter storm that hit Texas this year wiped out about
$600 million in food, not to mention $300 million in loss of
livestock.\2\ All of this is occurring while many western states and
regions--including west Texas--are engulfed in extreme or exceptional
drought.\3\ These issues have only been exacerbated by the ongoing
global pandemic, which itself has been a stress test for global food
supply chains. These and other factors have collectively wreaked havoc
on numerous supply chains and the effects will likely reverberate for
years to come.
---------------------------------------------------------------------------
\2\ See, e.g., Hope Ngo, Food Prices Will Continue To Rise in 2021.
Here's Why, Mashed (Mar. 5, 2021), https://www.mashed.com/349212/food-
prices-will-continue-to-rise-in-2021-heres-why/.
Editor's note: references annotated with are retained in
Committee file.
\3\ See Danny Dougherty & Peter Santilli, Drought's Toll on U.S.
Agriculture Points to Even Higher Food Prices, Wall Street Journal
(July 1, 2021), https://www.wsj.com/articles/droughts-toll-on-u-s-
agriculture-points-to-even-higher-food-prices-11625137201.
---------------------------------------------------------------------------
Few industries are feeling the impact more than the grain market,
which is critical to maintaining the livestock Americans depend upon to
keep affordable food on their tables. As highlighted recently by the
New York Times, U.S. ranchers simply ``can't grow enough feed for their
cattle, so they're selling off the animals before they starve.'' \4\
Simply put, the drought and resulting animal feed shortage is costing
farmers their livelihoods, with ranchers that have spent their entire
lives or generations building their cattle herds to now suddenly be
forced to sell or cull herds because they simply don't have enough feed
to maintain them.
---------------------------------------------------------------------------
\4\ Henry Fountain, The Worst Thing I can Ever Remember: How
Drought Is Crushing Ranchers, N.Y. Times (Aug. 29, 2021) [Appendix B].
---------------------------------------------------------------------------
The issue is so dire that even the nation's largest animal protein
producers are struggling to find sufficient feed. In the effort to meet
demand, many American protein producers and livestock farmers are
importing vast quantities of grain. One leading poultry provider was
forced to secure more than 30,000 metric tons of Brazilian soybeans in
order to feed its livestock.\5\
---------------------------------------------------------------------------
\5\ See Fabiana Batista, Michael Hirtzer, & Isis Almeida, Soy
Buyers `Left With [Virtually] Nothing' in U.S. Turn to Brazil,
Bloomberg (May 20, 2021), https://www.bloomberg.com/news/articles/2021-
05-20/soy-buyers-left-with-virtually-nothing-in-u-s-turn-to-brazil.
---------------------------------------------------------------------------
B. Hemp Provides the Best Available Solution to Alleviating the
Hardships U.S. Farmers and Consumers Are Facing Due to the Feed
Shortage, While Greatly Benefiting the U.S. Economy and
Environment
Although the feed shortage is a global problem not unique to the
United States, our nation is exceptionally situated to be a leader in
solving the problem. And part of that solution can be found in the hemp
plant--which ironically enough was illegal to grow in the U.S. until
very recently. With a change in hemp's legal status should come a more
concerted effort to use hemp to address the global livestock feed
shortage.
It is projected that there will be 201 million pounds of excess
biomass in the supply chain prior to the 2021 planting season.\6\ Thus,
while the nation's farmers face a feed and grain shortage, there are
literally millions of pounds of hemp plant material available right now
to help feed cattle and other livestock.
---------------------------------------------------------------------------
\6\ Riley Rice, Growers in Wasco County navigate a young and
dynamic hemp industry, The Time-Journal (Aug. 30, 2021), https://
timesjournal1886.com/growers-in-wasco-county-navigate-a-young-and-
dynamic-hemp-industry/.
---------------------------------------------------------------------------
Hemp has all the nutritional traits of other grains used for animal
feed--and then some. To start, the FDA already evaluated and recognized
hemp seed oil, hemp hearts, and hemp protein powder as ``Generally
Recognized as Safe'' (GRAS) for human consumption.\7\ Not only is it
safe, but it is also one of the only complete plant proteins on the
planet and is richer in nutrients than many compounds already consumed
by our livestock, which is why you'll find hemp-based nutritional
supplements and food products for human consumption in just about any
grocery store.\8\ Hemp feed is high in protein, contains high amounts
of omega-3 and omega-6 fatty acids, and can be made into different
forms of animal feed, including seed, oil, cake, meal, silage, and
roughage. Several studies show that animals' health improved when fed
hemp-based diets.\9\
---------------------------------------------------------------------------
\7\ See U.S. Food & Drug Admin, FDA Responds to Three GRAS Notices
for Hemp Seed-Derived Ingredients for Use in Human Food (Dec. 20,
2018), https://www.fda.gov/food/cfsan-constituent-updates/fda-responds-
three-gras-notices-hemp-seed-derived-ingredients-use-human-food.
\8\ See Cathleen Crichton-Stuart, Health Benefits of hemp seeds,
Medical News Today (Sept. 11, 2018), https://www.medicalnewstoday.com/
articles/323037#_noHeaderPrefixedContent.
\9\ See, e.g., L. Karlsson, M. Finell, & K. Martinsson, Effects of
Increasing Amounts of Hempseed Cake in the Diet of Dairy Cows on the
Production and Composition of Milk, Animal 4:11, pp 1854-1860 (2010),
https://doi.org/10.1017/S1751731110001254.
---------------------------------------------------------------------------
Last, the hemp plant is uniquely situated to withstand the very
droughts that created the grain and feed shortage now endangering our
nation's food supply chain. Hemp needs little water, and therefore
requires far less irrigation than corn, wheat, or soybeans.\10\ The
crop needs half as much water as cotton, and significantly less than
almonds.
---------------------------------------------------------------------------
\10\ See David Silverberg, New heights but no high--why hemp sales
are soaring, BBC (Mar. 7, 2019), https://www.bbc.com/news/business-
47400789.
---------------------------------------------------------------------------
The industrial hemp industry stands ready to work with Congress,
the U.S. Department of Agriculture, the Food and Drug Administration,
and all relevant stakeholders to ensure that U.S.-grown hemp can safely
and effectively help address the global feed shortage and provide much
needed relief to U.S. meat producers. We all share the Committee's goal
of ensuring that all Americans have access to sufficient food to meet
their nutritional needs, and that consumers can trust that all hemp-
derived animal feed is safe and nutritious.
Sincerely,
Graham Owens,
Co-Chair, NIHC Government Affairs Committee;
President, Delta Agriculture.
CC: Members of the U.S. House of Representatives' Committee on
Agriculture.
[Appendix A]
[Hemp Animal Feed Proposal Overview]
The National Feed Consortium (NFC) is a collection of businesses
and thought leaders working together in a post-partisan fashion to
advance policies that address the global animal feed shortage. NFC
advocates for authorizing industrial hemp grain and fiber (hereinafter
``hemp'') for use as ingredients in animal feed and bedding in the
United States. Hemp provides the best available solution to alleviating
the hardships U.S. farmers and consumers are facing due to the feed
shortage, while greatly benefiting the U.S. economy and environment.
Overview
NFC proposes policymakers start authorizing hemp for use as
feed ingredients for animals not intended for human consumption
(e.g., pets; specialty pets; exotic pets; ornamental fish;
horses; livestock not intended for human consumption). Feed for
livestock intended for human consumption would continue to
require FDA-CVM approval to ensure all safety standards are
met.
The global feed shortage is creating unprecedented
competition for feed sources. Animal feed is becoming so
expensive it's upending global trade flows. Absent action from
policymakers, consumers will feel it soon in increased prices.
This proposal furthers the development of feed regulations
and does not avoid them. Authorizing hemp as feed for non-
production animals will enable U.S. regulators and industry
stakeholders the opportunity to fully study its effects, fund
additional research and develop long-term regulations based on
sound science.
Why Hemp?
2020 New Frontier DataDSource New
Frontier Data.
Hemp is a superfood! Hemp has all the nutritional traits of
other grains used for animal feed and then some. It is richer
in nutrients than many compounds consumed by livestock. Hemp
feed is high in protein, contains high *
---------------------------------------------------------------------------
* Editor's note: the bulleted line is incomplete. It has been
reproduced herein as submitted.
Abundance of hemp in the United States. There are millions
of pounds of hemp grown over the past 2 years are bagged and
ready for sale.
What Are the Additional Benefits of Hemp As Animal Feed & Bedding?
Dual cost benefit. Use of domestic hemp for feed enables
U.S. farmers to directly support U.S. ranchers while keeping
food costs for consumers low.
Drought resistant. Hemp needs little water, and therefore
requires far less irrigation than corn, wheat or soybeans.
Increase U.S. competitiveness against global competitors.
China currently exports over 60% of the world's industrial
hemp. In a struggle to meet traditional feed demand, many
American operators are importing vast quantities of feed grain.
Dispelling Common Hemp Feed Myths
Hemp feed is not marijuana, cannabinoids, or even CBD. While
hemp has long been associated with its psychoactive cousin,
marijuana, industrial hemp has none of the psychoactive traits.
Under U.S. law, hemp cannot contain more than 0.3% THC (the
compound most associated with getting a person ``high'').
Animal feed comes from hemp grain and fiber and not from
cannabinoid or CBD hemp.
Yes, hemp has been found safe for consumption. The U.S. Food
& Drug Administration evaluated and recognized hemp seed oil,
hemp hearts, and protein powder as ``Generally Recognized as
Safe'' (GRAS) for human consumption.
[Appendix B]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[https://www.nytimes.com/2021/08/25/climate/drought-cattle.html]
`The Worst Thing I Can Ever Remember': How Drought Is Crushing Ranchers
North Dakotans can't grow enough feed for their cattle, so
they're selling off the animals before they starve.
A truckload of yearling steers from Tom and Kim Fettig's
ranch at the Kist Livestock Auction in Mandan, N.D., last
month.
By Henry Fountain *
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* https://www.nytimes.com/by/henry-fountain.
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Photographs by Benjamin Rasmussen
Published Aug. 25, 2021 Updated Aug. 29, 2021
Towner, N.D.--Darrell Rice stood in a field of corn he'd planted in
early June, to be harvested in the fall and chopped up to feed the
hundreds of cows and calves he raises in central North Dakota.
``It should be 6, 7, 8 tall,'' he said, looking down at the
stunted plants at his feet, their normally floppy leaves rolled tight
against their stalks to conserve water in the summer heat.
Like ranchers across the state, Mr. Rice is suffering through an
epic drought as bad or worse than anywhere else in this season of
extreme weather in the Western half of the country.
A lack of snow last winter and almost no spring rain have created
the driest conditions in generations. Ranchers are being forced to sell
off portions of herds they have built up for years, often at fire-sale
prices, to stay in business.
Some won't make it.
``It's a really bad situation,'' said Randy Weigel, a cattle buyer,
who said this drought may force some older ranchers to retire.
``They've worked all their lives to get their cow herd to where they
want, and now they don't have enough feed to feed them.''
Since December, in the weekly maps produced by the United States
Drought Monitor,\1\ all of North Dakota has been colored in shades of
yellow, orange and red, symbolizing various degrees of drought. And
since mid-May, McHenry County, where Mr. Rice ranches and farms, has
been squarely in the middle of a swath of the darkest red, denoting the
most extreme conditions.
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\1\ https://droughtmonitor.unl.edu/.
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The period from January 2020 to this June has been the driest 18
months in McHenry and 11 other counties in the state since modern
record keeping began 126 years ago, according to the National Oceanic
and Atmospheric Administration.
``I've been ranching for 47 years and then this year had to come
along,'' said John Marshall, who ranches with his son, Lane, not far
from Mr. Rice in this sprawling county where the county seat, Towner,
bills itself as the cattle capital of North Dakota. ``It's the worst
thing I can ever remember.''
Drought conditions that are affecting nearly half the land area of
the lower 48 states \2\ are helping send beef prices higher in
America's grocery stores. But ranchers here say they aren't seeing that
money--slaughterhouses and other middlemen are. If anything, the
ranchers said, they are losing money because they are getting less from
the forced sale of their animals.
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\2\ https://www.nytimes.com/2021/08/25/us/drought.html.
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The Marshalls have already sold about 100 cows and plan to sell at
least another 120, which would leave them with about \2/3\ of their
usual herd. ``Never had to do it before,'' Mr. Marshall said.
Mr. Rice's corn, which is stored as silage to feed his animals
later in the year, is so short that if he tried to harvest now it he
couldn't. ``It's unchoppable,'' he said.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Darrell Rice, in an oat field on his ranch outside Towner,
N.D., in late June, showed how high the crop would normally
have been.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Corn stalks, curled, stunted and without cobs because of
drought, on John and Lane Marshall's ranch.
If he gets some rain--a big if, as the forecast into the fall is
for continued heat and dryness--the corn may reach 6, or \1/2\ its
usual height. Even then he would be looking at a shortage of feed, and
would very likely have to have his cows weighed at the communal
ranchers' scale off Main Street in Towner and then sold to a buyer
elsewhere.
``If we don't get silage,'' he said, ``the cows are going to
town.''
Rachel Wald, who works for North Dakota State University advising
and supporting ranchers, said that livestock auction houses, called
sale barns, had been very busy this spring and summer. ``We've got
2,000 critters heading down the road each week'' in the county, she
said. By some estimates, half the cattle in the state may be gone by
fall.
For ranchers who have spent years building up the genetics of their
herd, that can mean a giant step backward. ``Every year we try to
better our breed,'' said Shelby Wallman, who with her husband, Daryl,
has been ranching for decades in Rhame, in the southwestern corner of
the state.
``It's a calling,'' she said. ``You spend your entire life with
these cattle. I can tell you, there's going to be tears.''
North Dakotans have seen drought many times before. One in 1988 was
particularly bad, although John Marshall and others who made it through
that year said the current drought is worse.
Ranchers point to the variable nature of the climate here--where a
dry year or 2 may easily be followed by a wet period--instead of
talking about climate change.\3\ Yet climate change is occurring in
North Dakota, as it is everywhere else.
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\3\ https://www.nytimes.com/2021/08/29/climate/climate-change-
hurricanes.html.
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``We're at the epicenter of a changing climate,'' said Adnan Akyuz,
the state's climatologist and a professor at North Dakota State
University. The state has warmed by 2.4 Fahrenheit (about 1.3
Celsius) over the past century, he said. That's one of the largest
increases in the United States.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Raking what little has grown on Shane Anderson's oat field
outside Towner. At summer's end, the field will have produced
less than half it would have in a normal year.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Rachel Wald of North Dakota State University tested levels of
sulfates and total dissolved solids concentration in a watering
hole on John Marshall's ranch.
North Dakota's climate is expected to become even more variable,
with more extreme rainfall and heat. And as elsewhere, droughts are
expected to grow in intensity and frequency.
Conditions are highly variable in large part because North Dakota
is so far from the oceans, which have a moderating effect on climate.
When the state doesn't get moisture from them, it relies on local
sources, including lakes, rivers and reservoirs, along with moist air
that funnels into the region in late spring and summer from the Gulf of
Mexico.
But that Gulf moisture did not arrive this year. And heat has dried
up many of the local water sources. The result is air that sucks all
the moisture it can from the soil and from plants.
Signs of drought-stressed vegetation can be seen across McHenry
County. Stunted silage corn like Mr. Rice's is called pineapple corn,
because the tight leaves make it look more like a pineapple plant.
Elsewhere, soybean plants have flipped their leaves over to reduce
photosynthesis and thus the need for water, giving them a paler green
appearance.
And in the Marshalls' pastures, grass that would normally be green
and reach the knee is brown and stubby.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Lane Marshall, speaking with his father, John, on their
ranch. ``It's stuff you don't want to do,'' the elder Mr.
Marshall said of selling off cattle.
Grazing on stubs of grass on the Marshall ranch.
The Marshalls rely on clean well water pumped into troughs for most
of their cattle. But they and other ranchers also use watering holes,
which collect snow runoff and rain. And as watering holes dry up,
nutrients and other compounds in the water become more concentrated,
which can sicken animals.
In one of the Marshalls' watering holes, the level had dropped by
several feet. Ms. Wald, from the university, tested for sulfates and
dissolved solids and told the Marshalls that the water was still good.
But she noticed something else.
``Lane, one of the things I'd watch out for here is actually blue-
green algae,'' she said. Amid the heat the organisms were flourishing
and could eventually release toxins that could harm cattle. ``If a
bloom occurs you have to move the animals out of here and find them a
new water source,'' Ms. Wald said.
Like other ranchers, the Marshalls have bought supplemental feed.
But with the drought sending feed prices higher, at some point it makes
more financial sense to sell animals.
That has kept auctioneers busy. At a recent sale at Kist Livestock
Auction in Mandan, just across the Missouri River from Bismarck,
ranchers in pickup trucks, trailers in tow, lined up to unload cattle
they couldn't afford to keep.
Tom Fettig and his wife, Kim, were there with 60 yearlings, about
half of a herd they were helping their son raise on the outskirts of
Bismarck. The animals had been bought in February with the goal of
fattening them until October, when they would be sold to a feedlot.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Tom Fettig looking over his family's steers before they went
up for auction at the Kist Livestock Auction in Mandan last
month.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Buyers and sellers at the Kist Livestock Auction on July 28.
The drought ruined those plans. ``We've only had them out on
pasture since June 1,'' Mr. Fettig said. ``And there's nothing left.''
Their hay crop has been abysmal as well. In a normal year they'd
end up with 800 to 900 bales. So far this year they have only 21.
Inside the semicircular auction ring, the Fettigs sat on a bench
and waited for their yearlings to come up for sale. They watched as a
parade of other animals entered and the auctioneer, Darin Horner,
rattled off prices in a droning hum. Weights and prices flashed on
screens above the auctioneer's head.
``There's a nice set of steers right off the prairie,'' Mr. Horner
announced as the Fettigs' animals crowded the ring in two groups of 30.
They sold for about $1,250 apiece--perhaps $150 a head less, Mr. Fettig
said, than if they'd been able to feed them all summer.
The Fettigs and John Marshall are fortunate in that their sons have
followed them in the ranching business. But Jerry Kist, a co-owner of
the auction barn, noted that older ranchers whose children have left
the land were the most vulnerable in this drought, as were younger
ranchers who don't have ranching parents they can rely on to help them
become established.
``You just don't want to see these guys folding and selling their
whole cow herd,'' Mr. Kist said.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Washing livestock in preparation for the North Dakota State
Fair in Minot last month.
Henry Fountain specializes in the science of climate change
and its impacts. He has been writing about science for The
Times for more than 20 years and has traveled to the Arctic and
Antarctica. @henryfountain Facebook \4\
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\4\ https://www.facebook.com/henryfountain.
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A version of this article appears in print on Aug. 26, 2021,
Section A, Page 1 of the New York edition with the headline: A
State So Dry, Ranchers Are Selling Cows Before They Starve.
Letter 3
on behalf of kevin scott, president, american soybean association
November 3, 2021
Hon. David Scott, Hon. Glenn Thompson,
Chairman, Ranking Minority Member,
Committee on Agriculture, Committee on Agriculture,
U.S. House of Representatives, U.S. House of Representatives,
Washington, D.C.; Washington, D.C.
Dear Chairman Scott and Ranking Member Thompson:
On behalf of the American Soybean Association (ASA), I write to
thank you for holding today's hearing on ``The Immediate Challenges to
our Nation's Food Supply Chain'' and welcome this opportunity to
provide the Agriculture Committee with background on how current supply
chain constraints are impacting our industry. ASA represents more than
500,000 U.S. soybean farmers on domestic and international policy
issues important to the soybean industry and has 26 affiliated state
associations representing 30 soybean-producing states.
From the COVID-19 pandemic to natural disasters, the past few years
have led to major disruptions to the soybean industry. As you know,
soybeans and all agricultural commodities rely on a multimodal network
to move product to market. As such, a strong supply chain built on
reliable infrastructure systems represents the largest competitive
advantage for American soybean farmers over our competitors in Brazil
and Argentina. Unfortunately, the recent supply chain challenges that
this hearing seeks to address related to transportation and
infrastructure, input supply, and labor continue to negatively impact
soybean growers and the agricultural industry as a whole; but we are
thankful that the soybean supply is not one of these challenges.
Currently, the largest supply chain constraint facing the
agriculture sector is an inadequate labor supply. While challenges
exist throughout the supply chain, long-term commercial truck driver
shortages have been compounded by COVID-19. Current estimates suggest
that over 60,000 drivers are required just to meet current demands.
Hurdles to hiring qualified drivers and a state patchwork of weight
limits have further exacerbated market failures. Transportation costs
to bring inputs to farms or haul farm goods have risen dramatically,
due to both trucking constraints and dramatic increases in Mississippi
barge and ocean-going vessel rates. These labor and transportation
challenges continue to squeeze soybean farmers' margins.
We are also greatly concerned about disruptions to input supply
chains, which have resulted in significant shortages and price hikes on
essential products, such as fertilizer and pesticides. Soybean growers
are dependent upon fertilizers to ensure plants receive proper
nutrients throughout the growing season. Nitrogen, phosphorus, and
potassium--the three major fertilizers utilized by soybean producers--
have experienced significant price increases over the past year.
Multiple factors have played a role in these price increases, including
the COVID-19 pandemic, trade actions by the U.S. International Trade
Commission, transportation costs, and global demand. ASA members who
have been able to guarantee fertilizer availability for next planting
season have relayed being quoted prices up to six times as high as they
were in 2021. The price of monoammonium phosphate (MAP) is reported to
be up by 72% this year. In other cases, retailers are not even able to
guarantee these inputs will be available at all in spring 2022.
Major herbicides used on hundreds of millions of crop acres have
seen similar challenges. In recent months some chemistries have
experienced doubling in price or more, assuming supplies can be
obtained at all due to shortages. While there are a number of factors
that have impacted pesticide markets, such as labor shortages and
natural disasters, we strongly urge regulatory agencies to first do no
harm and not make the situation worse. Should regulatory changes occur
for pesticide registrations that would result in significant product
and variety demand shifts ahead of the 2022 growing season, it could
inflict an even greater shock that supply chains would be unable to
accommodate.
The supply chain challenges highlighted above underscore the
unfortunate fact that prices have increased for soybean oil, as well as
a number of other agricultural products. During this hearing, testimony
suggested that the expansion of renewable fuels capacity is both
inflating the price of soybean oil and creating rationing and shortage
concerns for the food industry. The data tells a more complicated
story. America's soybean growers are currently in the process of
harvesting another record soybean crop--over 4.4 billion bushels--and
are poised to meet market demands from both food and biofuels sectors.
While soybean growers look forward to meeting increased demand from the
biofuels sector in the future, the overall use of soybean oil for
biofuels has not increased in 2021 compared to 2020 while domestic
soybean oil supplies are projected to reach a record high by USDA.
While we expect to see an increase in soybean oil demand in the
years ahead, we are excited about several announcements for new
facilities or plant expansions that will increase domestic crushing
capacity by about 13%. U.S. soybean growers are proud to play a part in
offering a homegrown energy solution through biodiesel and renewable
diesel and believe that we have the capacity to meet market demands for
food, feed, fuel, and other soy-based products.
ASA appreciates your continued focus on supply chain challenges
impacting the agricultural sector and your consideration of our
comments. We look forward to continuing to work with the Committee to
address the needs of soybean growers and the agricultural industry at
large.
Sincerely,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Kevin Scott,
President.
Letter 4
on behalf of hon. stephanie stuckey, chief executive officer, stuckey's
corporation
November 2, 2021
Hon. David Scott, Hon. Glenn Thompson,
Chairman, Ranking Minority Member,
Committee on Agriculture, Committee on Agriculture,
U.S. House of Representatives, U.S. House of Representatives,
Washington, D.C.; Washington, D.C.
Dear Chairman Scott and Ranking Member Thompson:
Thank you for the opportunity to provide my perspectives at today's
hearing on ``Immediate Challenges to our Nation's Food Supply Chain''.
I am particularly grateful for the opportunity to cross paths again
with Chairman Scott, a former Georgia State Legislature colleague of
mine and my father Billy's.
As the Chairman knows, Stuckey's, the multi-generational family-run
small business that I currently operate, is part of the fabric of
Georgia, creating jobs and lasting memories throughout the state and
the entire Southeast. My grandfather Sylvester founded Stuckey's as a
roadside pecan stand along Highway 23 in Eastman, Georgia in 1937. He
traveled the state, buying pecans from local farmers to sell at his
stand, along with local honey and souvenirs. My grandmother, Ethel,
added her delicious homemade candies--southern delicacies like
pralines, Divinities, and our iconic Pecan Log Rolls.
Today, I am proud to carry on the legacy Sylvester and Ethel built,
and while our business is always on the lookout for opportunities to
grow, we face several challenges--some that existed before the COVID-19
pandemic, and some that have been exacerbated by it.
One of our major supply chain challenges is the perpetual problem
of the U.S. Sugar Program, which adds significant supply and cost
pressures to my business and so many other food manufacturing
businesses across the country. The U.S. Sugar Problem severely
restricts the supply of sugar in the United States to artificially
inflate prices. American businesses that rely on a steady supply of
sugar to make their products always pay more, sometimes two to three
times more, than what our competitors pay for sugar on the global
market.
The United States does not and cannot grow enough sugar to meet
demand. Yet, under current law, in times of sugar shortage, domestic
sugar producers and processors are restricted from expanding output
because they are subject to legally binding marketing allocations. Even
worse, sugar imports are not permitted to meet demand because they are
subject to strict import quotas, and the government's hands are tied by
law from taking steps on the world market to increase import
allocations from countries with excess sugar.
Sugar is a major commodity used in billions of dollars of food
manufacturing, yet Federal statute severely restricts the supply of
sugar, and prevents regulators from making real-time decisions to
increase supply and prevent shortages. We at Stuckey's have felt this
problem more acutely this year than ever before. In fact, one of our
main suppliers has suffered serious shortages and delays in getting us
one of our main ingredients because they do not have access to enough
sugar. As the Committee considers solutions to supply chain problems, I
strongly encourage you to reform the U.S. Sugar Program.
In addition, we are also dealing with increased costs and delays in
shipping, and difficulties getting the raw ingredients needed to make
our many products. Perhaps our largest supply chain issue right now has
been securing a manufacturing workforce. We are hiring constantly and
investing in training only to have the new trainees leave before our 90
day introductory period has ended. The labor force issue has deeply
limited our ability to pursue new sales and grow our business, and I
encourage Congress to invest in workforce development programs to
address these problems.
Thank you, Chairman Scott and Ranking Member Thompson, for your
tremendous leadership, and for the opportunity to offer these comments
for your consideration. I am grateful for the Committee's interest in
my perspective on the many supply chain challenges this country faces.
Sincerely,
Stephanie Stuckey,
Chief Executive Officer,
Stuckey's Corporation.
______
Submitted Comment Letter by Hon. David Scott, a Representative in
Congress from Georgia; Authored by Agricultural Transportation
Working Group
October 18, 2021
Hon. Pete Buttigieg,
U.S. Department of Transportation
Washington, DC 20590-0001
RE: Docket No. DOT-OST-2021-0106
Dear Secretary Buttigieg:
The associations that make up the Agricultural Transportation
Working Group (ATWG) submit this statement in response to the U.S.
Department of Transportation's (USDOT) request for information that
will be used to prepare a report for President Biden on supply chains
for the industrial base.
The undersigned agricultural producer, commodity, agribusiness and
food-related national organizations respectfully request the Biden
Administration's support to advance transportation infrastructure and
policies for truck, rail, waterways and ports that will enhance the
efficient and cost-effective transport of agricultural and food
products. The farmers, ranchers, food and beverage manufacturers,
processors, package suppliers, farm supply dealers and agricultural
product marketers that comprise our collective memberships are
dedicated to providing safe, abundant, affordable and sustainably
produced human and animal food, fiber and other agricultural products
that directly benefit U.S. and global consumers and contribute
significantly to U.S. economic growth and trade. Importantly, they also
support and sustain millions of American jobs, many in rural
communities.
The COVID-19 pandemic and subsequent surge in consumer demand has
resulted in major supply chain disruptions, including in the food and
agricultural supply chain. The disruptions are ongoing, and the work
performed by President Biden's Supply Chain Disruptions Task Force that
is co-chaired by the Secretaries of Transportation, Agriculture and
Commerce is important to support resilient, diverse, and secure supply
chains. Such supply chains are buttressed by strong transportation
infrastructure and flexible policy and are needed to ensure America's
farmers, ranchers, commodity handlers, processors and food
manufacturers can reliably deliver high-quality, cost-effective
products to domestic and global consumers.
More needs to be done to institutionalize the lessons that are
being learned from the pandemic to ensure resiliency of the food and
agricultural supply chain. We respectfully offer for your consideration
the following recommendations:
Labor
Presently, inadequate labor availability is the largest supply
chain constraint facing the U.S. agricultural industry. ATWG members
are unable to fill open positions throughout the production,
transportation, warehousing, and processing phases of the supply chain.
These shortages are directly impacting our members' ability to meet
consumer demands. Not only does a labor shortage make it difficult to
keep pace with open positions, but it also makes it more challenging to
add shifts to keep pace with increasing demand for agricultural
products. The lack of access to labor threatens operations and supply
chain resiliency and leads to lost productivity and higher prices for
food and agricultural products along the supply chain.
During the pandemic, as agriculture continued to operate while also
prioritizing the health and safety of their employees, the shortages of
personal protective equipment, disinfectants, and other COVID-19
mitigation tools created challenges. In planning for the next crisis,
the U.S. Government should ensure that the food supply chain continues
to be deemed essential and receives priority access to necessary
supplies in future response plans. Furthermore, the U.S. Government
should consider efforts to create national stockpiles of supplies, such
as respirators and face masks which are required for application of
certain pesticides.
Specifically, within DOT's jurisdiction, policies to increase
trucking productivity would be helpful as would harmonizing the Federal
truck driving age limit with the state age limit to provide a more
accessible pathway into the trucking industry for drivers aged 18-20.
Another specific concern is how a forthcoming Emergency Temporary
Standard (ETS) regarding vaccines is implemented. We support the use of
vaccines to fight the spread of COVID-19, but as announced, the ETS
could cause serious labor disruptions for agribusinesses. We encourage
the Administration to continue to recognize the critical infrastructure
status of the food and agriculture sector and provide flexibility for
agricultural employers to avoid the negative effects a vaccine mandate
would have on the efficiency and reliability of the agricultural supply
chain. We would like to partner in developing solutions and educational
programs that will expand the number of vaccinated workers without
introducing additional risks to the agricultural supply chain.
Climate Policy
The ability for the U.S. food and agricultural sector to continue
as the world's largest hinges on the availability of cropland to
produce raw agricultural commodities. The production of raw
agricultural commodities is the beginning and most important part of
the food and agricultural supply chain. An abundant, affordable,
sustainable, and wholesome supply of raw agricultural commodities is a
prerequisite for the remaining steps in the food and agricultural
supply chain.
Due to the inherent linkage between the first step in the food and
agricultural supply chain, the production of raw agricultural
commodities, and the climate change policies that are under
consideration, the ATWG urges the Transportation, Agriculture and
Commerce Departments to assess their climate change policies and supply
chain policies in tandem. Policies that idle cropland and reduce U.S.
agricultural output result in less U.S. agricultural market share and
harm rural economies.
As an alternative to cropland idling climate change polices, the
ATWG urges the U.S. Department of Agriculture (USDA) to prioritize
Federal resources toward working land programs to achieve large
environmental and economic benefits by incentivizing broader adoption
of best management farming and ranching practices across potentially
hundreds of millions of our nation's best acres for agricultural
production.
Transportation Policy and Infrastructure
The ATWG recommends strengthening U.S. freight transportation
policy and infrastructure to help ensure there are many efficient ways
for agricultural commodities and products to flow throughout the
agricultural supply chain. The ATWG believes the U.S. freight
transportation system can be strengthened through the following ways:
1. Adopt solutions to better balance the needs of ocean carriers
with the needs of our agricultural exports.
2. Increase Federal investment to modernize U.S. inland waterways
locks and dams--particularly those on the Upper Mississippi
River and Illinois River (UMR-IR) System--and fully
utilizing the Harbor Maintenance Trust Fund for its
intended purpose of dredging U.S. ports and harbors.
3. Foster increased competition among freight railroads and other
transportation modes, provide a better method for
challenging unreasonable rail rates and require railroad
carriers to provide increased access to railroad service
data to enhance agricultural supply chain operations.
4. Increase motor carrier capacity through regulatory reform and
legislative change and investing strategically in rural
roads and bridges through collaboration with states.
Container Shipping
We are supportive of efforts to better balance the needs of ocean
carriers with the needs of our agricultural exports. Concerns over
ocean carriers and terminals practices at U.S. ports include ignoring
the Federal Maritime Commission's existing demurrage and detention
guidelines, making containers unavailable to carry agricultural export
cargo, canceling or refusing export container bookings and a persistent
lack of timely notice of changes to U.S. shippers.
The lingering effects of the COVID-19 pandemic's shock to global
trade have resulted in a backlog of container ships waiting to unload
outside the West Coast's most critical shipping ports. Ongoing
congestion and related logistical obstacles threaten U.S. farmers' and
ranchers' ability to meet much-welcome increases in foreign demand for
our products.
Elevated imports and exports have caused considerable congestion
both on water and land as the ports fill with the extra containers. To
avoid congestion and to get containers back to Asia as quickly as
possible so that they can be refilled with more import goods, there has
been an increase in the shipment of empty containers out of the West
Coast ports. Some consider it more efficient to ship empty containers,
rather than waiting for export goods to be loaded, which has led to a
significant decline in the number of containers available to
agricultural exporters.
Across California's three major ports, the shipment of empty
containers jumped 56% from an average of 1.16 million TEUs (20
equivalent units) in the first quarters of 2018-2020 to 1.81 million
TEUs in the first quarter of 2021. Compared to the first quarter of
2020 alone, the first quarter of 2021 represents an 80% increase in
empty export container units. At the Port of Los Angeles, in 2021,
through July, nearly 75% of all exported containers were empty.
Accessibility to export containers has been further limited by record
shipping costs and harmful surcharges. With these factors combined, the
ability for farmers and ranchers to fulfill oversees contracts has been
significantly impacted, with some estimations nearing $1.5 billion in
lost agricultural exports.
All these harmful patterns are contributing to supply chain
dysfunction, increased costs for U.S. agricultural exporters and
preventing U.S. shippers from capturing export opportunities. The ocean
shipping industry has vastly changed in recent years, increasingly to
the detriment of U.S. exporters.
Inland Waterways
A modern, efficient inland waterways transportation system (locks
and dams) is critical to U.S. agriculture and the entire U.S. economy.
Our nation's inland water navigation system is a low-cost and
environmentally sustainable way to get crop inputs, such as fertilizer
and farm supplies, to farmers and for delivering harvests, such as
grains and other crops, to domestic and international markets. In 2020,
the United States exported 29 percent of its grains and oilseeds. Of
this quantity, more than half transited the Mississippi River System,
while 29 percent moved through the Columbia-Snake River System in the
Pacific Northwest, and five percent was shipped through the Texas Gulf.
U.S. agricultural exports traditionally contribute a nearly $15-$20
billion surplus to the U.S. balance of trade, as well as provide
upwards of 20 percent of U.S. farm income.
Unfortunately, most locks on the UMR-IR System were built in the
1930's and have long surpassed their projected 50 year design life.
These locks were built when 600 locks were the standard. Today, a full
barge tow is 1,200 so upgrading this aging infrastructure is a
necessity and will strengthen U.S. agricultural competitiveness and the
resilience of the country's supply chain. A 2016 study by the
University of Tennessee and funded by USDA, looked at two locks along
the UMR-IR and found that unscheduled outages would result in the loss
of 12,500 jobs and reduce economic activity by $4.2 billion.
Another significant study issued in August 2019 and conducted by
Agribusiness Consulting (formerly Informa Economics) under a contract
with the USDA Agricultural Marketing Service, entitled ``Importance of
Inland Waterways to U.S. Agriculture'', quantified both the critical
connection between the inland waterways and the competitiveness of
American agriculture in global markets, as well as the economic costs
of delaying renovation of America's river transport network.
Among other things, the study found that the inland waterways
system saves between $7 billion to $9 billion annually over the cost of
shipping by other modes (values based on all goods currently being
moved on the water compared to the same volume transported by rail). It
also found that every dollar of waterways activity output results in
$1.89 in additional U.S. economic activity directly related to the
waterways.
Most significantly, the study found that compared to the status
quo, increasing investment in the inland waterways system by $6.3
billion over a 10 year period (through 2029) and $400 million per year
thereafter through 2045 cumulatively would grow the waterways'
contribution to U.S. gross domestic product by 20 percent (to $64
billion) and increase waterways-related employment by 19 percent, to
472,000 jobs. The study says this option would more than offset the
cost of completing all the proposed projects and would increase the
market value of U.S. corn and soybeans by $39 billion. Conversely,
reduced investment would decrease the market value of those commodities
by $58 billion.
In addition to the economic and competitiveness enhancing benefits
of the inland waterways transportation system, the environmental and
energy efficiency qualities must also be recognized. According to a
2017 study by the Texas A&M Transportation Institute prepared for the
National Waterways Foundation, barge transportation produces the least
amount of CO2 emissions compared to rail (30% more) & truck
(1,000% more). Further, a 15-barge tow can carry the same amount of
cargo as 1,050 semi-trucks or 216 railcars. Barge transportation is the
most fuel-efficient form of surface transportation and policymakers
should prioritize the modernization of U.S. locks and dams in any
infrastructure bill as well as the annual appropriations process.
Specifically, the ATWG urges support for the funding and
construction of the top 15 lock and dam projects identified by the Army
Corps of Engineers in the 2020 Capital Investment Strategy (CIS). The
CIS outlines a scenario where all 15 projects could be constructed in
10 years at a cost of $7 billion. This includes seven additional 1,200
locks on the Upper Mississippi River and Illinois Waterway as part of
the Navigation Ecosystem Sustainability Program (NESP). Lock and Dam 25
on the Upper Mississippi River is part of NESP, and the top ranked new
construction start on this list of 15 priority projects. The ATWG urges
USDA to continue to reinforce with Congress and the Office of
Management and Budget, the importance of funding and constructing the
NESP locks and dams to bring U.S. inland waterways transportation into
the 21st century.
Rail Competition and Service
Rail transportation remains an important mode for transporting
agricultural products, even though its modal share has declined
significantly. While truck and water transportation are often viewed as
potential competitors to rail, they have significant limitations that
prevent them from providing effective competition on all but a narrow
range of movements. Water transportation cannot compete with rail
except for traffic moving between an origin and destination on a
navigable waterway. Truck transportation is significantly less
efficient than rail, making it uncompetitive except for short
distances. Today, four railroads haul more than 90 percent of all
freight rail traffic and rail rates \1\ have crossed a threshold that
can make truck transportation the only viable option for many shippers.
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\1\ Rail rates to ship anhydrous ammonia, which is a key ingredient
for 75% of the essential fertilizers utilized by farmers, have
increased over 200% in the past 20 years.
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Rail carrier implementation of large cost-cutting initiatives, such
as so-called precision scheduled railroading (PSR), have disrupted rail
service to many agricultural shippers. PSR focuses on removing network
capacity in rail carrier operations to increase their operating-ratio
profits. The loss of this capacity generally results in poor service
for shipping and receiving customers and removes substantial rail
network elasticity. This can turn an upward change in demand or a
weather event into a severe and long-lasting disruption to service. The
removal of capacity through PSR may make the rail carriers slightly
more profitable but it comes at a high cost for rail customers in the
agricultural sector.
The ATWG believes it is necessary to seek all available options to
increase competition among freight railroads and other transportation
modes and provide shippers and receivers with increased access to
railroad service information to enable informed business and capital
investment planning.
The Surface Transportation Board (STB) can increase competition
among railroads by finalizing a long-pending proceeding on reciprocal
(also referred to as ``competitive'') switching. Competitive switching
will enable shippers and receivers that are captive to one rail
carrier, but are near a second rail carrier, to gain access to the
second carrier via a short distance switch.
For shippers and receivers that are not close to a second rail
carrier to benefit from competitive switching, there is a rulemaking
underway at STB--known as the Final Offer Rate Review--that the ATWG
hopes will result in a more streamlined, simplified, and less costly
process for challenging unreasonable rail rates.
Last, greater access to rail carrier data is needed by shippers and
receivers to help optimize their supply chain operations. The ATWG
commends STB for requesting information on first-mile/last-mile rail
service, which is an often overlooked, but extremely important area in
the agricultural supply chain.
While STB has jurisdiction over disputes related to railroad
service and rates, there are some areas where the USDOT can help. The
DOT has delegated authority to the rail industry via the Association of
American Railroads (AAR) Tank Car Committee (TCC). For many years,
shippers have been trying to work with AAR and DOT to reform the
processes of the TCC. Historically, TCC has imposed measures on
shippers that raise serious concerns about the extent of TCC authority.
While this is a complicated issue, to date, DOT has not responded to a
shipper-industry petition filed in 2016 on this matter.\2\ In recent
years, regulatory actions imposed or initiated by the TCC, without a
cost-benefit analysis, have raised shipping costs for the fertilizer
industry by millions of dollars. DOT can and should make an effort to
reform the AAR Tank Car Committee.
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\2\ Petition No. P-1678; Docket No. PHMSA 2016-0093.
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Motor Carrier Freight Transportation Efficiency
The ATWG believes supply chain resiliency can be enhanced by
strengthening the motor carrier freight transportation sector through
streamlined and cost-effective regulatory and/or legislative policy. To
increase transportation capacity and efficiency of this sector, the
ATWG recommends the following regulatory and legislative policies:
1. Adoption of policies to mitigate the ongoing truck driver
shortage, such as removing the commercial driver's license
(CDL) restrictions on drivers aged 18-20 that creates an
obstacle to recruiting a new generation of drivers into the
industry. There are 49 U.S. states that allow 18 year olds
to obtain a CDL, but Federal law prohibits them from
driving across state lines until they are 21. The ATWG is
supportive of pathways that include additional training to
bring more drivers aged 18-20 into the industry.
2. With the challenges facing supply chains and a shortage of
drivers, we continue to see bottlenecks, supply constraints
and increased costs when moving goods across the country.
As we saw in the early days of the pandemic, much of the
agriculture supply chain relies on just-in-time delivery.
This is also extremely important when considering the need
for animal feed, farm supplies to arrive at the appropriate
time during planting season as well as completing harvest
before crops spoil or the season ends. It is also critical
that we can safely transport our live animals and insects
to their destinations without delay.
We recommend that USDA and USDOT continue to coordinate to
ensure agricultural haulers and the rest of the trucking
industry have the flexibilities needed to provide timely
delivery of essential products. Flexibilities such as
relief from Hours-of-Service requirements have been
critical over the last 18 months. Our industry has proven
that we can maintain a high level of safety while also
efficiently delivering wholesome and affordable food to the
American consumer.
3. Adoption of a 10% axle tolerance for dry bulk shipments. This
bipartisan policy, supported by Rep. Anthony Brown (D-Md.)
and Rep. Mike Gallagher (R-Wis.), was included in H.R.
3684,* the INVEST in America Act.
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* https://www.congress.gov/bill/117th-congress/house-bill/
3684?q=%7B%22search%22%3A
%5B%22H.R.+3684%22%5D%7D&s=1&r=1.
Load shifts during transport can result in tickets for drivers
because a portion of the truck becomes heavier than allowed
under current law, even though the overall truck weight is
below the Federal truck weight limit of 80,000 pounds. The
ATWG supports this policy already adopted by 38 states on
state/county roads that authorizes an axle weight tolerance
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to account for this shifting during transport.
4. Adoption of a pilot program to achieve economic and environmental
efficiencies through a modest increase in Federal truck
weight limits.
Lower Interstate Highway System truck weight limits relative to
state road truck weight limits are a barrier to economic
and environmental efficiency. The 80,000-lbs. gross vehicle
weight (GVW) limit on Interstate Highways has been in place
since 1982 despite major advancements in vehicle safety and
paving technology.
If a state's truck weight limit for its roads is 91,000 pounds
and the Interstate Highway weight limit is 80,000 pounds,
and the route includes an Interstate Highway then the
driver's utilized freight limit is only 80,000 pounds. This
can prevent trucks from utilizing the best shipping route
if it includes Interstate Highways, which are our nation's
safest and best built and maintained roads. A tractor-
trailer combination loaded to 80,000 pounds carries
approximately 50,000 pounds of freight. At 91,000 pounds,
the tractor-trailer combination carries about 60,000 pounds
of freight, amounting to about a 20 percent increase in
freight efficiency and an associated reduction in its
carbon footprint.
The ATWG urges authorization of an opt-in pilot program to
modestly increase truck weight limits by allowing 91,000-
lb., six-axle vehicles on Federal Interstate Highways in
ten states. This configuration complies with the Federal
bridge formula and is shown to have better braking capacity
than 80,000-lb., five-axle trucks.
In March 2020, Congress provided states with the option to
determine truck weight limits for 120 days through Section
22003 of the CARES Act and the ensuing trucking
efficiencies were gained safely.
5. Maintaining the existing minimum financial liability coverage
level for motor carriers. Efforts to increase liability
insurance for motor carriers beyond the current $750,000
level will increase freight costs without any known safety
benefits. Annual premiums for each truck are already
significant at about $5,000 per year. Whereas the minimum
automobile liability insurance for most states is less than
$100,000, which is inequitable to the $750,000 minimum for
truck financial liability. Raising the minimum financial
liability coverage level for motor carriers will increase
the already inequitable difference between coverage for
automobiles and motor carriers.
6. Support necessary reforms to modernize the Farm-Related
Restricted CDL program, which has currently been adopted by
24 states. The Farm-Related Restricted Commercial Driver's
License (CDL) or more commonly referred to as the
``Seasonal Ag CDL'' program has been an essential seasonal
program for farm-related service industries since 1992.
These industries have a very strong transportation safety
record and it has not been diminished since these Federal
regulations have been in place. The Seasonal Ag CDL program
has helped promote economic growth for America's
agricultural industries serving the essential needs of
farmers during the busy planting and harvesting seasons.
Due to challenging weather events, the increase in crop
production diversification, technological advances and
weight increases in light duty pickup trucks and
agricultural equipment over the past several decades, it is
necessary to modernize the Federal regulations providing
the framework for these state administered programs. The
temporary shutdown of the state Department of Motor
Vehicles offices throughout the nation during the height of
the [COVID-19] pandemic also caused major disruptions for
farm-related service industries and their rural
communities.
More flexibility is needed and can be provided by expanding the
total days allowed to utilize Farm-Related Restricted CDL
drivers by up to 270 days to accommodate for the longer
seasons, which can fluctuate from year to year due to
climate change as well as more diversified crop production.
Individual states would maintain the ability to set the
seasons these days could be utilized by the industry. The
new 12 month seasons restart should occur each calendar
year on January 1 to prevent any overlap of seasons from
the previous year and the requirement for an in-person
seasonal renewal should be eliminated.
Concluding Statement
The ATWG commends the Departments of Transportation, Agriculture
and Commerce for seeking ways to support resilient, diverse, and secure
supply chains to help ensure U.S. economic prosperity and national
security. Such supply chains are needed to ensure America's farmers,
ranchers, commodity handlers, processors and food manufacturers can
reliably deliver high-quality, cost-effective products to domestic and
global consumers.
The ATWG's most pressing recommendation is to address labor
availability, which is among the largest supply chain constraints
facing the agricultural sector. The lack of access to labor threatens
operations and supply chain resiliency and leads to lost productivity
and higher prices for food and agricultural products along the supply
chain. Specifically, within DOT's jurisdiction, policies to increase
trucking productivity would be helpful as would harmonizing the Federal
truck driving age limit with the state age limit to provide a more
accessible pathway into the trucking industry for drivers aged 18-20.
Further, the ATWG recommends USDA agencies collaborate on their
climate change and supply chain polices due to their inherent linkage
to the production of raw agricultural commodities--the first step in
the food and agricultural supply chain and the most likely step to be
impacted by climate change policies. As an alternative to cropland
idling climate change polices, the ATWG urges USDA to prioritize
Federal resources toward working land programs to achieve large
environmental and economic benefits by incentivizing broader adoption
of best management farming and ranching practices.
The ATWG supports strengthening U.S. freight transportation policy
and infrastructure to help ensure there are many efficient ways for
agricultural commodities and products to flow throughout the
agricultural supply chain. The ATWG believes the U.S. freight
transportation system can be strengthened through the following ways:
1. Adopt solutions to better balance the needs of ocean carriers
with the needs of our agricultural exports.
2. Increase Federal investment to modernize U.S. inland waterways
locks and dams--particularly those on the UMR-IR System--
and fully utilizing the Harbor Maintenance Trust Fund for
its intended purpose of dredging U.S. ports and harbors.
3. Foster increased competition among freight railroads and other
transportation modes, provide a better method for
challenging unreasonable rail rates and require railroad
carriers to provide increased access to railroad service
data to enhance agricultural supply chain operations.
4. Increase motor carrier capacity through regulatory reform and
legislative change.
Thank you for this opportunity to provide information that will be
used to prepare a report for President Biden on supply chains for the
industrial base. We believe our responses provide ideas to support
supply chain policies that will allow U.S. farmers, ranchers, commodity
handlers, processors, and food manufacturers to reliably deliver high-
quality, cost-effective products to domestic and global consumers.
We look forward to working with you to support U.S. agriculture's
adoption of resilient, diverse, and secure supply chain practices.
Sincerely,
Agricultural Transportation Working Group
Agricultural and Food Transporters National Council of Farmer
Conference Cooperatives
Agricultural Retailers Association National Grain and Feed Association
Agriculture Transportation National Grange
Coalition
Amcot National Grocers Association
American Beekeeping Federation National Milk Producers Federation
American Farm Bureau Federation National Oilseed Processors
Association
American Feed Industry Association National Potato Council
American Frozen Food Institute National Sorghum Producers
American Pulse Association National Sunflower Association
American Seed Trade Association North American Millers' Association
American Sheep Industry Association North American Renderers
Association
American Soybean Association Pet Food Institute
Corn Refiners Association Specialty Soya & Grains Alliance
Farm Credit Council The Fertilizer Institute
Fresh Produce Association of the United Dairymen of Arizona
Americas
Growth Energy United Fresh Produce Association
Hardwood Federation United States Cattlemen's
Association
Institute of Shortening and Edible USA Dry Pea & Lentil Council
Oils
International Dairy Foods USA Rice
Association
Livestock Marketing Association U.S. Canola Association
National Aquaculture Association US Dry Bean Council
National Association of Wheat U.S. Pea & Lentil Trade Association
Growers
National Barley Growers Association U.S. Poultry & Egg Association
National Cattlemen's Beef Waterways Council, Inc.
Association
National Corn Growers Association WineAmerica
National Cotton Council
______
Submitted Statements by Hon. David Scott, a Representative in Congress
from Georgia
Statement 1
on behalf of julie anna potts, president and chief executive officer,
north american meat institute
On behalf of the North American Meat Institute (NAMI or the Meat
Institute) based in Washington, D.C., and its 724 member companies
around the country, thank you for the opportunity to submit this
testimony.
The Meat Institute is the United States' oldest and largest trade
association representing packers and processors of beef, pork, lamb,
veal, turkey, and processed meat products. NAMI members include more
than 350 meat packing and processing companies, large and small, and
account for more than 95 percent of the United States' output of meat
and 70 percent of turkey production. The Meat Institute provides
legislative, regulatory, international affairs, public relations,
technical, scientific, and educational services to the meat and poultry
packing and processing industry.
In July, NAMI and eleven other organizations representing livestock
producers, farmers and companies who produce the vast majority of
America's meat, poultry, and dairy, as well as animal feed and
ingredients, unveiled the Protein PACT for the People, Animals, and
Climate of Tomorrow.i The Protein PACT is the first joint
initiative designed to accelerate momentum and verify progress toward
global sustainable development goals across all animal protein sectors
to ensure customers, consumers, and policy makers trust that meat
aligns with their sustainability expectations.
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\i\ https://www.meatinstitute.org/ht/display/ReleaseDetails/i/
192863/pid/287.
Editor's note: references annotated with are retained in
Committee file.
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Through the Protein PACT, Meat Institute members have developed
robust metrics for continuous improvement and publicly committed to
sustain healthy animals, thriving workers and communities, safe food,
balanced diets, and the environment and align with the United Nations'
2030 Sustainable Development Goals.ii
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\ii\ https://sdgs.un.org/goals.
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COVID-19 Affected the Cattle and Beef Markets.
The COVID-19 pandemic was a shock to the meat supply chain, as it
was for every industry in America, and the shock continues to
reverberate today, as evidenced in labor availability, consumer demand,
and throughout the supply chain.
During 2020, pandemic-related plant interruptions temporarily idled
about 40 percent of slaughter capacity for cattle and hogs at the peak
of its impact. This disruption happened in tandem with unprecedented
retail demand for beef due to panic buying and freezer stocking as
shelter-in-place orders were effectuated. The situation was worsened by
the significant operational changes needed to rebalance production,
processing, and distribution away from foodservice toward retail. The
cuts, product sizes, processing equipment, packaging, and distribution
vary considerably between retail and foodservice and are not easily
transitioned, but the industry was resilient and adapted.
The shift from foodservice to retail had a dramatic impact. In
2020, retail beef sales increased by 606 million pounds by volume, or
more than 11 percent. All fresh meat and poultry sales increased 19
percent by value, an increase of $9.6 billion. Beef sales increased by
$5.9 billion in value, accounting for 61 percent of that overall growth
in protein demand. Ground beef sales alone grew by $2.02 billion,
accounting for 21 percent of the total increased aggregate demand for
meat and poultry.\1\
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\1\ Beef Checkoff, Hindsight 2020: Retail and Foodservice Trends
Through the Pandemic (https://www.beefitswhatsfordinner.com/retail/
sales-data-shopper-insights/pandemic-market-trends), accessed November
2021.
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Beef and pork demand remains high: the total volume of red meat
retail sales January through September 2021, remained nearly four
percent higher than the pre-pandemic levels over the same period in
2019. This increase in demand in 2020 happened while the packing
sector's ability to process livestock was experiencing operational
constraints, and has continued into this year because labor
availability has similarly affected the packing industry's ability to
operate at full capacity.
Labor is Capacity.
Production in meat packing and processing plants is labor-
intensive, and therefore tied to the number of employees working the
line. Throughout 2021, even as the comprehensive COVID-19 protections
instituted by the meat industry since the spring of 2020 successfully
lowered transmission among meatpacking workers and held case rates
lower than case rates in the general U.S. population, worker shortages
have persisted. The Meat Institute regularly hears from member
companies challenged with 20 percent absenteeism on any day, as
Francois Leger of FPL Food testified iii before this
Committee on October 7. Without a steady, reliable workforce, plants do
not run efficiently and production declines. Labor is capacity.
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\iii\ https://docs.house.gov/meetings/AG/AG00/20211007/114110/HHRG-
117-AG00-Wstate-LegerF-20211007.pdf.
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To be clear, labor challenges were not caused by the pandemic;
COVID-19 only exacerbated the issue. The meat industry has been facing
a labor shortage for some time and it continues today. The pace of
Saturday shifts has also strained available labor and adds to
processing costs. Recent media reports underscore the industry's
recruitment efforts, including wage increases, signing bonuses,
relocation bonuses, retention bonuses, and generous benefits. Several
major companies have publicly announced starting salaries at or above
$20 per hour, and raising starting salaries means raising all other
salaries up the chain. This labor shortage impact is not only on
processing lines but also warehouse workers, skilled maintenance
positions, and other jobs critical to maintaining the supply chain.
Meat and poultry processors are the harvest stage of livestock and
poultry production, as field work is for so many crops. Meat and
poultry packers and processors must have access to an expanded, year-
round agricultural guestworker program. The current agricultural
guestworker program fails to meet the needs of all of agriculture: it
is seasonal and does not include the meat and poultry industry.
When American consumers head to the grocery store, they expect to
see the meat counter filled with animal protein options. America's
farmers, ranchers, and processors produce the highest-quality animal
protein in the world. However, bringing nutritious and affordable
animal protein to consumers requires a strong, efficient supply chain--
and that supply chain is hindered by the lack of access to a skilled,
reliable workforce for meat and poultry operations across the country.
Port Congestion is Putting Exports in Jeopardy.
Over the past year, America's ports have experienced increasing
pressure caused by myriad factors that have hampered U.S. agricultural
trade with devastating consequences for farmers, ranchers, truckers,
manufacturers, food industry workers, and rural communities. In
addition to contending with excessive delays and congestion at many
U.S. marine terminals, U.S. agricultural exporters, importers,
truckers, and producers have experienced the near-constant predatory
and unreasonable behavior of vessel-operating common carriers (called
common carriers or ocean carriers from this point forward). This
behavior has exacerbated existing delays and congestion concerns, and
has gone largely unchecked, with no sign of abating.
Perhaps the most egregious action perpetrated by ocean carriers is
their proclivity to decline to carry U.S. agricultural commodity
exports, including meat and poultry exports, instead hastening empty
containers to Asian markets to fill them with more lucrative consumer
goods to export to the U.S. In some instances, common carriers are
collecting freight rates ranging as high as $12,000 to almost $20,000
per container to carry U.S. agricultural exports. Because meat and
poultry exports are perishable, with a relatively short shelf-life in
the case of chilled meat products, the decision by ocean carriers to
cancel export bookings or bypass carrying U.S. agricultural products
altogether is particularly consequential. These exports cannot
withstand extensive disruptions or delays, and should not be forced to
do so if there is sufficient space available on a vessel. Yet, often
ocean carriers are departing U.S. ports with vessels loaded at less
than 50 percent capacity--a stark contrast to the near 100 percent
capacity observed on vessels making the journey to the U.S. These
cancellations and delays are costing U.S. meat and poultry companies
millions, as they are forced to downgrade, discard, or divert product
in the case of exports, and source from non-traditional suppliers at
extremely high prices in the case of imports.
Failure to hold the ocean carriers accountable could have long-
lasting, detrimental effects for the trade-dependent U.S. meat and
poultry industry and agriculture sector. If ocean carrier practices
persist, and are not subject to oversight, then the U.S. meat and
poultry industry, its workers, and the communities it supports will
struggle to access these vital markets cultivated over decades. This
threat is concerning because Asia accounts for a significant portion of
U.S. meat and poultry trade, with China, Japan, and Korea among the top
markets for both beef and pork annually. The U.S. meat and poultry
industry has earned the reputation of being a reliable supplier of
safe, high-quality products to these export markets. But the European
Union, Australia, and countries in South America are ready to fill the
void left by the U.S.'s absence--an absence resulting directly from
ocean carriers' nefarious actions. Once foreign competitors seize
previously held U.S. market share, it becomes increasingly difficult,
if not impossible, to recapture the same level of hard-earned access.
The U.S. meat and poultry industry counts on these markets to send
products that otherwise would not be consumed, or would be consumed in
extremely low quantities, by Americans. As a result, the U.S. domestic
market would not easily absorb these products, pressuring livestock
producers, packers, and processors, and the communities they support.
It would be cost prohibitive for many of these businesses to reengineer
supply chains or to find alternative buyers to fulfill overseas
contracts. Continued port disruptions could also undermine the U.S.'s
food supply, which relies on imports to fill gaps in U.S. production.
This would inevitably curtail consumer choice.
Those costs are compounded by excessive and unreasonable detention
and demurrage fees assessed on U.S. importers and exporters by ocean
carriers and marine terminal operators for the failure of these
importers and exporters to either retrieve a container from a marine
terminal or return one within a specified amount of time. The Federal
Maritime Commission (FMC) has found that ocean carriers and marine
terminal operators regularly issue these costly penalties even if
delays in retrieving or returning containers are beyond the control of
the importer or exporter. Although the FMC has deemed such charges to
be ``unreasonable,'' and in violation of the Shipping Act, ocean
carriers and marine terminal operators have faced few consequences for
imposing these exorbitant, punitive costs.
As the U.S. continues to emerge from the economic hardship
inflicted by the COVID-19 pandemic, our farmers, ranchers, agricultural
producers, manufacturers, and food industry workers need functioning
ports, and access to export markets and critical inputs they afford.
The Meat Institute appreciates the attention this issue has garnered in
Congress, including the strong bipartisan support for the Ocean
Shipping Reform Act of 2021, which, if passed, would address many
concerns described in this testimony, including granting the FMC
explicit statutory authority to enforce its detention and demurrage
rule to help stem future abusive ocean carrier practices. American
importers and exporters would also benefit from efforts to shift the
burden of proof to carriers and terminals to confirm detention and
demurrage charges comply with FMC's rule. It is equally important to
prevent ocean carriers from declining export cargo bookings if such
cargo can be safely loaded on vessels in an appropriate timeframe; the
fate of U.S. agriculture exports should not solely be determined by
carriers.
Addressing this crisis not only involves holding ocean carriers
accountable for their actions, but it also requires improving port
efficiencies. Recent announcements by the Ports of Los Angeles and Long
Beach to extend hours of operations must be matched with an adequate
supply of labor, including truck drivers, along with extended warehouse
hours to improve cargo flows. Urgent action is especially critical to
enhance current port capacity, including using nearby empty lots for
container storage and unloading, along with inland loading points.
Efforts to resolve equipment shortages, such as through a
domestically-controlled supply of chassis, combined with investments in
port data infrastructure, must complement improvements in capacity and
operating hours to ensure the interconnected challenges that have
contributed to, and exacerbated, this crisis are addressed
comprehensively. The Meat Institute stands ready to work with Members
of Congress to secure passage of the Ocean Shipping Reform Act of 2021
and to identify other legislative means to provide much-needed relief
to America's farmers, ranchers, agricultural producers, manufacturers
and food industry workers.
Criteria for Line Speed Waivers Must be Issued.
Last spring, a Federal judge blocked the U.S. Department of
Agriculture's (USDA) New Swine Inspection System (NSIS) rule because of
an Administrative Procedure Act technicality: the court found that in
its final rule, USDA had failed to address comments the Department had
received about worker safety. Then the Biden Administration decided not
to appeal the case, and line speeds for swine plants that participated
in NSIS have been slowed since July 1. Some of these plants have been
running at elevated line speeds for upwards of 20 years and
demonstrated their ability to do so safely while maintaining and
continuously improving worker safety.
In June--before the July 1 slowdown--the Meat Institute provided
information to USDA regarding worker safety practices and draft
criteria that could be included in a line speed waiver to address
worker safety and inform future rule-making. Since then, although the
Meat Institute has been told repeatedly the Department is close to
finalizing criteria for line speed waivers, nothing has been issued. It
is beyond past time for USDA to issue the criteria for line speed
waivers: the NSIS plants--specially configured and staffed to operate
under NSIS--have been operating at a competitive disadvantage since
July 1, and hog slaughter capacity has been reduced. With hog plants
already running below capacity because of lack of labor, the additional
slowdown due to slower line speeds is a self-inflicted wound by the
Administration.
COVID-19 Vaccine Requirement for Federal Employees and Contractors.
The meat and poultry industry was among the first to urge the Biden
Administration to prioritize vaccines for essential workers. The Meat
Institute partnered with the United Food and Commercial Workers
International Union (UFCW) iv to urge all 50 state governors
to prioritize meat and poultry workers for the vaccine.
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\iv\ https://www.meatinstitute.org/ht/display/ReleaseDetails/i/
186143/pid/287.
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Meat Institute members provided significant support for vaccination
efforts, holding onsite clinics for vaccination, providing paid leave
for workers to obtain the vaccine, offering vaccine bonuses, holding
vaccine lotteries with monetary prizes, providing information sessions,
vaccinating family members of workers and other members of the
community and much more: the industry supports vaccines.
The Meat Institute is concerned, however, about the vaccine mandate
for Federal employees and contractors. By statute, meat and poultry
plants are subject to continuous Federal inspection, without which
product may not be shipped in commerce. The Meat Institute is concerned
that if significant numbers of Federal inspection personnel at USDA's
Food Safety and Inspection Service decline to get vaccinated, it will
compound the current inspector shortage and result in slowdowns at
processing plants. Likewise, the Meat Institute has similar concerns
about vaccine requirements creating labor shortages for Federal
contractors, such as the rail lines and trucking industry. The Meat
Institute urges the Federal Government to develop viable contingency
plans should there be significant attrition of Federal inspectors due
to this mandate.
Conclusion
The North American Meat Institute is prepared to discuss these
supply chain issues and work with the Committee to resolve them. Thank
you for the opportunity to provide this testimony.
Statement 2
on behalf of national cotton council
Market & Supply Chain Disruptions Facing U.S. Cotton Merchandisers and
Other Cotton Industry Segments
The NCC is the central organization of the United States cotton
industry. Its members include producers, ginners, cottonseed processors
and merchandizers, merchants, cooperatives, warehousers and textile
manufacturers. A majority of the industry is concentrated in 17 cotton-
producing states stretching from California to Virginia. U.S. cotton
producers cultivate between 10 and 14 million acres of cotton with
production averaging 12 to 20 million 480 lb bales annually. The
downstream manufacturers of cotton apparel and home furnishings are
located in virtually every state. Farms and businesses directly
involved in the production, distribution and processing of cotton
employ more than 115,000 workers and produce direct business revenue of
more than $22 billion. Annual cotton production is valued at more than
$5.5 billion at the farm gate, the point at which the producer markets
the crop. Accounting for the ripple effect of cotton through the
broader economy, direct and indirect employment surpasses 265,000
workers with economic activity of almost $75 billion. In addition to
the cotton fiber, cottonseed products are used for livestock feed and
cottonseed oil is used as an ingredient in food products as well as
being a premium cooking oil.
Role of Cotton Merchandisers
Cotton merchandisers provide benefits and services to all supply
chain participants. Traditionally, growers desire to market their
entire crop, consisting of a wide variety of qualities, at one time, at
the highest price possible, receiving payment in full. Conversely,
mills and manufacturers desire to purchase at the lowest possible
price, as they consume throughout the year, in very specific quality
specifications, paying as they go. Neither party traditionally manages
the delivery logistics. The merchandisers' role is to harmonize the
needs of the producers and consumers and assume their price risk and
other risks. Merchandisers effectively bridge the gap between timing
mismatches of supply and demand fundamentals in the global marketplace.
Summary of Market Disruptions
Since March 2020, the cotton market has experienced unprecedented
disruptions that have caused significant financial losses for cotton
merchandisers. The COVID pandemic and subsequent surge in consumer
demand has resulted in major supply chain disruptions.
Between March and July 2020, COVID restrictions led to sharp
declines in retail clothing sales and in cotton processed by mills
around the world. The loss in demand caused U.S. cotton to be stored
for a longer period than originally expected, leading to increased
storage costs and carrying charges.
As COVID restrictions relaxed and world economies began reopening,
the supply chain experienced a level of stress unlike any previous
time. In part, stress on the supply chain has been amplified because
supply chain providers took significant capacity out of the system
during the government-imposed shutdowns. This decreased supply chain
capacity made handling an unexpected demand spike even more difficult
and has resulted it a supply lag both for goods and supply chain
capacity which has not been made up for yet.
The impact on cotton is unique and more acute due to cotton's lack
of fungibility relative to other commodities; cotton's dependence on
export sales; containers as the sole method of cotton export shipments;
and cotton's reliance on Los Angeles/Long Beach ports.
There continue to be concerns over the practices of ocean carriers
and terminals operators at U.S. ports. These include ignoring the
Federal Maritime Commission's existing demurrage and detention
guidelines, limiting container availability to carry agricultural
export cargo, canceling or refusing export container bookings and a
lack of timely notice of changes to U.S. shippers.
Across California's three major ports, the shipment of empty
containers jumped 56% from an average of 1.16 million TEUs (20
equivalent units) in the first quarters of 2018-2020 to 1.81 million
TEUs in the first quarter of 2021. Compared to the first quarter of
2020 alone, the first quarter of 2021 represents an 80% increase in
empty export container units.
At the Port of Los Angeles, in 2021, through July, nearly 75% of
all exported containers were empty. Accessibility to export containers
has been further limited by record shipping costs and harmful
surcharges.
The issue of freight carriers electing to leave without refilling
empty containers with American goods and products is limiting U.S.
cotton's ability to satisfy strong export demand. Shipping containers
filled with imported goods are normally unloaded, sent to rural areas,
filled with agricultural commodities and then shipped abroad. However,
the increased disparity in freight rates paid by the import cargo that
has resulted this past year, combined with congestion and delay at
ports on our West and East Coasts, are leading carriers to immediately
return empty containers to their overseas ports of origin. Freight
charges from Asia to the U.S. have been driven as high as $15,000 to
$20,000 per container. By comparison, freight charges for an export
container carrying agricultural products typically costs $400-$1,800.
While there continues to be much focus on the problems at the West
Coast ports, it is important to point at that U.S. South Atlantic
ports, which are strategic cotton shipment ports and are noted for
their efficiency and forward-looking strategic initiatives, have also
faced unimaginable challenges due to the surges in volume and
unmanageable schedule changes.
Additionally, the lack of adequate labor is one the largest supply
chain constraints limiting the efficient movement of U.S. cotton.
According to recent estimates, the trucking industry needs more than
80,000 additional drivers immediately to meet the current demand. Labor
shortages are not just limited to the trucking industry as ocean
carrier's abilities to provide services have been hindered
significantly not only at terminals and on vessels but also in
administration, communication, scheduling, and documentation since
March of 2020 through today due to numerous factors affecting their
labor forces.
Key Issues and Economic Impacts
To highlight some of the most challenging shipping issues facing
U.S. cotton merchandisers and the harmful and costly impacts resulting
from these issues, the below table catalogs the key problems, with
further details provided below.
------------------------------------------------------------------------
Key Issues Major Impacts
------------------------------------------------------------------------
Warehouse Date Additional Storage Costs
Inconsistency
Driver Shortages Increased Ocean Rates
Chassis Shortages Increased Truck Rates
Limited Container Late Warehouse Fees
Availability
Vessel Schedule Missed Loads
Variability
Port/Rail Congestion Driver Disincentive for
Export Loads
Transshipment Delays Ocean Carrier Disincentive
for Export Loads
Increased Import Volumes Operational Inefficiencies
Delayed Documents Reconcentration Costs
(Truck and Warehouse)
Inefficiencies Due to Rolled Bookings
Staff Shortage, Remote Work, Etc.
Detention and Demurrage
Charges at Port of Destination
Customer Frustration with
a Traditionally Reliable U.S.
Supply Chain
Concerns Meeting Export
Commitments
------------------------------------------------------------------------
Increased Carrying Costs from Erosion of Demand: Cotton
accrued more storage, interest, insurance, and other costs as
consumption halted due to COVID.
At the height of the COVID shutdown, cotton had to be
stored for longer periods of time than originally
anticipated, in some cases as much as an additional 3
months.
Even as markets have reopened, delays of 1 to 2 months
continue due to driver shortages, chassis shortages, port/
rail congestion, and other operational inefficiencies.
Comprehensive Increases in Supply Chain Costs: COVID based
spending trends have overwhelmed the intermodal supply chain
vastly increasing costs for:
Trucking--The Bureau of Labor Statistics reports that
the PPI for General Freight Trucking in September 2021 is
23% higher than pre-pandemic levels.
Ocean Freight--According to USDA data, outbound ocean
freight rates from Los Angeles to Shanghai have more than
doubled between March 2021 and September 2021, going from
$800 per 40 container to $1,710 per 40 container.
Rail Service--Since May 2020, rail freight rates
increased by 28%.
Intermodal Equipment Provisioning.
Costs Associated with Broken Supply Chain Links: As the
intermodal supply chain has become overwhelmed with cargo,
acute points of congestion have created tremendous delays and
costs related to detention, demurrage, storage, rolled
bookings, canceled sailings and renegotiation of documents,
among others. The industry is experiencing on-going disruption
costs for changing vessel schedules and resulting early return
date and intermodal and port cutoff changes that directly
impact planned pickups shifting them days or weeks into the
future on top of other demand with no capacity to recover. The
costs include:
Team resource costs.
Elongation of trade-to-cash cycle.
Split shipment to customer.
Warehouse pickup rescheduling costs and late pickup
fees.
Warehouse late pickup fee.
Incremental trucking costs.
Storage costs for loaded container.
Per-diem costs for containers and chassis.
Chassis per diem costs.
Domino Effect: Trade frictions with China have delayed
shipments and added to the economic costs of the COVID
pandemic.
Cotton merchandisers have continually provided
liquidity to producers and consumers of U.S. cotton without
compromise or default throughout these catastrophic events.
In addition to the severe disruptions and related costs being
experienced by cotton merchandisers since COVID struck, there are more
recent supply chain disruptions impacting cotton producers and others
through the entire cotton and textile production value chain.
As noted by numerous agricultural organizations and companies, the
following issues have been identified as some of the other problematic
for the agricultural supply chain and are directly causing higher
prices and/or shortages for the agriculture sector.
Labor: Labor shortages exist on the farm, in processing
facilities, and among critical service providers. A National
Council of Farmer Cooperative survey found that 77% of
responding coops had issues retaining a skilled workforce
during the pandemic.
Fertilizer: A confluence of factors negatively impacting
global fertilizer market supply chains include, (1) global
demand for fertilizer, which is largely driven by crop
plantings and prices; (2) recent weather events that disrupted
domestic production; (3) COVID-19-related deferral of facility
maintenance that is now being undertaken; (4) trade actions;
(5) transportation costs; and (6) the supply and cost of
natural gas.
Chemical Inputs and Seed: Regulatory action by EPA is
limiting the availability of pesticides necessary for
agricultural production. Transportation issues are creating
issues in product delivery, and Hurricane Ida has disrupted a
critical region for herbicide production.
Energy: Energy during the early stages of the pandemic was
primarily consumed at home. That abrupt change suddenly
reversed, and fuel prices have soared in the past year. Not
only does energy affect fuel costs, but also it is an input for
chemical, fertilizer and seed production.
Equipment and Parts: Steel prices rose dramatically during
the pandemic due to both demand and tariffs levied on multiple
steel products in August 2021. And, a lack of microchips
stemming from COVID-era demand for laptops and other home
electronics has forced many farm equipment manufacturers to
halt production, creating delays in shipping new equipment that
sometimes last a year or more. In addition, parts needed to
repair equipment may not be available.
Thank you for the opportunity to catalog the numerous supply chain
disruptions and costs that are negatively impacting the U.S. cotton
supply chain and the real concern about additional costs and supply
shortage for key production inputs moving into the 2022 growing season.
The National Cotton Council appreciates the leadership of this
Committee and your colleagues in Congress to take actions to help
address these issues and urging the Administration to take all actions
possible to provide both immediate relief and remedy structural issues
for the long-term. We are particularly concerned about the stress the
current situation is placing on our merchandising segments. We would be
pleased to provide any additional information and data that will be
helpful and to respond to any questions.
Statement 3
on behalf of the fertilizer institute
Thank you for holding today's hearing on ``The Immediate Challenges
to our Nation's Food Supply Chain.'' The Fertilizer Institute (``TFI'')
appreciates the opportunity to share information regarding supply chain
challenges that are impacting TFI's members and fertilizer markets.
TFI represents companies that are engaged in all aspects of the
fertilizer supply chain in the United States. Fertilizer is any
combination of specific nutrients designed to provide the nourishment
essential for growth and maintenance of crops. Three primary
macronutrients--nitrogen (N), phosphorus (P2O5)
and potassium (K)--are the major building blocks of most fertilizers
and comprise the bulk of all fertilizer produced. The fertilizer
industry ensures that farmers receive the nutrients they need to enrich
the soil and, in turn, grow the crops that feed our nation and the
world. Fertilizer is a key ingredient in feeding a growing global
population, which is expected to surpass 9.5 billion people by 2050.
Half of all food grown around the world today is made possible through
the use of fertilizer,\1\ hence its importance to farmers and food
production.
---------------------------------------------------------------------------
\1\ Stewart, W.M., Dibb, D.W., Johnston, A.E. and Smyth, T.J.
(2005), The Contribution of Commercial Fertilizer Nutrients to Food
Production. Agron. J., 97: 1-6. https://doi.org/10.2134/
agronj2005.0001.
---------------------------------------------------------------------------
A variety of factors impact fertilizer markets, and most recently,
are negatively impacting supply and raising costs. Many in the
agricultural sector have experienced some challenges related to crop
inputs. Fertilizer is an essential input for the economic viability of
U.S. farmers and for feeding a growing global population. Challenges
impacting the fertilizer industry can also impact farmers.
Overview
Fertilizers are resourced based materials and produced primarily in
countries where these limited resources exist. While the number of
countries that produce fertilizers are more restricted due to the
availability of these resources, the demand for fertilizer is truly
global in nature and fertilizers are used by farmers in nearly every
country in the world. In addition, fertilizer demand, driven by crop
production, is seasonal with the window available to apply these
materials limited by crop planting seasons as well as weather.
Consequently, fertilizers are truly global commodities as these
materials are transported from the limited number of countries which
produce them to the global market which requires them. In fact, nearly
44% of all fertilizers produced globally, or more than 200 million tons
of material, are exported annually. Moving this material from
production facilities to farms requires virtually every mode of
transportation and a carefully orchestrated system of logistics to
serve farmers on a just-in-time basis.
Fertilizer markets and related supply chain challenges must be
considered within a global context. A variety of global and domestic
factors can impact the supply of fertilizer and fertilizer markets and
prices.
Domestic Production and Imports
Unlike microchips or other critical components, the U.S. has
substantial domestic nitrogen and phosphate fertilizer production. From
the standpoint of our nation's supply chain and food security, this is
good news. In 2020, the U.S. was the world's third largest producer of
nitrogen-based fertilizers and the second largest producer of phosphate
fertilizer. While we are a large producer, we also import. In 2020, 27%
of our nitrogen supply and 16% of phosphate supply was imported. In
contrast, the U.S. imports most of its potash supply, with 86% coming
from Canada in 2020.
Domestic production of fertilizers is at 5 year historical norms
while total planted acreage of corn, soybeans, wheat, and cotton are
down 0.3% from recent 2017 highs. However, relative to the last 2
years, domestic production is slightly below historical norms due, in
part, to weather events.
About 60% of domestic ammonia production capacity is located near
large natural gas reserves in Louisiana, Oklahoma, and Texas.\2\ The
February winter ice storms and Hurricane Ida disrupted production in
this critical production region. The winter storms in February of this
year resulted in missed production of approximately 250,000 short tons
of nitrogen fertilizers.\3\ This comprises 3.3% of the total domestic
nitrogen production between January and June.
---------------------------------------------------------------------------
\2\ U.S. Geological Survey, Mineral Commodity Summaries, January
2021; https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-nitrogen.pdf.
Editor's note: references annotated with are retained in
Committee file.
\3\ Calculated based on 2019 and 2020 average February production
levels. Between 2016 and 2019 ammonia production facilities operated at
an average of 90% of capacity, there is limited ability for
manufacturers to ``make-up'' for lost production.
---------------------------------------------------------------------------
Perhaps the pandemic's biggest impact on domestic fertilizer
production is the deferral of necessary maintenance that is now being
undertaken throughout 2021 and likely into 2022. Fertilizer production
facilities are multi-billion-dollar facilities that must undergo
periodic ``turnarounds'' that result in production shutdowns for about
2-6 weeks. Turnarounds were deferred to reduce potential exposure to
COVID from additional personal onsite in the middle of the global
pandemic. This has an impact on fertilizer supply as more production
facilities are currently undergoing maintenance than would otherwise be
the case. Moreover, this further erodes the ability of domestic
manufacturers to recover from February's lost production.
International/Governmental Supply Disruptions
Disruptions across the global supply chain can have an impact on
fertilizer production and supply, and this can further impact America's
farmers in terms of fertilizer prices and availability. For example,
Belarus has historically comprised 21% of the global exports of potash.
In August 2021, the U.S. Government, and other countries sanctioned
Belarus. Although the sanctions did not directly include the country's
solo potash exporter, potential legal liability may limit the purchase
of its potash. The U.S. only imported about 5% of our annual potash
supply from Belarus in each of the last 3 years. TFI does not have a
position on the sanctions themselves, but the sanctions are an example
of how the global nature of fertilizer supply can impact the supply-
demand balance and, consequently, fertilizer prices. The sanctions
against Belarus are negatively affecting potash markets and supply.
Another example of governmental actions that impact the market is a
ban imposed by China on exports of phosphate fertilizer. In 2020, China
accounted for approximately 25% of global phosphate fertilizer exports.
The ban on phosphate fertilizer exports by China at the end of
September has negatively impacted global supply by reducing the
quantity of phosphates available for import. On October 15, China also
instituted tighter export controls on other fertilizer materials
including urea. Urea accounts for 49% of global nitrogen use and China
accounted for 10% of global urea exports in 2020 so these additional
restrictions on Chinese exports have further tightened the global
nitrogen market.
Natural Gas
Natural gas prices are a key input cost for fertilizer production.
Depending on its cost, natural gas accounts for approximately 70-90
percent of the production cost for ammonia, with 40% used as fuel and
60% as the feedstock. Ammonia is directly applied as a fertilizer and
is also the building block for all other nitrogen fertilizers. It is
also required for the manufacture of ammonium phosphates, the most
widely used phosphate fertilizer materials which also contain nitrogen.
While the U.S. has enjoyed low natural gas prices in recent years, in
the past 6 months, domestic natural gas prices have increased by 224
percent.\4\ The steep increases in natural gas prices substantially
raises production costs for domestic fertilizer producers.
---------------------------------------------------------------------------
\4\ Energy Intelligence; Natural Gas Weekly; https://
www.energyintel.com/. Wellhead prices have more than doubled from $2.52
to $5.45 from April 2021 to October 18, 2021.
---------------------------------------------------------------------------
In Europe, record natural gas prices--which are currently four
times more expensive than in the United States--combined with other
pressures are forcing the continent's ammonia producers to reduce
output or idle plants which will lead to lower availability and higher
prices of fertilizers for farmers. The European Union comprises
approximately 9% of global nitrogen production, and these shutdowns are
impacting the global supply of fertilizer.
Rising domestic prices of natural gas are a chief concern as it
relates to domestic production of fertilizers. As experienced in
Europe, domestic facility closures would disrupt global markets and
negatively impact U.S. farmers.
Transportation
Fertilizer moves by rail, truck, barge, pipeline, and ocean vessels
and America's farmers and their suppliers rely on a safe and efficient
transportation network for their success.
Trucking capacity and the infrastructure of rural communities,
including broadband and roadways, must be addressed. All fertilizer
utilized in the United States touches a truck at least once, and the
timeliness of deliveries is crucial to farmers. Trucking capacity,
which impacts everyone in the agricultural sector, can be improved
through investment, regulatory reform, and efficiency gains. For
example, the current Gross Vehicle Weight (GVW) limit for Federal
Interstate Highways of 80,000 lbs. on five axles is woefully outdated.
Congress should authorize a voluntary program to allow up to ten states
to opt-in to allow 91,000 lb., six-axle, bridge formula compliant
trucks on Federal Interstate Highways within their borders. At 91,000
pounds, freight efficiency increases by 22 percent along with a
commensurate reduction in the carbon footprint per pound. Modernizing
weight restrictions for six-axle trucks would make U.S. farmers and
businesses more competitive and reduce the number of trucks needed to
haul the same amount of goods, reducing infrastructure wear-and-tear,
enhancing capacity, and benefiting the environment by reducing vehicle
miles traveled.
Both Congress and industry also need to find ways to broaden the
pool of available drivers. To this end, the Senate-passed bipartisan
Infrastructure Investment and Jobs Act, which should be enacted as soon
as possible, includes an important pilot program for up to 3,000
interstate professional drivers ages 18-20.
The following examples regarding the rail marketplace uniquely
impact the fertilizer industry.
On a ton-mile basis, more than half of all fertilizer moves by
rail. U.S. Government data indicates that fertilizer relies more on
rail transportation than other agricultural commodities.\5\ As such,
rail network disruptions can be a serious challenge. Rail carrier
implementation of large cost-cutting initiatives, such as precision
scheduled railroading (``PSR''), have disrupted rail service to many
shippers. PSR has made it more difficult and expensive to ship
fertilizer. Regarding rail rates, over the past 20 years, rail rates to
ship anhydrous ammonia--the building block of all nitrogen fertilizers
and one of the most efficient sources of nitrogen for farmers--
increased 206%, which is more than triple the average increase for all
commodities combined.
---------------------------------------------------------------------------
\5\ The Importance of Highways to U.S. Agriculture; https://
www.ams.usda.gov/sites/default/files/media/Main_Highway_Report.pdf.
U.S. Department of Agriculture; December 2020; page 13.
---------------------------------------------------------------------------
Another element of fertilizer transportation costs is the Tank Car
Committee. The Department of Transportation has delegated authority to
the rail industry via the Association of American Railroads (``AAR'')
Tank Car Committee (``TCC''). For many years, shippers have been trying
to work with AAR and DOT to reform the processes of the TCC.
Historically, TCC has imposed measures on shippers that raise serious
concerns about the extent of TCC authority. While this is a complicated
issue, to date, DOT has not responded to a shipper-industry petition
filed in 2016 on this matter.\6\ In recent years, regulatory actions
imposed or initiated by the TCC--without a cost-benefit analysis--have
raised shipping costs for fertilizer by millions of dollars.
---------------------------------------------------------------------------
\6\ Petition No. P-1678; Docket No. PHMSA 2016-0093.
Editor's note: the entire docket of the petition (totaling nine
documents) is retained in Committee file.
---------------------------------------------------------------------------
Conclusion
In summary, fertilizer is critical for food production and is truly
a global commodity. Our nation is blessed by a strong domestic
production industry. A confluence of factors impact global fertilizer
market supply chains. Current factors that have most influenced the
current market supply of fertilizer include (1) global demand for
fertilizer, which is largely driven by crop plantings and prices; (2)
recent weather events that disrupted domestic production; (3) COVID-19
related deferral of facility maintenance that is now being undertaken;
(4) international actions, including Belarus and China; (5)
transportation costs; and (6) the supply and cost of natural gas.
Thank you again for holding today's hearing and for the opportunity
to submit this statement. TFI looks forward to working with Congress to
address the challenges facing our nation's food supply chain.
______
Submitted Op-Ed by Hon. Cynthia Axne, a Representative in Congress from
Iowa
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[https://www.agri-pulse.com/articles/16649-opinion-the-soy-oil-crisis-
that-never-heated-up]
Opinion: The ``soy oil crisis'' that never heated up
10/18/21 11:30 a.m.
By Stephen Censky *
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* https://www.agri-pulse.com/authors/404-stephen-censky.
If you listen to certain groups in the food industry right now, you
may have heard claims that there are potential shortages or even
rationing of edible vegetable oil. Some go as far as using this
unfortunate fearmongering to suggest that Renewable Fuel Standard
volumes for bio-mass based diesel (made from used cooking oil,
vegetable oils, and animal fats) should be rolled back.
Is there indeed a soybean oil supply crisis?
Very simply, no. The data does not support the alarm.
Harvest is currently underway for more than 86 million soybean
acres, with U.S. farmers projected to produce a record soybean crop of
over 4.4 billion bushels this year. From that record soybean crop will
come a record amount of soybean oil available to meet both food and
fuel needs. Growers are efficiently producing more per acre and meeting
current demands. And, if the market signals for more soy next year, soy
farmers are more than capable of responding.
Not only are America's farmers growing more soybeans using less
land and energy per bushel, but also the soybean industry is gearing up
to process more soybeans, thus ensuring adequate soybean oil is
available for market needs. At least seven new oilseed processing
plants are under development, and soybean oil production by our
domestic processing industry is projected by USDA to reach a record
level this year--on top of a 26% growth in supply over the last 10
years. In short, the markets are responding to the new demands.
Increased soybean crushing here in the United States has a
beneficial side effect for U.S. consumers as well: An even greater
supply of this less expensive protein is available for food production.
When a soybean is crushed, about 4 pounds of soybean meal are produced
for every pound of soybean oil, and that meal is an excellent source of
protein for the animal food industry. As a result, ongoing industry
expansion to meet soybean oil needs will reduce feed costs and,
subsequently, lower meat prices for consumers if other factors remain
equal.
The unfortunate fact is that prices have increased not only for
soybean oil right now, but likewise for many products. Farmer input
costs have rapidly increased. For example, fertilizer prices have
approximately doubled this past year. Other parts of the supply chain
downstream from the farm are also experiencing higher costs, with the
producer price index for general freight trucking increasing by more
than 20% in slightly over a year and barge freight costs on the
Mississippi River about six times higher than just a few months ago.
Attempting to pin the inflationary pressures impacting the food and
agriculture sector across all cost categories solely on renewable fuels
expansion is illogical. Doing so would only stifle our ability to
reduce carbon emissions, could potentially increase protein prices for
livestock producers, and would keep the market from adopting soybean
processing expansion that would allow it to meet growing demand. This
would hurt farmers' ability to withstand the higher costs they, along
with much of the world, are facing.
Rather than create concern over edible soybean oil supplies, we
encourage our food industry peers to recognize that America's soybean
growers are meeting current demands at the same time the soy industry
prepares to meet even greater future demand for our versatile
commodity--be that for food, feed, fuel or soy's many other diverse
uses.
There are numerous real challenges, both ongoing and developing, in
food and agriculture. We are thankful soybean oil supply is not one of
them and that every bit of each bean--whether meal or oil--can be used
for America's vital, evolving agricultural markets.
Stephen Censky is CEO of the American Soybean Association.
For more opinions and ag news, go to: www.agri-pulse.com.
______
Submitted Letter by Hon. Jimmy Panetta, a Representative in Congress
from California; on Behalf of British Columbia Produce Marketing
Association, Et Al.
Joint Statement from North America's fresh produce industry on supply
chain disruptions
On behalf of North America's fresh produce industry, we are calling
for urgent government action to address significant ongoing supply
chain disruptions with impacts to our food systems, economies, and
ultimately individuals and families across the continent and around the
globe.
The COVID-19 global pandemic has created unprecedented public
health, economic, and logistical challenges for communities and supply
chains around the world. The fresh fruit and vegetable industry has
been no exception. From the seed to the dinner plate, our sector has
continued to work daily to find solutions to mitigate the impact of the
outbreak and ensure consumers continue to have access to our safe,
healthy and nutritious products.
Almost 2 years since the start of the pandemic, substantial
increases in costs and delays along the supply chain threaten our food
security and the long-term economic viability of the North American
fresh produce sector. It is important to note that these costs cannot
be fully borne by the industry and will ultimately be passed to
consumers. Sadly, these increases, which are already being felt by the
end consumer are likely to escalate, affecting most those who can least
afford it.
Examples of ongoing supply chain disruptions include:
Crippling port congestion--Gridlock at all major North
American ports has resulted in lines of ships waiting to dock
and containers stacked high waiting for unloading and pick-up.
For our highly perishable products, long delays at port can
result in loss of product, sales and ultimately food waste.
Significant delays in receiving equipment, building materials
and other inputs also serve to threaten upcoming growing
seasons.
According to Goldman Sachs, more than 30 million tons
of cargo are waiting for delivery.
Even once a vessel berths, it can take days to
discharge the containers.
Soaring demurrage and detention fees resulting from
port delays cannot be sustainably absorbed by the industry.
Long wait times for drivers picking up containers
result in further congestion and delays in delivery.
For Canada and parts of the United States, it is
important to note that much of our 2021 growing season has
ended and the busier import season is set to begin.
Delays and exploding costs in container shipping--While
major international shipping companies have been sending empty
containers back to Asia and posting record profits, weeks-long
shipping delays have resulted in major losses of product and
sales for the North American industry. Coupled with
exponentially growing container costs and a limited number of
refrigerated containers, this situation creates serious
challenges for the fresh produce industry and our countries'
food security. Governments must work together to provide
greater oversight of international ocean carriers and ensure
fair and ethical practices to support the continued flow of
goods.
The cost of shipping containers has tripled or more in
the past year, with estimates increasing from $3000 per
container to $15,000 to $18,000, and even as high as
$25,000 per container.
Due to the highly perishable nature of our
commodities, there are already a limited number of carrier
companies that accept fresh produce shipments. One of the
largest of these has recently announced it will no longer
carry fresh produce due to the increase in claims being
made.
Despite the significant delays in product delivery,
shipping companies are holding container rates for shorter
periods of time. These companies have also begun cancelling
bookings, only to reschedule them at a higher rate.
Cascading effects of inconsistent product delivery--When a
significant delay in receiving perishable product is followed
by receiving a large amount at once, a string of new issues and
costs arise, including arranging distribution and sourcing
additional labour required to re-grade and re-package
salvageable product to recover sales and avoid waste. Barriers
to exports resulting in more domestic product remaining in
North America also have the potential to create new supply and
demand challenges, including decreased profitability to all
domestic supply chain partners.
Many aspects of our supply chain are designed to
penalize late or lengthy deliveries. For example,
distribution centres charge fees for missed appointments or
changes, carriers charge fees for detention and demurrage,
and upstream distributors charge fees for partial or
unfilled orders. This further inundates the supply chain
with additional costs.
These ongoing disruptions have brought about
unprecedented issues over extended periods of time,
unforeseen challenges that many contracts simply did not
account for. This has resulted in an increasing number of
legal proceedings over contract disputes, placing further
stress on the supply chain.
Continuing labour shortages across the supply chain--The
significant labour shortages in the fresh produce industry have
extended from the farm throughout the supply chain, and are
impacting everything from planting and harvest, to packing,
transportation and retail/foodservice. Governments have a key
role to play in incentivizing workforce re-engagement and
facilitating access to both domestic and international labour.
The challenges agricultural employers are facing in
attracting workers is exacerbated by procedural delays and
COVID-19-related protocols.
The National Council of Agricultural Employers
recently cited a report that in Q2 of 2020 more than
100,000 job openings were posted in the U.S. agriculture
sector which called for workers with no or limited
experience; even so, Department of Labor records show that
only 313 of these openings were filled by domestic workers.
The American Trucking Association has estimated that
the U.S. alone has a shortage of around 80,000 truck
drivers, and the driver shortage tops the American
Transportation Research Institute's list of Top Industry
Issues. The scarcity of commercial truck drivers is made
worse in the produce industry, as drivers may opt to take
on less urgent, non-refrigerated loads rather than the
urgent, time-sensitive and highly temperature-controlled
loads necessary in fresh produce.
Growing input shortages--From fertilizer, crop protection
products and greenhouse building materials, to pallets,
cardboard and packaging, the fresh produce supply chain is
experiencing increasing shortages and rising costs in inputs
that are critical to our sector, with impacts being felt now
and threatened for the future.
In spring 2021, lumber shortages drove wood prices up
nearly 350%, resulting in a pallet shortage that lasted for
nearly 6 months. This shortage had significant impacts on
our sector, as fresh produce cannot move without pallets,
and fresh produce's status as a low margin item, our
industry was the last to receive new pallets from suppliers
when they finally became available.
In summer 2021, prices for paper `pulp', the raw
material used to make boxes, were reported as being as much
as 40% higher, year-over-year, which has resulted in a
massive increase in the price of cartons--the primary
shipping container for fresh produce.
Fertilizer costs have risen by more than 20% over the
past year, with China's recent announcement of restricted
energy consumption in key phosphate production regions
leading to anticipated shortages headed into the 2022
growing seasons.
The Canadian greenhouse sector has reported delays of
more than 8 months in receiving critical building
materials, posing a major barrier to preparations for the
next growing season.
Stockpiling of product by consumers--While the issues
outlined above pose significant concerns, it is vitally
important that they are not further exacerbated by consumer
panic buying or stockpiling of goods. Every effort must be made
to address supply chain disruptions while also clearly
communicating this to the broader public.
In the early days of the pandemic, our governments took swift
action to invest in food systems and to work together to keep supply
chains moving. The situation we now face echoes some of the challenges
we saw in the spring of 2020, with the added complications of heavier
border traffic, consumer purchasing habits that have been significantly
increased over the course of the pandemic, and government support
programs that are winding down or have ended.
We cannot emphasize strongly enough the need for our governments to
work together to address these issues in a multi-lateral and holistic
manner. The examples outlined above demonstrate clearly the complexity,
interconnectedness and dependencies of our supply chain and the
challenges we face. It is imperative that governments work urgently
with all parts of the supply chain to mitigate the serious threats of
food insecurity and food shortages. These multi-faceted problems will
not be resolved overnight and delays in course correction are likely to
compound and further complicate the situation.
Simply put, without multilateral engagement to find solutions,
these issues will create long lasting impacts to the detriment of all
North American economies. These include: bankruptcies, legal disputes,
industry consolidation, inflation, inaccessible food supplies, and many
more. Time is against us, and the necessity of addressing these
challenges now cannot be understated.
Our organizations stand ready to work with governments and partners
throughout the supply chain to ensure a path forward that enables the
continued flow of our essential goods.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[British Columbia [California [Canadian [Canadian
Produce Strawberry Horticultural Produce
Marketing Commission] Council] Marketing
Association] Association]
[Fruit and [Florida Fruit & [Florida Tomato [Fresh Produce
Vegetable Vegetable Committee] Association of
Dispute Association] the Americas]
Resolution
Corporation]
[Northwest [Ontario Fruit & [Ontario [Ontario Produce
Horticultural Vegetable Greenhouse Marketing
Council] Growers' Vegetable Association]
Association] Growers]
[Great American [Association des [Association [Texas
Media Services producteurs Quebecoise de International
and Produce maraiichers du la distribution Produce
Processing] Quebec] de fruits et Association]
legumes]
[Toronto [United Fresh [Western
Wholesale Produce Growers]
Produce Association]
Association]
______
Submitted Article by Hon. Glenn Thompson, a Representative in Congress
from Pennsylvania
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[https://www.thederrick.com/free/cranberry-schools-thinking-outside-
the-box-to-keep-students-fed/article_6f9c11fc-3eff-11ec-92a0-
4bae287f7f79.html]
Cranberry schools `thinking outside the box' to keep students fed
By Laura O'Neil, Staff writer *
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* https://www.thederrick.com/users/profile/lauraoneil.
Nov. 2, 2021
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Cranberry Area High School students Preston Forrest, front,
and Aidan O'Brian visit the cafeteria for lunch on Monday. They
were served by Connie Schwabenbauer, left, and Carolyn Parkes,
right In the background, Kim Daugherty puts a tray of food in
the oven.
Photos by Laura O'Neil.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Connie Schwabenbauer serves Cranberry Area High School
students. from left. Kenny Lavrich, Avery Keenan and Coin Zerbe
their lunches on Monday.
Photos by Laura O'Neil.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Carolyn Parkes serves chicken dinner to Cranberry Area High
School students Colin Zerbe, left, and Braden Rekiel, right.
Photos by Laura O'Neil.
``We've been improvising . . . We made our own muffins one
morning. We are really thinking outside the box.''
Kim Daugherty
As labor, transportation and food shortages spread across the
country, local schools are adjusting to keep their students fed.
``We have scaled back considerably from what we used to do,'' said
Kim Daugherty, food services director for the Cranberry Area School
District. ``If you go back before COVID, we had seven or eight homemade
condiments.''
``We have just cut back on a lot of our offerings . . . Instead of
having seven main entrees, we have cut it to three.''
Even though there are fewer options in the cafeteria line,
Daugherty said people shouldn't worry. The kids are still getting fed.
``This year all the students are eating for free, so our
participation is really high,'' she said. Between the high school and
elementary schools, the school district is providing more than 800
lunches and about 500 breakfasts.
The district purchases its food from various suppliers, including
US Foods, which is a national supplier, and Schneider's Dairy. The U.S.
Department of Agriculture provides the district with cheese, ground
meat, fruit and vegetables.
In October, US Foods limited how many cases a buyer can purchase at
once. Now, instead of ordering 100 cases a week, Cranberry schools can
only order 50 cases.
Limiting the size of orders has enabled US Foods to replenish its
inventory, but it has also forced buyers to look for other options.
``We go through 11 cases of cereal a week and ten cases of mini
muffins. That's 20 cases right there that we are just using at
breakfast time,'' Daugherty said.
To compensate, the cafeteria has been serving more foods from local
suppliers, such as Schneider's Dairy. Daugherty said she has purchased
things like salt and sugar from local stores.
``We've been improvising . . . We made our own muffins one morning.
We are really thinking outside the box.''
The cafeteria is also facing a shortage of disposable products like
straws, plastic wrap and aluminum foil. Daugherty has had to buy these
items from places like Walmart and Sam's Club.
Last year, during the height of the COVID-19 pandemic, the
cafeteria switched to using paper plates and disposable silverware. At
the beginning of this year, it switched back to regular plates and
silverware.
On Monday, Cranberry Area High School students lined up to receive
helpings of chicken dinner. One student remarked, ``Chicken dinner!
That looks rad.'' Another was disappointed that there weren't any
muffins.
Overall, Daugherty said, the high school students have been
understanding about the adjustments in the cafeteria. ``The kids are
fantastic. They are just very gracious.''
The district's cafeteria staff, Daugherty said, has been able to
``rise to the occasion, whatever it is, and they all work together. We
couldn't do what we do without them.''
``Everything just has to come together, and you have to be ready to
feed 800 people around 11 o'clock.''
Laura O'Neil, reporter for The Derrick and The News-Herald,
can be reached at [email protected] or (814) 677-
8357.
______
Submitted Letter by Hon. Dusty Johnson, a Representative in Congress
from South Dakota
November 4, 2021
Hon. Pete Buttigieg,
Secretary,
U.S. Department of Transportation,
Washington, D.C.
Dear Secretary Buttigieg,
Amid the growing supply chain crisis, drivers in the trucking
industry have stepped up to ensure the timely delivery of goods. Yet
even with their efforts, there simply aren't enough truckers on the
road to meet the demand.\1\ Given this, we urge the Department of
Transportation (DOT) to proceed with the Federal Motor Carrier Safety
Administration's (FMCSA) Under-21 Commercial Driver Pilot Program.
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\1\ Wanted: 80,000 truck drivers to help fix the supply chain.
https://www.cnn.com/2021/10/19/economy/trucking-short-drivers/
index.html.
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Currently, only commercial driver's license (CDL) holders over the
age of 21 can operate commercial motor vehicles (CMVs) in interstate
commerce. However, 49 states and the District of Columbia already allow
18 to 20 year old CDL holders to operate CMVs in intrastate commerce.
Accordingly, Congress supported, and the Trump Administration began,
the process to implement the FMCSA's Under-21 Commercial Driver Pilot
Program to allow drivers aged 18, 19, and 20 to operate CMVs in
interstate commerce. This new pilot program would create a road map to
drastically increase the number of truck drivers and alleviate the
current crisis. Yet, the DOT has not taken action to move this program
forward.\2\
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\2\ FMCSA Proposes New Under-21 Commercial Driver Pilot Program.
https://www.fmcsa.dot.gov/newsroom/fmcsa-proposes-new-under-21-
commercial-driver-pilot-program.
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As our supply chain issues continue to grow, we should be doing
everything we can to fix the problem. Therefore, we urge implementation
of FMCSA's Under-21 Commercial Driver Pilot Program. It's critical that
we pursue all avenues to alleviate the supply chain crisis and get
goods moving again.
Thank you for your attention to this letter. We look forward to
your prompt response.
Sincerely,
Hon. Dusty Johnson, Hon. Josh Harder,
Member of Congress. Member of Congress.
Hon. David G. Valadao, Hon. Abigail Davis Spanberger,
Member of Congress. Member of Congress.
Hon. Bill Johnson, Hon. Sanford D. Bishop, Jr.,
Member of Congress. Member of Congress.
Hon. Troy Balderson, Hon. Jim Cooper,
Member of Congress. Member of Congress.
Hon. Jackie Walorski, Hon. Jim Costa,
Member of Congress. Member of Congress.
Hon. Bob Gibbs, Hon. Jimmy Panetta,
Member of Congress. Member of Congress.
Hon. Don Bacon, Hon. Cynthia Axne,
Member of Congress. Member of Congress.
Hon. Madison Cawthorn, Hon. Dan Newhouse,
Member of Congress. Member of Congress.
Hon. David B. McKinley, Hon. Randy K. Weber, Sr.,
Member of Congress. Member of Congress.
Hon. Eric A. ``Rick'' Crawford, Hon. Brian J. Mast,
Member of Congress. Member of Congress.
Hon. Mo Brooks, Hon. Bill Posey,
Member of Congress. Member of Congress.
Hon. Ashley Hinson, Hon. Stephanie I. Bice,
Member of Congress. Member of Congress.
Hon. Lauren Boebert, Hon. James R. Baird,
Member of Congress. Member of Congress.
Hon. Louie Gohmert, Hon. Robert J. Witmann,
Member of Congress. Member of Congress.
Hon. Ann Wagner, Hon. Ronny Jackson,
Member of Congress. Member of Congress.
Hon. Fred Keller, Hon. Carol D. Miller,
Member of Congress. Member of Congress.
Hon. Kelly Armstrong, Hon. Jake LaTurner,
Member of Congress. Member of Congress.
Hon. William R. Timmons IV, Hon. Mike Bost,
Member of Congress. Member of Congress.
Hon. John H. Rutherford, Hon. John R. Moolenaar,
Member of Congress. Member of Congress.
Hon. Larry Bucshon, Hon. Claudia Tenney,
Member of Congress. Member of Congress.
Hon. Russ Fulcher, Hon. Rick W. Allen,
Member of Congress. Member of Congress.
Hon. H. Morgan Griffith, Hon. Mariannette Miller-Meeks,
Member of Congress. Member of Congress.
Hon. Adrian Smith, Hon. Mike Gallagher,
Member of Congress. Member of Congress.
Hon. Greg Pence, Hon. Michelle Fischbach,
Member of Congress. Member of Congress.
Hon. Robert E. Latta, Hon. Tracey Mann,
Member of Congress. Member of Congress.
Hon. David Rouzer, Hon. Van Taylor,
Member of Congress. Member of Congress.
Hon. Barry Loudermilk, Hon. Paul A. Gosar,
Member of Congress. Member of Congress.
Hon. Ben Cline, Hon. Peter Meijer,
Member of Congress. Member of Congress.
Hon. Andy Harris, Hon. Glenn Thompson,
Member of Congress. Member of Congress.
Hon. Ron Estes, Hon. Randy Feenstra,
Member of Congress. Member of Congress.
Hon. Scott Perry, Hon. Brad R. Wenstrup,
Member of Congress. Member of Congress.
Hon. Darin LaHood, Hon. Markwayne Mullin,
Member of Congress. Member of Congress.
Hon. Victoria Spartz, Hon. Harold Rogers,
Member of Congress. Member of Congress.
Hon. Daniel Meuser, Hon. Byron Donalds,
Member of Congress. Member of Congress.
Hon. Steven M. Palazzo, Hon. Richard Hudson,
Member of Congress. Member of Congress.
Hon. Andy Barr, Hon. Elise M. Stefanik,
Member of Congress. Member of Congress.
Hon. Scott Fitzgerald, Hon. Mike Kelly,
Member of Congress. Member of Congress.
Hon. Tom Reed, Hon. Brett Guthrie,
Member of Congress. Member of Congress.
Hon. James Comer, Hon. Ralph Norman,
Member of Congress. Member of Congress.
Hon. Julia Letlow, Hon. Glenn Grothman,
Member of Congress. Member of Congress.
Hon. Steve Womack, Hon. Michael Guest,
Member of Congress. Member of Congress.
Hon. Michael Cloud, Hon. Troy E. Nehls,
Member of Congress. Member of Congress.
Hon. Barry Moore, Hon. Lisa C. McClain,
Member of Congress. Member of Congress.
Hon. Jodey C. Arrington, Hon. Michael K. Simpson,
Member of Congress. Member of Congress.
______
Submitted Video by Hon. Troy Balderson, a Representative in Congress
from Ohio
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[https://www.wsj.com/video/series/on-the-news/help-wanted-truck-
drivers-to-unclog-the-supply-chain/86C1B309-522E-4C81-88D1-
16CAC0ADE1BB]
Help Wanted: Truck Drivers to Unclog the Supply Chain
Trucking companies desperately need drivers. Here's how they're
tackling the problem
Editor's note: the video is available at the hyperlink above,
and is retained in Committee file.
By Wall Street Journal
Nov. 3, 2021 5:37 p.m.
The trucking industry has long been dealing with a shortage of
drivers and high job turnover, but supply-chain bottlenecks have
underscored the need for new recruits. Here's how some companies are
trying to get them behind the wheel. Photo: Robyn Beck/AFP via Getty
Images.
______
Submitted Comment Letter by Hon. Michelle Fischbach, a Representative
in Congress from Minnesota; Authored by Jack Roney, Director of
Economics and Policy Analysis, American Sugar Alliance
June 18, 2021
Hon. Thomas J. ``Tom'' Vilsack, Bruce Summers,
Secretary, Administrator, Ag. Marketing
Service
U.S. Department of Agriculture, U.S. Department of Agriculture,
Washington, D.C.; Washington, D.C.
Dear Secretary Vilsack & Administrator Summers:
We write today to provide information on critical goods and
infrastructure for the U.S. sugar sector in response to your request
for information. The structure of the domestic sugar industry in the
United States was resilient in meeting the joint challenges of adverse
weather in 2019, which lowered domestic sugar stocks, and the COVID-19
pandemic in 2020, which shocked consumer demands in multiple ways. The
U.S. sugar supply chain is deliberately configured to withstand such
shocks, which are all too common for agricultural commodities.
On February 24, 2021, President Biden issued an Executive Order
(E.O.) on ``America's Supply Chains,'' which directs the Secretary of
Agriculture to submit, within 1 year, a report to the President that
assesses the supply chains for the production of agricultural
commodities and food products. The U.S. Department of Agriculture
(USDA) has requested that the public submit comments and information
(``Supply Chains for the Production of Agricultural Commodities and
Food Products,'' 86 FR 20652) to assist the USDA in preparing the
report required by E.O. 14017. This submission from the American Sugar
Alliance is in response to that request.
As noted in 86 FR 20652, USDA notes its particular interest in
those essential goods necessary for nutritional security given its
related importance to national and economic security. This submission
will detail how sugar is a critical and essential good for national and
economic security.
Moreover, as noted by USDA, sufficient processing, distribution,
and production capacity across all agricultural commodities are
critical for ensuring adequate access to essential goods. This
submission will discuss how the current domestic sugar and trade
policies were critical in maintaining the integrity and resilience of
the domestic supply chain for the production, processing, and
distribution of safe and adequate supplies of sugar for the American
public during the pandemic despite a challenging economic situation.
Introduction: America's Supply Chains for Sugar
The USDA notes in the request for public responses to direct
comments at the policy objectives outlined in EO 14017 as they affect
agricultural and food products supply chains.
In E.O. 14017 President Biden affirmed that the
``. . . United States needs resilient, diverse, and secure
supply chains to ensure our economic prosperity and national
security. Pandemics and other biological threats, cyber-
attacks, climate shocks and extreme weather events, terrorist
attacks, geopolitical and economic competition, and other
conditions can reduce critical manufacturing capacity and the
availability and integrity of critical goods, products, and
services. Resilient American supply chains will revitalize and
rebuild domestic manufacturing capacity, maintain America's
competitive edge in research and development, and create well-
paying jobs. They will also support small businesses, promote
prosperity, advance the fight against climate change, and
encourage economic growth in communities of color and
economically distressed areas . . .''
The most recent report examining the U.S. sugar-producing industry
estimates that 142,000 jobs in 22 states and $20 billion in annual
economic activity are associated with domestic sugar production.\1\
Many of the jobs and businesses associated with the U.S. sugar industry
are in highly vulnerable and economically distressed rural areas.\2\
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\1\ LMC International, ``The Economic Importance of the Sugar
Industry to the U.S. Economy--Jobs and Revenues,'' Oxford, England,
August 2011.
\2\ See examples of how the U.S. sugar industry helped recovery
last year in rural America at https://sugaralliance.org/sugar-industry-
sustains-communities-during-pandemic/15934 and https://
sugaralliance.org/sugar-industry-lends-helping-hand-to-support-nations-
recovery/15953.
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American food manufacturers and consumers depend on a reliable,
dynamic, geographically-dispersed domestic sugar industry to provide
safe, high-quality, responsibly-produced sugar at a reasonable price.
U.S. sugar policy is working well for American consumers, food
manufacturers, and taxpayers. In 2020, 34.4 million tons of sugarcane
and 33.6 million tons of sugarbeets were produced in the United States
for processing into sugar for domestic food manufacturing and for
household consumption. In total, 4.3 million tons of sugar from
domestic sugarcane were refined and 5.1 million tons of sugar from
domestic sugarbeets were processed.
And as noted in E.O. 14017, resilient supply chains, like those
around our domestic sugar supplies, are
``. . . secure and diverse--facilitating greater domestic
production, a range of supply, built-in redundancies, adequate
stockpiles, safe and secure digital networks, and a world-class
American manufacturing base and workforce. Moreover, close
cooperation on resilient supply chains with allies and partners
who share our values will foster collective economic and
national security and strengthen the capacity to respond to
international disasters and emergencies . . .''
However, concerns over adequate domestic supplies of sugar are not
new to the United States. For example, for reasons of food security,
from 1890-1894 the U.S. Congress offered a bounty to entice investment
by farmers to grow the crop and investors to build factories to
encourage the growth of a domestic sugar industry.\3\ During WWII sugar
was the first commodity rationed and the last commodity to come off
rationing.
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\3\ See F.R. Rutter. 1902. ``The Sugar Question in the United
States,'' Quarterly Journal of Economics, Vol. 17(1): 44-81.
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More recently, during the 2020 pandemic, consumer hoarding behavior
was observed at the nation's retail grocery stores and supermarkets as
essential food and consumer goods supplies were overwhelmed by spiking
demands. Ingredients for baking and cooking (sugar, flour, oils, etc.)
were top food items in demand as retail food service shuttered
overnight. To meet those challenges and to provide sufficient supplies
to food manufacturers, during March-May 2020 the domestic sugar
industry put an equivalent of an additional 53 million 4 lb bags on the
shelf in record time to meet consumer needs and provided a calming
effect of a resilient supply chain.
Moreover, sugar is an essential ingredient in the manufacture of
most baked goods, snacks, soft drinks, and desserts.\4\ Without
reliable supplies of sugar over the past year, it is likely we would
have seen several food manufacturers having to idle operations
resulting in lost jobs and shortages of staple goods at grocery stores
at a time when consumers needed those more than ever, due to the
closure of most food service establishments.
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\4\ A reported 74 percent of consumer-packaged foods contain
caloric sweeteners (Ng, S.W., M.M. Slining, and B.M. Popkin. 2013.
``Use of Caloric and non-caloric sweeteners in U.S. consumer packaged
foods,'' Journal of the Academy of Nutrition and Dietetics, Vol. 112
(11): 1828-1834.
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Section (i) ``critical goods and materials underlying agricultural and
food product supply chains.'';
As noted in the Presidential Policy Directive 21 (PPD-21) on
Critical Infrastructure Security and Resilience and as outlined
recently by the Food and Drug Administration (FDA) and USDA, ``. . .
all components of the Food and Agricultural Sector are considered
critical infrastructure.'' Sugarcane and sugarbeets are critical for
the production of sugar and sugar is a critical natural food ingredient
necessary for food manufacturing and for household
consumption.5-6 In fact, 68% of packaged foods and
beverages purchased in the United States contain added sugars.\7\
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\5\ See Presidential Policy Directive (February 12, 2013; https://
obamawhitehouse.archives.gov/the-press-office/2013/02/12/presidential-
policy-directive-critical-infrastructure-security-and-resil).
\6\ See the FDA-USDA MOU (May 20, 2020; https://www.usda.gov/sites/
default/files/documents/mou-between-fda-usda-dpa.pdf).
\7\ Popkin B.M., Hawkes C. Sweetening of the global diet,
particularly beverages: patterns, trends, and policy responses. Lancet
Diabetes Endocrinol. 2016; 4: 174-86.
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Real sugar comes from sugar beets and sugar cane. Sugar occurs
naturally in all green plants. Of all plant varieties, sugar beet and
sugar cane contain the highest concentrations of sucrose, making them
the most efficient way for farmers to grow and harvest sugar. The same
pure sugar extracted from sugar cane and sugar beets is identical to
the sugar that is found in your pantry.
Sugar has several functional properties in food and beverages.
Sugar plays a crucial role in food preservation, helping to extend the
shelf-life of certain food products.[5] For example, in jams
and jellies sugar's ability to attract water prevents microorganisms
from multiplying and spoiling food. In breads and baked goods this same
quality keeps the bread moist, extending the shelf life thus reducing
waste. Sugar can act as a preservative for medicines too and is also
used for coating and flavoring medicines to mask their bitterness.
There are over 60 different forms of sugar that provide a multitude of
functions in the U.S. marketplace from making healthy foods more
palatable to coatings on medicines masking their bitterness.
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\[5]\ Davis, E.A. Functionality of sugars: physicochemical
interactions in foods. American Journal of Clinical Nutrition. 1995 ;62
(suppl.): 170S-177S.
---------------------------------------------------------------------------
The 2020-2025 Dietary Guidelines for Americans recognize that
``added sugars help with preservation; contribute to functional
attributes such as viscosity, texture, body, color, and browning
capability; and/or help improve the palatability of some nutrient-dense
foods.'' [4] For example, sugar is a key component of the
Maillard Reaction in products like bread and other nutrient dense
foods, improving palatability.\8\ Because of the multiple roles it
plays, there is no single ingredient that can replace sugar's flavor
and function. When sugar is removed, often several ingredients are
added.
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\[4]\ U.S. Department of Agriculture and U.S. Department of Health
and Human Services. Dietary Guidelines for Americans, 2020-2025. 9th
Edition. December 2020. Available at DietaryGuidelines.gov. Accessed
January 14, 2021.
\8\ [1] Davis EA. Functionality of sugars:
physicochemical interactions in foods. American Journal of Clinical
Nutrition. 1995; 62(suppl.): 170S-177S [3] Goldfein KR, Slavin J.L. Why
Sugar is Added to Food: Food Science 101. Comprehensive Reviews in Food
Science and Food Safety. 2015; 14(5): 644-656.
``Overall, the public health recommendation about `added
sugars' must be balanced with the reality that sugar added to
food is an important piece of the food science puzzle given its
several functionalities in food. Not only can a spoonful of
sugar help the medicine go down, but it can help fruit,
vegetables and fiber go down as well.'' (Goldfein and Slavin,
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2015).
Sugar is a key partner in nutrient delivery. Adding a limited
amount of sugar to foods that provide important nutrients--like whole-
grain cereal, flavored milk, or yogurt--to improve their taste makes
sugar a key partner in nutrient delivery.
According to the 2020-2025 Dietary Guidelines, improving
palatability of some nutrient-dense foods, helps to meet food group
recommendations. ``In fact, the nutrient dense choices included in the
Health U.S.-Style Dietary Pattern are based on availability in the U.S.
food supply and include 17-50 calories from added sugars, or 1.5-2
percent of total calories.'' (USDA 2020).
Sugar is a simple carbohydrate, providing glucose that the brain
and muscles need to function. Carbohydrates are an integral part of a
healthy diet.[3] Carbohydrates (sugars and starch) are the
primary source of energy for the body because they are broken down into
glucose. Glucose, which makes up half of each sugar molecule, is
essential to the function of the brain, muscles, and other organs (our
brains require around 130 grams of glucose per day).
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\[3]\ Goldfein K.R., Slavin J.L. Why Sugar is Added to Food: Food
Science 101. Comprehensive Reviews in Food Science and Food Safety.
2015; 14 (5): 644-656.
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Sugar is an ingredient that consumers know and recognize--and
during the Pandemic, consumers turned to simple, essential ingredients
like sugar for baking and cooking at home to both feed their families
and bring some joy as restaurants closed and home cooking replaced food
service purchases. Sugar, whether from fruits and vegetables, or
extracted and crystallized, has been an important part of human diets
throughout time. Consumers recognize sugar on an ingredient list,
whether on the side panel of a food product or in a recipe. Sugar is
pure and contains no preservatives or additives of any kind. Replacing
sugar in food is a difficult and time-consuming process of trial and
error. Changing food recipes at the industrial level is also quite
expensive requiring product reviews by the appropriate food
regulators.[7]-[8]
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\[7]\ https://onlinelibrary.wiley.com/doi/full/10.1111/1541-
4337.12151#: :text=Sugar percent20
provides percent20bulk percent20which percent20impacts,than
percent20sucrose percent20
(Spillane percent202006).
[8] https://www.foodbusinessnews.net/articles/7433-g-m-
o-labeling-alone-may-cost-americans-3-8-billion.
---------------------------------------------------------------------------
Section (iii) ``the manufacturing or other capabilities necessary to
produce [sugar]'';
American sugar producers are among the world's most efficient,
while adhering to standards and costs for environmental, consumer, and
worker protections that are among the highest in the world. American
sugar producers can compete against foreign producers on a level
playing field, free of government interventions, but cannot compete
against foreign sugar subsidies that lead to a world sugar market with
dumped surpluses and depressed prices.
The current U.S. sugar policy is a critical response to foreign
subsidization and dumping practices that result in a highly volatile
global market for sugar. Absent current policy, American jobs in sugar
production would be lost to foreign unfair trading practices and the
viability and resilience of the U.S. food supply chain would be
threatened. As noted at the 2018 Sugar Symposium by an industry
representative, ``Historically big food companies demanded high-quality
sugar but didn't want to pay for its actual cost of production. Now
dependable delivery and a reputation with consumers for having top-end
products is of increased importance. I am more worried about
availability and security of supply.'' \9\
---------------------------------------------------------------------------
\9\ See article at Agri-pulse (https://www.agri-pulse.com/articles/
11320-availability-and-exemplary-top-grade-service-gaining-higher-
priority-in-sugar-market).
---------------------------------------------------------------------------
The U.S. sugar industry is among the world's largest and its
producers are among the most competitive (see figure 1 below). The
United States is the world's fifth largest sugar producer, the third
largest consumer, and the third largest importer behind China and
Indonesia. Despite the high cost of complying with some of the world's
highest labor and environmental standards. The United States has the
20th lowest cost of production, compared to the other 94 sugar-
producing countries.\10\ Most of those other sugar producers are
developing countries with far lower government-imposed labor and
environmental standards, regulations and costs.
---------------------------------------------------------------------------
\10\ LMC International, ``Sugar Production Costs: Global
Benchmarking 2011 Report,'' August 2012, Oxford, England.
---------------------------------------------------------------------------
More than half of U.S. sugar production is from sugarbeets and a
little less than half is from sugarcane.
Figure 1. U.S. low costs of sugar production
The United States: One of the World's Largest and Lowest-Cost Sugar
Producers
------------------------------------------------------------------------
------------------------------------------------------------------------
U.S. rank among world sugar markets \1\
------------------------------------------------------------------------
U.S. Rank
------------------------------------------------------------------------
Production 5
Consumption 3
Imports 3
------------------------------------------------------------------------
U.S. cost of production rank among all producers \2\
------------------------------------------------------------------------
U.S. Rank # of Producing
Countries/Regions
------------------------------------------------------------------------
All 20 95
Beet...................... 1 35
Cane...................... 35 61
------------------------------------------------------------------------
\1\ USDA, Foreign Agricultural Service, May 2021. Rankings based on 5
year Olympic Average (2015/16-2021/22).
\2\ LMC International, Sugar Production Costs: Global Benchmarking 2011
Report, August 2012, Oxford, England. ``One'' ranking = lowest cost.
The U.S. industry has 45 mills, factories, and refineries that
process sugarbeets, sugarcane, and raw cane sugar, with that sugar
distributed from 91 locations strategically located throughout the
United States (see figures 2 and 3 below).
Figure 2. U.S. sugar industry profile
U.S. Sugar Industry Profile
2020/21
(Thousand short tons, raw value)
------------------------------------------------------------------------
------------------------------------------------------------------------
Beet Sugar Production 5,118 21 beet factories in 9
states \1\
Cane Sugar Production 4,181 16 cane mills in 3 states
-------------
Total 9,299 37 facilities in 12 states
-------------
Sugar consumption 12,230
TRQ Imports \2\ 1,673 40 WTO quota-holding
countries + FTAs
Mexico Imports [3] 981 Additonal U.S. import needs
Cane Sugar Refineries 8 refineries in 6 states
Jobs generated 142,000 22 states \4\
------------------------------------------------------------------------
\1\ Sugarbeets grown in 11 states.
\2\ Tariff-rate quota imports for domestic food use, actual entries.
Total minimum access provided: 1.6 mst.
\3\ Limited under suspension agreements negotiated between U.S. and
Mexican Governments in 2014; amended in 2017.
\4\ LMC International, ``The Economic Importance of the Sugar Industry
to the U.S. Economy--Jobs and Revenues ,'' Oxford, England, August
2011. Revenues generated: $20 billion per year.
Data source: USDA, June 2021 WASDE.
The sugar industry is largely structured as farmer-owned
cooperatives. The cooperative model has, in some circumstances, been
used when corporations choose not to remain in such narrow-margin
businesses as sugar. Cooperatives have proven to be effective in
eliminating excess costs in the U.S. sugar industry, improving
efficiency, and providing growers the opportunity to vertically
integrate, govern, and earn more of the food production dollar. Thus,
the farmer-owned cooperative business model is a mainstay of the
domestic sugar industry.
Figure 3. U.S. sugar industry locations
Beet sugar is produced in 11 states primarily in the north, because
cold winter temperatures permit beets to be stored outside with minimal
loss of their sucrose content. The outside storage of beets permits
beets to be efficiently processed long after their harvest. Beet sugar
primarily serves the interior of the country. This source of sugar is
located near major food manufacturers, who have facilities close to
other agriculture raw materials.
Sugarcane is grown in three states, processed into raw sugar, then
refined at eight coastal refineries. Cane sugar primarily serves the
heavily populated coastal regions of the country.
Beet and cane refined sugar warehousing and distribution terminals
are strategically located throughout the U.S. to meet customer needs on
a just-in-time basis. Refined sugar is sensitive to heat and moisture
and as food grade product must be kept under seal during shipment by
train and truck. Sugar is heavy and transportation is expensive, so
moving the product short distances is preferred to reduce costs and
maximize efficiencies.
For the past 5 years, sugarcane and sugarbeet processing capacity
has been currently sufficient to provide 65-76 percent of U.S. sugar
needs. American cane sugar refiners refine most of the imported sugar
such that more than 90 percent of sugar consumed in the U.S. comes from
American farms or American cane refiners. The remaining ten percent of
sugar consumed in the U.S. is imported as refined sugar. At a minimum,
the United States has agreed to market access commitments under the
World Trade Organization (WTO) or through bilateral/regional free trade
agreements (FTAs) to allow approximately 1.4 million metric tons per
year of raw and refined sugar to enter the United States on
preferential terms, and in most cases duty free. In years when the
production of sugarcane or sugarbeets is sufficiently low, the
United States will seek additional supplies of imported sugar,
first from Mexico as required under the antidumping and countervailing
duty suspension agreements and then from other foreign sources. If
domestic sugar from U.S. sugarcane or sugar beets exceeds 85 percent of
U.S. needs, as it has rarely done in the past, sugarcane and sugarbeet
processors would place surplus sugar in storage, at their own expense,
until the following production year.
Section (iv) ``contingencies that may disrupt, strain, compromise, or
eliminate the supply chain [for sugar]'';
There are a number of contingencies that have the potential to
disrupt, strain, compromise, or eliminate the current, effective supply
chain for domestic sugar. These would include policy changes, demand
shocks, and supply shocks.
Policy--Though the U.S. industry is efficient by global standards,
long periods of low prices and high risks have resulted in the
shuttering of over half of the beet and cane sugar processing
facilities since 1985, with third party owners exiting the business and
most of the remaining companies purchased by farmers to avoid closure
(see figures 4-6 below). The loss of milling and refining capacity from
further closures would threaten the domestic industry's ability to
provide a safe and reliable supply of sugar, carefully tailored to the
complex needs of U.S. food manufacturers and consumers and would cause
further distress in many hard-pressed rural areas.\11\
---------------------------------------------------------------------------
\11\ See how the U.S. sugar industry supports economic
opportunities in rural America at https://sugaralliance.org/u-s-sugar-
policy-supports-american-jobs-strong-communities/15898.
---------------------------------------------------------------------------
Figure 4. Real sugar price falling over time
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Data sources: BLS--CPI-U. USDA--wholesale refined beet sugar,
Midwest markets; annual averages 1985-2020; 2021 January-May
average.
Figure 5. Low prices lead to consolidation
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: USDA, annual average wholesale refined sugar prices,
Midwest markets, 1985-2020. More operations would have closed
had farmers not organized cooperatively to purchase independent
beet and cane processing and refining facilities. User access
to domestic sugar would have suffered.
Figure 6. Sector consolidation since 1985
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: American Sugar Alliance, 2021.
Two main risks exist to maintaining stable prices at levels that
allow for orderly production and marketing of sugar domestically and
allow investments in the supply chain (from research and development of
seed varieties to broadband installation): changes to trade policy and
changes to farm policy.
Trade Policy: The current U.S. sugar policy buffers the U.S.
market against highly subsidized foreign competition, but some
may argue for weakening the existing measures. It is clear that
a subsidized and oversupplied global market results in
depressed and volatile prices. Due to the economic and
political importance of defending sugar production, and
consumption, every sugar-producing country's government
intervenes in some aspect of its sugar industry (price,
production, consumption, imports, and exports) to provide
economic stability and profitability to sustain their domestic
industry. Surplus production is sold (dumped) on the world
market to prevent oversupply in their own market and to clear
storage for the next crop, regardless of the world price. This
results in world prices below the world average cost of
production, posing a direct threat to more efficient producers
in the United States and elsewhere (see figures 7-8 below).
Figure 7. World raw sugar prices are lower than costs of production
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Sources: World Price: USDA, #11 raw contract, Caribbean
ports, monthly average prices, 1989-2021. Cost of Production:
LMC International, ``World Sugar Prices vs Costs of
Production,'' Oxford, England, April 2021.
Figure 8. World refined prices are lower than costs of production
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: World Price: USDA, London #5 contract. Monthly
Average prices, 1970-2021. Cost of Production: ``Sugar
Production Cost, Global Benchmarking Report,'' LMC
International, Oxford, England, April 2021.
Subsidized and dumped sugar has driven out smaller sugar
producers around the world, some who were once suppliers to the
U.S. market. The International Sugar Organization (ISO)
surveyed 78 countries to learn actual wholesale prices--the
price producers in those countries receive for their sugar. The
ISO documents that, globally, actual wholesale refined sugar
prices have averaged 38 percent higher than the world price
over the past decade. Prices in other developed countries have
averaged 76 percent higher than the world market price, and
three percent higher than U.S. prices (see figure 9 below).\12\
---------------------------------------------------------------------------
\12\ International Sugar Organization, ``Domestic Sugar Prices--a
Survey,'' MECAS (19)05, May 2019.
---------------------------------------------------------------------------
Figure 9. Wholesale sugar prices within countries exceed global price
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Sources: International Sugar Organization (ISO), ``Domestic
Sugar Prices--a Survey'', May 2015 (MECAS(15)06) & May 2019
(MECAS(19)05); USDA, U.S. Midwest wholesale refined price and
London #5 refined sugar futures contract.
Though the U.S. industry is efficient by global standards, long
periods of low prices have resulted in the shuttering of over
half of the beet and cane sugar processing facilities since
1985, with most of the remaining companies purchased by farmers
to avoid closure. There is too much risk and not enough returns
for third party investors to own sugar processing assets.
Concessions the United States has made in the WTO and in a number
of bilateral/regional FTAs ensure that the U.S. is, and will
remain, a net importer of sugar. These commitments, along with
a growing population will produce a higher of rate of overall
demand to continue to outpace production. This has made the
United States the world's third largest sugar importer (behind
China and Indonesia), importing some 25-30 percent of U.S.
needs in a given year (see figure 10 below).
Figure 10. U.S. sugar imports
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Data Source: USDA, 2020/21 forecast; 2021/22 projection.
Our import commitments to 40 countries under the WTO, plus in
FTAs with Mexico, Canada, the CAFTA-DR countries (Costa Rica,
El Salvador, Guatemala, Honduras, Nicaragua, Dominican
Republic), Colombia, Peru, and Panama, and have grown over time
(see 11 below).
Further opening the U.S. market to the global market for sugar
would likely drive additional U.S. producers out of business.
For example, Mexico's open access to the U.S. market provided
under NAFTA led to the dumping of subsidized Mexican sugar on
the U.S. market in 2013, depressing U.S. prices, costing U.S.
farmers approximately $4 billion.\13\
---------------------------------------------------------------------------
\13\ A successful anti-dumping and countervailing duty case in 2014
led to the current regime of Suspension Agreements with Mexico, that
still guarantees duty-free access under certain conditions. See the
U.S. Department of Commerce fact sheet at https://www.commerce.gov/
news/fact-sheets/2017/07/final-amendments-mexican-sugar-suspension-
agreements-fact-sheet.
---------------------------------------------------------------------------
Figure 11. U.S. sugar market concessions as of 2020/21
------------------------------------------------------------------------
Minimum Import Amount (or Recent Average)
-------------------------------------------------
FTAs Metric
WTO tons, raw value Total
(MTRV)
------------------------------------------------------------------------
WTO (41 countries, 1,139,195 1,139,195
including
below)
------------------------------------------------------------------------
NAFTA/USMCA
------------------------------------------------------------------------
Mexico (recent -- 1,089,666 1,089,666
average) \1\
Canada 10,300 9,600 19,900
CAFTA/DR \2\ 311,700 155,780 467,480
Colombia 25,273 56,750 82,023
Peru \3\ 43,175 13,160 56,335
Panama \4\ 30,538 7,650 38,188
Total (WTO + FTA 1,139,195 FTAs (excl. 2,892,787
minimums + MX): 226,320
Mexico actual)
------------------------------------------------------------------------
\1\ Suspension Agreements (SAs) signed December 2014, revised June 2017,
limit imports from Mexico to U.S. import needs above WTO and FTA
quotas. Mexico FTA total is 3 year average actual entries (2017/18-
2019/20). The SAs are subject to annual administrative reviews and to
sunset reviews every 5 years; next sunset review in 2024.
\2\ Central American Free Trade Agreement/Dominican Republic access for
CY 2021; includes 2,000 tons of specialty sugars for Costa Rica. CAFTA
countries' WTO access included in WTO total. Other CAFTA/DR countries:
Guatemala, El Salvador, Honduras, Nicaragua, Dominican Republic.
\3\ Peru FTA access is 11,160 MTRV, subject to net exporter status (not
yet achieved) and 2,000 MTRV of specialty sugars not subject to net
exporter status.
\4\ Panama FTA specifies 6,600 tons of access must be raw; the remainder
raw, refined or products. (CAFTA, Colombia and Peru FTAs do not
specify raw or refined.)
Note: TRQs set in the FTAs for CAFTA/DR, Peru, Colombia, and Panama are
subject to net-exporter provisions (exports, excluding those to the
U.S., minus imports). This requirement may limit access under these
TRQs for some of these countries in some years. For 2021, the DR,
Panama and Peru were determined not to have met the trade surplus
provision and are unable to utilize their respective raw/refined TRQs
(raw TRQ in the case of Panama).
Moreover, there are additional challenges of moving foreign
refined sugar to the U.S. market, such as questionable product
quality (resulting from a host of issues, such as packaging,
polarity, foreign materials, heat and humidity in transit).
There are significantly higher handling and transportation
costs for importing global sugar, and at times, logistical
obstacles. For example, the pandemic-induced container shortage
has significantly hampered India's ability to export sugar this
year. In Brazil, the world's largest sugar exporter, ships have
experienced lengthy delays (3+ weeks) and associated demurrage
costs waiting to load sugar due to shipping challenges
exacerbated by both the pandemic and China's voracious demand
for soybeans. Looking back more than a decade, when droughts
hit the four major exporters (Brazil, India, Thailand, and
Australia) at the same time in 2010, sugar prices shot up,
leading these countries to concentrate on delivering shipments
to nearby markets to save freight costs.
Farm Policy: Domestically, the current sugar program, as
detailed in the farm bill, provides a safety net for sugarbeet
and sugarcane farmers by providing nonrecourse loans to assist
with orderly marketing throughout the year. That maintains a
steady flow of sugar supplies to consumers and industrial food
manufacturers without requiring wholesale intermediaries or
industrial facilities to invest in, construct, and maintain
costly storage facilities. Legislative proposals weakening
USDA's sugar program administration could jeopardize supply-
chain resiliency by causing additional consolidation and
contraction. Less geographic dispersion of the industry implies
greater vulnerability to regional weather anomalies.
Rising input costs for sugar production (equipment, fertilizer,
fuel, seed, labor, etc.) also put at stress the supply chains
for sugar production and distribution (see figure 12). For
example, labor availability is a perennial issue for sugarbeet
and sugarcane producers at harvest. Because the beet and cane
sugar content is best maintained for optimal extraction though
speedy harvests, the demand for labor during those periods
often exceeds local availability.
Figure 12. Input prices rising
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
1980s average compared with 2021 average-to-date.
Sugar price data source: USDA Table 5; Wholesale refined
price (Midwest markets). Input cost and inflation data source:
U.S. [Bureau of Labor] Statistics.
Other policy issues--In addition to changes in trade or farm
policy putting the resilience of the sugar supply chain at
risk, there are myriad other policy changes that could threaten
the supply of safe, reliable, and quality sugar to Americans.
Crop insurance is an essential risk management tool
for growers and is usually a requirement by their bankers.
Historically, crop insurance has served beet growers with
minimal but adequate coverage. Purchase of buy-up policies
by the cane sector has been more limited. However, RMA has
always worked well with our growers and we appreciate their
attention to our concerns.\14\ And with continued
improvements to both the sugarcane and sugarbeet policies
as well as new products offering hurricane coverage there
has been continued growth in polices and coverage for the
sector. For example, in 2019, a year with adverse weather
for beet as well as cane, total premiums for sugarbeets
totaled $53.6 million and for sugarcane $6.1 million.
Indemnities totaled $172.5 million for beets and $4.8
million for cane.
---------------------------------------------------------------------------
\14\ See for example https://www.rma.usda.gov/News-Room/Press/
National-News-Archive/2018-News/2018-News/RMA-18-074-Crop-Insurance-
for-Sugar-Beets-Sees-Improvements and https://www.rma.usda.gov/en/
Topics/Hurricane-Insurance-Protection-Wind-Index.
Continued public- and private-sector research and
development is needed to provide continued advances in
sugarcane and sugarbeet plant genetics that are more
productive and more resilient to adverse growing
conditions. Over the past 20 years, sugar growers have
produced 16 percent more sugar on 11 percent less land:
sugarbeet yields are up 42 percent and sugarcane yields are
---------------------------------------------------------------------------
up 12 percent.
Similarly, continued access to plant protectants and
other production inputs such as improved fertilizers will
continue to remain a priority for growers who continually
improve productivity to accommodate falling real commodity
prices. Use of science-based rules rather than the
precautionary principle to maintain access to those inputs
is essential.
Changes to tax policy without safeguards for farm
ownership may interfere with the orderly succession of farm
ownership from one generation to the next and could be
disastrous for U.S. sugarcane and sugarbeet growers. Recent
tax proposals have involved re-examining capital gains
taxes and the treatment of stepped-up basis at the time of
an owner's death. Changes to long-standing tax policies
that would make it more difficult for family members to
continue efficient farm operations or force them to sell
off parts of the farm to satisfy tax liabilities would be
particularly difficult for capital-intensive operations
(such as beet or cane) to survive long without significant
consolidation. Farm operations have often been in a family
for generations and built up to scale over time. Efficiency
is driven by economies of scale and our growers achieved
efficiencies that have allowed them to remain in business.
Changes to tax policy that would eliminate the efficiencies
of scale would be disastrous to our industry and would be
hard to reverse. Such threats underscore the importance of
maintaining a broad sugarbeet and sugarcane production base
as an important component of a resilient U.S. supply chain.
Shocks to Demand and Supply--It is clear that an important aspect
of a resilient food and agricultural supply chain is the ability to
adjust to rapid changes in demand or supply. As weather shocks becomes
more frequent, the inelastic nature of demand for food suggests that,
absent a resilient supply chain, year-to-year supply and price
variations could be severe.
For example, in 2019, severe weather disrupted sugarbeet
production in several U.S. regions and in Canada, as well as
sugarcane production in Louisiana and Mexico. Several sugar
marketing companies were forced to invoke force majeure because
of their inability to fulfill all their sales contracts.
Despite the 850,000-ton, or ten percent, decline in domestic
sugar production in 2019/20, the U.S. sugar market remained
stable. The United States was able to replace that lost supply
by increasing its imports of raw and refined sugar. During that
marketing year no food manufacturing company was required to
idle production for lack of sugar availability.
Moreover, the U.S. sugar industry was able to ensure
adequate retail supplies as consumers shifted their demand away
from food-service establishments. To meet those challenges and
to provide sufficient supplies to food manufacturers, during
March-May 2020 the domestic sugar industry put an equivalent of
an additional 53 million 4 lb bags on the shelf in record time
to meet consumer needs and provided a calming effect of a
resilient supply chain.
Section (v) ``the resilience and capacity of American [sugar]
manufacturing supply chains and the industrial and agricultural
base of the United States to support national security [as it
relates to nutritional security] in the event that
contingencies occur'';
As noted in E.O. 14017, resilient supply chains, like those around
our domestic sugar supplies, ``. . . are secure and diverse--
facilitating domestic production, a range of supply, built-in supply
redundancies, adequate stockpiles, safe and secure digital networks,
and a world-class American manufacturing base and workforce. Moreover,
close cooperation on resilient supply chains with allies and partners
who share our values will foster collective economic and national
security and strengthen the capacity to respond to international
disasters and emergencies . . .''
The supply chain for sugar production and distribution in the
United States has remained strong, despite the closure of more than
half of all sugar processing operations since the 1980's. Rising costs
and declining real prices led to the loss of large portions of American
sugar production and manufacturing but the remaining, more
consolidated, industry has continued to invest to sustain efficiency
and flexibility.
As noted earlier, the sugar industry is largely structured as
farmer-owned cooperatives. The cooperative model has, in some
circumstances, been used when corporations choose not to remain in such
narrow-margin businesses as sugar. Cooperatives have proven to be
effective in eliminating excess costs in the U.S. sugar industry,
improving efficiency, and providing growers the opportunity to
vertically integrate, govern, and earn more of the food production
dollar. Thus, the farmer-owned cooperative business model is a mainstay
of the domestic sugar industry.
Sec. (v) part (A) ``manufacturing or other needed capacities of the
United States, including the ability to modernize to meet
future needs'';
Though U.S. sugar producers and farmer-owned cooperatives remain
under some economic duress, they have continued to make investments to
survive and respond to supply and demand challenges. For example,
sugarbeet processors have built or expanded refined storage facilities
in major demand centers, such as Chicago, to better supply consumers
and industrial users in the Midwest. Following the disastrous railcar
shortages in the Upper Midwest in 2014/15, which severely hampered the
orderly marketing of agricultural commodities, sugarbeet processors
expanded storage capacity in demand centers to help mitigate future
transportation bottlenecks.
Similarly, continued investments by the sugarcane refining sector
in Louisiana and Florida have expanded domestic refining capacity,
lowering the need to import refined sugar.
Sec. (v) part (E) ``exclusive or dominant supply of critical goods and
materials and other essential goods and materials by nations
that are likely to become unfriendly or unstable'';
As mentioned, the U.S. sugarbeet and sugarcane processing industry
has the capacity to meet approximately 75 percent of U.S. demands, with
the remainder of that demand being met by our trading partners, with
most of the imported raw sugar being refined by U.S. refineries. The
United States provides preferential access in commitments made under
the WTO and various bilateral/regional FTAs. Our largest foreign
supplier is Mexico.
Mexican access to the U.S. market is determined by the antidumping
and countervailing duty Suspension Agreements (SAs) negotiated by the
U.S. and Mexican governments in 2014 and revised in 2017. The SAs were
in response to the damage done to domestic producers when Mexico
unleashed a flood of dumped and subsidized sugar into the U.S. market
in 2013. As a result, prices collapsed, seriously injuring American
farmers and their refiners, causing them to lose an estimated $4
billion total from 2013 to 2014--and for the first time in over a
decade U.S. sugar policy incurred a budgetary cost ($259 million) to
the detriment of U.S. taxpayers.
To combat these unfair trade practices and restore balance and
stability, U.S. sugar producers filed anti-dumping (AD) and
countervailing duty (CVD) cases in 2014. The U.S. International Trade
commission ruled unanimously that Mexico had injured the U.S. sugar
industry.\15\ The U.S. Department of Commerce (DOC) determined that
combined duties of up to 80 percent were justified and would be needed
to eliminate the injurious effects of Mexican dumping and
subsidization. Such duties would almost certainly have stopped all, or
nearly all, imports of sugar from Mexico. This was not the goal of the
U.S. sugar industry. The goal was to stop dumped and subsidized sugar
from threatening the viability of our industry and placing a burden on
U.S. taxpayers. Therefore, in lieu of AD and CVD duties, the U.S. and
Mexican governments negotiated the SAs in December 2014 to attempt to
eliminate injury and, at the same time, allow the Mexicans substantial
access to the U.S. sugar market.
---------------------------------------------------------------------------
\15\ See ``Sugar from Mexico Injures U.S. Industry,'' at U.S.
International Trade Commission, News Release 15-098 (October 20, 2015;
https://www.usitc.gov/press_room/news_release/2015/er1020ll513.htm).
---------------------------------------------------------------------------
Unfortunately, these SAs did not work as intended and proved
totally ineffective. They neither eliminated dumping nor removed the
injury to our producers, resulting in economic damages to the sugar
industry of an additional $2-$2.5 billion (which totals $4-$4.5 billion
in reduced income).
This situation was brought under control only when the DOC
successfully completed a revision of these SAs, which came into effect
on October 1, 2017. Since then, the SAs appear to have been effective
in ending Mexican damage to the U.S. sugar industry.
Sec. (v) part (F) ``substitutes or alternative sources'';
The sweetener sector is very competitive. As mentioned, the U.S.
sugar sector is a highly dispersed and competitive marketplace
characterized by roughly 50 percent domestic beet sugar supplies and 50
percent domestic or imported cane sugar supplies. Other sweetener
supplies include caloric sweeteners such as honey or high fructose corn
syrup and non-caloric artificial sweeteners such as aspartame. None
have the multiple properties that sucrose provides. Changes in consumer
preferences will drive longer-term trends; and replacing sugar with
current alternative sources in the event of a short-term supply-chain
disruption is not likely. If we consider the pandemic, consumer demands
required swift movement of supplies from food service to retail grocery
outlets. Such a movement was accommodated by the resilient sugar supply
chain. In some cases, if industrial users wished to move to another
sweetener, that would have required lengthy experimentation with
ingredient lists and Federal food product approval--not the type of the
swift response required during a supply chain disruption.
Sec. (v) part (G) ``current domestic education and manufacturing
workforce skills for the relevant sector and identified gaps,
opportunities, and potential best practices in meeting future
workforce needs for the relevant sector'';
The sugar industry provides well-paying full-time jobs for many
communities supporting small independent businesses in the United
States, often in rural areas. Investments in automation at beet
processors and cane mills and refineries have helped the sector build
supply-chain resilience.
The most recent analysis estimates that the U.S. sugar industry
generates 142,000 jobs across the country and U.S. sugar companies pay
fair wages and offer good benefits. Importantly, the sugar industry
provides opportunities in communities where jobs can otherwise be
limited. Sugar companies take pride in fostering a skilled workforce.
Whether it is partnering with community colleges to develop educational
opportunities or providing tuition reimbursement, additional training
and technical classes, the sugar industry is continually encouraging
growth and career advancement. The U.S. sugar industry is also strongly
supported by its largely unionized workforce. In fact, 100 percent of
beet sugar processors employ union labor, as do most cane refineries.
Sec. (v) part (H) ``the need for research and development capacity to
sustain leadership in the development of critical goods and
materials and other essential goods and materials, as
identified in subsections (c)(i) and (c)(ii) of this section'';
Continued public- and private-sector research and development is
needed to provide continued advances in plant genetics. Both beet and
cane producers benefit from the USDA investments in the research
stations located in:
Cane: Canal Point, Florida; ARS Sugarcane Research Unit in
Houma, Louisiana
Beets: ARS stations in Fargo, North Dakota; Fort Collins,
Colorado; East Lansing, Michigan Kimberly, Idaho, Sidney,
Montana Beltsville, Maryland, Pullman, Washington, and
Wyndmoor, Pennsylvania. Additional research is conducted by
nine land-grant universities, eight sugar companies and three
seed companies. That research will improve the resilience of
the supply chain for sugar in the longer run by making U.S.
beet and cane crops less vulnerable to severe weather and
disease.\16\
---------------------------------------------------------------------------
\16\ See examples at https://sugaralliance.org/research-in-
louisiana-supports-sustainable-sugarcane-production/37544.
---------------------------------------------------------------------------
Section (ix) ``policy recommendations for ensuring a resilient supply
chain for the sector, including reshoring supply chains and
developing domestic supplies, enhancing access to financing,
expanding research and development to address risks posed by
climate change'';
Last year posed enormous challenges to the U.S. food and
agricultural system. The disruptive impacts of the COVID-19 pandemic on
the U.S. agricultural system were broad and varied. Markets--food,
commodity, labor, energy--were jolted by global, national, and regional
shutdowns, slowdowns, and overall uncertainty. Those shocks to the U.S.
and global economies affected both the supply and demand for food in
the U.S. and led to short-term, localized shortages in the U.S.\17\
However, as USDA's 97th annual Agricultural Outlook Forum highlighted
this February, U.S. agriculture was buttressed in this challenging
period by innovation, which allowed the supply chain for food and
agriculture to be resilient.
---------------------------------------------------------------------------
\17\ https://www.usda.gov/media/blog/2020/09/24/americas-farmers-
resilient-throughout-covid-pandemic.
---------------------------------------------------------------------------
Consumer food purchasing switched almost overnight with retail
spending growing by more than 50 percent in March 2020, while hotel and
restaurant spending fell by more than 60 percent as many states imposed
emergency measures to control the pandemic.\18\ In addition, food
manufacturers were challenged with receiving ample supplies of product
to process as well as safeguarding their workers and ensuring
sufficient labor supply to remain open. By and large, with few
exceptions, the resiliency of the U.S. food supply chain ensured
adequate food supplies for Americans throughout 2020. However, there
were instances when that supply chain was strained, and the Federal
Government had to step in and ensure the movement of food to Americans
that either had little access to those food products or were having
difficulties accommodating the rise in consumer food prices we saw at
this time. But the bottom line is that no food manufacturer had to shut
down due to a lack of sugar supply.
---------------------------------------------------------------------------
\18\ See J. Balagtas and J. Cooper. 2021. ``The Impact of
Coronavirus COVID-19 on U.S. Meat and Livestock Markets,'' USDA Office
of the Chief Economist, working paper (March: https://www.usda.gov/
sites/default/files/documents/covid-impact-livestock-markets.pdf).
---------------------------------------------------------------------------
We can see from this graphic provided by the USDA at the
Agricultural Outlook Forum (see graph below (from https://www.usda.gov/
sites/default/files/documents/2021-meyer-slides.pdf) that as producers
received lower amounts for their products in the first months of the
pandemic, consumer prices were surging due to the stress on the supply
chain.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: U.S. Bureau of Labor Statistics.
The supply chain for sugar, like many throughout the food supply
chain, was also stressed by the pandemic and change in consumer demands
last year. In addition to the stress on the sugar supply system due to
the pandemic, the domestic sugar industry was ending a disastrous 2019
crop for many parts of the industry, due to cold wet weather in the
Northern states and dry weather in Louisiana and Texas. Severe weather
caused U.S. beet sugar production in 2019/20 to drop 12 percent from
the previous year while Louisianan and Mexican cane sugar production
each dropped by 18 percent. Meanwhile, the pandemic threatened sugar
processing, transportation, and overall demand. However, because of the
strong sugar policy enacted by Congress and administered by USDA, USTR,
and DOC, the divergence in the PPI and CPI experienced by most of the
U.S. food and agricultural sector was not as apparent for the sugar
sector.
Lessons Learned--ensuring a resilient supply chain for U.S. sugar
1. The current trade policy for sugar is working.
The U.S. sugar industry is a major player in the world sugar
market. The United States is the world's fifth largest
sugar-producing country and is among the most efficient.
The U.S. is the 20th lowest cost among the 95 largest
sugar-producing nations. Most of these are developing
countries with far lower government-imposed costs for
worker, consumer, and environmental protections. U.S. beet
sugar producers, mostly in northern-tier states, have been
called the lowest-cost beet producers in the world.\19\
---------------------------------------------------------------------------
\19\ LMC International, ``Sugar & HFCS Production Costs: Global
Benchmarking,'' Oxford, England, August 2011.
---------------------------------------------------------------------------
The United States is also the world's third largest sugar-
consuming country and the third largest sugar importer
behind China and Indonesia, providing guaranteed, largely
duty-free, access to 41 countries. This makes the United
States one of the world's most open markets to foreign
sugar. The amount of preferential access is prescribed
under the World Trade Organization and other trade
agreements to which the United States is a party.
Since, U.S. sugar producers are among the lowest cost in the
world, one might ask why the industry requires a sugar
policy at all. To mitigate the potential for globally
subsidized sugar to be dumped on the U.S. market, sugar
policy has evolved to provide substantial access to trading
partners per agreed upon quantities at the higher U.S.
price. Similarly, Mexico, has agreed to limit exports to
the United States albeit at the higher U.S. price, through
negotiations with the Department of Commerce to avoid anti-
dumping duties levied against Mexican sugar exports by the
United States in 2014 and amended in 2017.
Researchers at Texas A&M University's Agricultural and Food
Policy Center have written: ``Policymakers in the United
States have long recognized that the world sugar market is
heavily distorted by foreign subsidies and market
manipulations and have provided U.S. sugar farmers with
some form of safety net for more than 200 years. Major
producers and exporters of sugar do not respond to the
signals of the world market but rather to the policies of
their governments that enable them to export sugar below
their costs of production and their own domestic prices.''
\20\
---------------------------------------------------------------------------
\20\ J. Outlaw and J. Richardson. 2016. ``Analysis of the Coalition
for Sugar Reform Amendments to U.S. Sugar Policy: Potential Effect on
Policy and Industry,'' Agricultural and Food Policy Center, Texas A&M
University (May).
---------------------------------------------------------------------------
A published study by University of Tennessee researchers has
noted: ``The U.S. sugar program protects domestic sugar
producers from world sugar prices because the world sugar
market consists of heavily subsidized sugar from countries
such as India and Brazil. The world sugar market carries
the moniker of being the most distorted commodity market
because nearly all sugar-exporting countries subsize and
protect their sugar industries.'' \21\
---------------------------------------------------------------------------
\21\ Carlos J.O. Trejo-Pech, Karen L. DeLong, Dayton M. Lambert,
and Vasileios Siokos, University of Tennessee, ``The impact of US sugar
prices on the financial performance of US sugar-using firms,''
Agricultural and Food Economics, August 2020.
---------------------------------------------------------------------------
2. Current farm policy for sugar is working.
U.S. beet and cane sugar producers process their crops into
sugar much faster than the market can absorb it. Producers
have to store sugar for many months at their cost until
their customers need it. The current sugar policy provides
nonrecourse loan to sugar producers so that they can manage
stocks, market their crop throughout the year, and benefit
from a needed economic safety net. U.S. sugar policy
requires close monitoring by the USDA to ensure that
supplies and demand remain in balance, targeting a range of
stocks to use from 13.5 percent to 15.5 percent to avoid
government costs. When supplies or demand move outside of
normal patterns, interventions can occur. With ready
supplies generally available from our main sugar trading
partner, Mexico, the close cooperation between the USDA,
the DOC, and Mexico ensures that the appropriate quantity
of raw and refined sugar from that country is available for
relatively quick purchase and delivery should the market
require it.
The sugar provisions in the farm bill are designed to provide a
safety net for farmers. Legislative threats to undermine
the policy would accelerate the consolidation or collapse
of the domestic industry putting consumers at higher risks.
Rising costs of goods (inputs) and services (labor) and
flat sugar prices continue to threaten production over
time. To that end, we are experiencing greater costs to
adopt greater sustainability/climate solutions to meet
challenging growing conditions, but also to meet consumer
expectations. Proper administration of the U.S. sugar
policy is key to balancing the domestic market.
Conclusion
Thank you for reviewing and strengthening the supply chains for
critical and essential goods and infrastructure needed for national
food security. We understand that you will be considering these public
comments and information as you determine and develop the Department's
response to President Biden's Executive Order 14017. We trust that the
attached information from the American Sugar Alliance regarding the
current supply chain for sugar production and distribution to the
American people and the U.S. food manufacturing sector will be helpful
in that effort. Again, it bears mentioning that thousands of U.S.
sugarbeet and sugarcane farmers and sugar industry workers, as well as
millions of consumers, rely on USDA to maintain the strength and
certainty of the U.S. sugar program and to collaborate with USTR and
DOC to maintain the integrity of the system governing U.S. sugar
imports.
Sincerely,
Jack Roney,
Director of Economics and Policy Analysis,
American Sugar Alliance.
______
Supplementary Material Submitted by Jon T. Schwalls, Executive Officer,
Southern Valley Fruit and Vegetable, Inc.; on behalf of Georgia Fruit
and Vegetable Growers Association
Insert
Mr. LaMalfa. You mentioned too that you--was it 70 percent of
ships leave the U.S. with empty containers, or in some cases no
containers, because they have left them on the dock because
they are in a hurry to get back?
Mr. Durkin. Correct.
Mr. LaMalfa. Has the 24/7 port order helped to change that
situation any?
* * * * *
Mr. LaMalfa. So it is not in place yet?
* * * * *
Mr. LaMalfa. My time is out, but I would hope the panel, in
other questions, would you emphasize what things we could be
fixing right now to get results right now in other questions?
Thank you.
* * * * *
The Chairman. Yes. And if you could provide those in writing
back to him, we would appreciate it. Thank you. And now the
gentlelady from Louisiana, Ms. Letlow, is recognized for 5
minutes.
February 14, 2022
Hon. Doug LaMalfa,
U.S. House of Representatives
Washington, D.C.
In Re: U.S. House Committee on Agriculture November 3, 2021 Committee
hearing, follow up question
Question: Has the 24/7 port order helped to change that situation
any?
Dear Congressman [LaMalfa]:
In California that seems to have helped to an extent. Our nation
has many ports, and the American supply chain has numerous parts that
are interwoven. There is not a single source of failure, so the
solutions must be diverse and flexible. Here on the eastern seaboard,
Savannah specifically has operated 24/7 for decades and still
encountered problems until it was solved through solutions like problem
solving partnerships with CSX and Norfolk Southern that lead to an
increase in truck capacity. Other specific solutions related to the
trucking industry would be a moratorium on E-logs as we had during the
pandemic. Relaxed DOT regulations that would move from fines for non-
egregious violations to warnings and lowering CDL applications from the
current age of 21 to 18, as used in the military. I believe in general
that we can find solutions through decreases in regulation that will
not compromise safety. I do not feel that regulations should be the
cause of food insecurity for our nation.
Thank you in advance for your question and leadership in such an
important issue.
Respectfully,
Jon T. Schwalls,
Executive Officer,
Southern Valley Fruit and Vegetable, Inc.
______
Supplementary Material Submitted by Ed Cinco, Director of Purchasing,
Schwebel's Baking Co.; on Behalf of American Bakers Association
November 12, 2021
Dear Chairman Scott, Ranking Member Thompson, and Members of the
House Agriculture Committee:
Thank you for the opportunity to testify at the November 3, 2021,
hearing on ``the immediate challenges to our nation's food supply
chain.'' To follow up on questions the American Bakers Association
(ABA) received, we are providing the Committee with additional
information for the record to supplement ABA's responses on a few
topics from the hearing:
Baking Industry Response to COVID-19
From the beginning of this crisis, as baking is a Department of
Homeland Security designated essential critical infrastructure sector,
ABA has advocated for actions that protect workers, including priority
access to personal protective equipment, critical hygiene and cleaning
supplies, testing, and early access to vaccines. ABA works
collaboratively with the Federal Government, including the U.S. Food
and Drug Administration (FDA), U.S. Department of Health and Human
Services (HHS), The Centers for Disease Control and Prevention (CDC),
and U.S. Department of Agriculture (USDA) to effectively communicate
and share information on best practices, industry hurdles and valuable
guidance throughout the pandemic. Additionally, ABA has a comprehensive
section on its website devoted to resources to help members understand
best practices and guidance around COVID-19. ABA is a member of the
U.S. Rapid Action Consortium (RAC) whose mission is to safely and
effectively reopen the U.S. economy faster through a COVID-19 rapid
action testing system to enable U.S. businesses to better create safer
workplaces. ABA members remain committed to providing a safe and
healthy work environment for all employees while producing and
delivering wholesome, nutritious baked goods to Americans.
Edible Oils
The demand for soybean oil and other vegetable oils has exceeded
the current domestic supply. Attachment A, is an economic report on the
surging biofuel demand on the U.S. Soy oil Market. This report
completed in September 2021 by agricultural economist Bill Lapp,
President, Advanced Economic Solutions, Inc. provides an in-depth
outlook on the edible oil market supplementing ABA's testimony on
soybean oil. Soybean oil is the most widely used cooking oil in the
United States. We have seen the demand of soybean oil rise faster, in
part because of steadily increasing renewable volume obligations as
dictated by the EPA's Renewable Fuel Standard. If the Biden
Administration were to maintain the renewable volume obligations at the
current levels through 2022, it will help to alleviate the growing
strain of the baking industry supply chain now and in 2022.
Sugar Subsidy Program
The current USDA sugar subsidy program contributes to food industry
supply chain hurdles. In addition to enforcing artificial price
inflation, the program's complicated labyrinth of rules pertaining to
imports and supply management bake bottlenecks and uncertainty into the
domestic sugar supply chain. As a matter of policy, the current sugar
program creates supply chain shortages for manufacturers of food,
beverage, and other sugar-containing products.
The current sugar shortage cannot simply be explained as another
phenomenon of larger pandemic-related supply chain issues. With regards
to the domestic sugar supply, supply continuity concerns have been
ongoing for food manufacturers for decades. While workforce shortages,
shipping costs and transportation bottlenecks are all contributing
factors to the current supply chain crisis, they are exacerbated by the
current sugar USDA subsidy program. The process for requesting tariff-
rate quota reallocations and other import remedies is slow,
bureaucratic, and arcane. Reforms are desperately needed to guarantee
market responsiveness and ensure a steady supply for domestic
industrial users and U.S. consumers.
If Congress wants to ease supply chain burdens for the food and
beverage production sector, it should pass H.R. 4680, the Fair Sugar
Policy Act of 2021. This legislation would safeguard an adequate supply
of sugar at reasonable prices for our nation's food and beverage
producers without jeopardizing the safety net for American sugar
producers and refiners.
Workforce Shortage
The baking industry depends on drivers with commercial driver's
licenses (CDL) to help move and deliver their products. Bakers are
often moving ingredients and products across state lines. Currently, 49
states and the District of Columbia allow individuals under the age of
21 to obtain a CDL and operate in intrastate commerce, however, those
individuals would be prohibited from driving a truck across state lines
until they are 21.
ABA supports the bipartisan DRIVE-SAFE Act (H.R. 1745) which would
create a rigorous two-step apprenticeship program creating a path for
drivers under 21 to enter the trucking industry. This legislation
requires candidates to complete at least 400 hours of additional
training--more than what is required for any other CDL holders in the
nation; safety is the priority of this legislation. ABA believes we
need to continue to provide more opportunities for individuals under
the age of 21 with extensive training opportunities to participate in
the workforce and create a new pipeline for truck driving as a career
choice. The driver shortage poses a major threat to the baking
industry's supply chain.
Thank you again for the opportunity to testify on the unique supply
chain challenges facing the baking industry and for the opportunity to
submit this additional supplemental information for the Committee's
consideration as we all continue to work together to support and
strengthen our supply chain and feed American families.
Respectfully submitted,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Ed Cinco, Lee Sanders, CAE,
Schwebel's Baking Co. SVP, Government Relations & Public
Affairs/Corporate Secretary
Attachment A
Outlook and Implications of Surging Biofuel Demand On the U.S. Soyoil
Market \1\
---------------------------------------------------------------------------
\1\ Revised September 6, 2021.
---------------------------------------------------------------------------
Bill Lapp, President, Advanced Economic Solutions
September 2021
Summary
Demand for and production of renewable forms of biodiesel has begun
to surge due to demand from biofuel mandates outpacing supply of soy
and canola oil agricultural feedstocks. This market imbalance has
caused edible oil prices to nearly triple and markets are anticipating
supply shortages in upcoming quarters.
Advanced Economic Solutions (AES) projects that renewable diesel
production will double from 2020 to 2021 to reach 1.0 B gallons, thus
straining already significant demand for vegetable oils as feedstocks
for various forms of biodiesel fuels. Beyond 2021, significant refining
capacity expansion and resulting demand driven by Federal and state
biofuel mandates is expected to drive domestic renewable diesel
production to 3-4 B gallons, triple the current level of production.
Background
Growth in the use of soyoil to produce biofuels has risen sharply
over the past 10 years, initially to produce biodiesel and more
recently renewable diesel. The key drivers of rising demand for soyoil
and other fats/oils are the Federal Renewable Fuel Standard (RFS) and
state mandates such as California's Low-Carbon Fuel Standard (LCFS).
During the October-September 2021/22 year, USDA is forecasting that
11.5 B pounds of soyoil or 43% of total U.S. soyoil demand will be used
to produce biofuels.\2\ This represents a 26% increase from a year ago.
The 11.5 B pounds includes soyoil used in the production of both
renewable diesel and biodiesel. AES estimates that more than \1/3\ of
the feedstock used to produce renewable diesel during 2021 will utilize
refined (RBD) soyoil. Because RBD soyoil is required by both food users
and a sizable share of renewable diesel producers, a severe
availability problem for RBD soyoil has developed. Demand for RBD
soyoil for renewable diesel will continue to trend higher over the next
12-24 months, creating a significant challenge in meeting both food and
renewable diesel demand for RBD soyoil. In the coming years, a growing
share of the total advanced biofuel will be renewable diesel due to its
higher impact upon reducing greenhouse gases and other credits under
biofuel programs. An already extremely tight supply/demand situation
for U.S. soyoil would be exacerbated if the EPA does not adjust
advanced biofuel renewable volume obligations (RVOs) for 2021 and 2022
beyond the 2020 mandated level (5.09B gallons).
---------------------------------------------------------------------------
\2\ USDA World Agricultural Supply and Demand Estimates, August 12,
2021.
---------------------------------------------------------------------------
As an indication of these market disruptions, soyoil prices,
including both futures and RBD soyoil, have surged in response to a
sharp increase in the amount of soy used to produce biodiesel and
renewable diesel. After reaching a peak of $1.03 per pound during early
June, RBD soyoil prices have relaxed into a $.70-80 range as of early
September, but are still double year ago levels. Without changes in
state or Federal biofuel policy, vegoil prices are expected to remain
at unprecedented high levels during the coming year. Further, in the
case of RBD soyoil there remains significant availability issue that
should not be overlooked. Without a reduction in state or Federal
mandates for biofuel usage, the bidding tension for RBD soyoil between
food interests and renewable diesel producers is likely to become even
more pronounced over the next 12-24 months.
Over the next 24-36 months, the high prices and reduced
availability of soyoil (and particularly RBD soyoil) will require an
increase in supplies through increased domestic production (plantings)
and imports,\3\ as well as a reduction in the demand for soyoil for
uses other than renewable diesel. In the short-term, the combination of
Federal and state mandates, as well as tax credits, has led to a
bidding war between biofuel producers and food user. The resolution of
the shortfall in supply will be challenging, and several critical
assumptions/risks that could compound the availability problem need to
be recognized--these include weather disruptions, expansion of biofuel
mandates to other states and an expansion of Federal RFS annual volume
mandates.
---------------------------------------------------------------------------
\3\ US soyoil imports are currently subject to a 19.1% import duty.
---------------------------------------------------------------------------
Soyoil Futures & Refined (RBD) Soyoil Prices (Cents/Lb)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Key Take-Aways
1. The price of refined soyoil has more than doubled over the past
year, rising from $.35 per pound to over $.70.\4\
Availability of adequate supplies of refined soyoil to meet
demand for traditional food use as well as rising demand
for renewable diesel remains a concern during 2022 and
beyond.
---------------------------------------------------------------------------
\4\ The Jacobsen.
2. It is notable that the United Nations' FAO Food Price Index
reports that in August their vegetable oil sub-index is 68%
higher than a year earlier. This is further indication that
increased biofuel production is impacting vegoil markets
---------------------------------------------------------------------------
beyond the U.S.
3. U.S. soyoil used to produce biofuel--both biodiesel and renewable
diesel--is forecast by USDA to rise to 11.5 B pounds during
the 2021/22 year, a surge of 26% from a year earlier. This
means that U.S. soyoil used to produce transportation fuel
will represent 43% of total usage--in other words nearly
half of edible soy food crop is being combusted in
vehicles.
4. The recent surge in soyoil demand, and the resulting supply
shortage, is being driven by Federal and state mandates to
produce transportation fuel made from fats and oils. A
reduction in the RVOs would allow for the vegoil markets to
``catch up'' with the sharp increase in demand.
5. AES expects that the demand for soyoil (and other fats and oils)
to produce renewable diesel will at least triple over the
next 3 years based on already robust renewable fuel
mandates increased by expanded renewable diesel production
to meet more stringent mandates.
6. Higher prices for soyoil and other fats/oils are expected to lead
to market adjustments, including reduction in demand for
other uses, as well as increased supplies of soyoil and
imported canola oil. However, these adjustments will take
time, and in the interim vegoil prices are expected to
trade at historically high levels, with availability/
shortages remaining a risk.
7. Rising vegoil prices are impacting the cost of food production:
the July 2021 producer price index for fats and oils is 47%
higher than a year earlier. Although the consumer price
index for fats and oils during July 2021 is only up 4.0%
from a year earlier, inevitably higher vegoil prices being
incurred by producers will be passed on to consumers.
Renewable Diesel Production Surging
Demand for and production of renewable diesel has been growing in
recent years and is poised to surge during 2021 and beyond. EPA RIN
data shows that domestic renewable diesel production tripled between
2015 and 2020, rising from 177 mm gallons to 533 mm gallons. AES
estimates that renewable diesel production will nearly double between
2020 and 2021 to 1.0 B gallons. Based upon EPA RIN data, year-to-date
production during January-July 2021 is 39% above year-ago levels.\5\
Beyond 2021, significant refining capacity expansion and further
tightening of biofuel mandates is expected to drive domestic renewable
diesel production to 3-4 B gallons, more than double the projected 2021
forecast.
---------------------------------------------------------------------------
\5\ EPA EMTS data and EIA production data.
---------------------------------------------------------------------------
Domestic Renewable Diesel Production (MM Gallons, 2021F)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: EPA, AES.
The dramatic increase in renewable diesel production and related
investments has been driven by the need to meet the requirements of
California's Low-Carbon Fuel Standard (LCFS).\6\ The LCFS took effect
in January 2011 , with the ultimate goal of reducing the carbon
intensity of California's transportation fuel by 6.25% during 2019
(relative to 2010), increasing linearly to a reduction of at least 20%
by 2030.
---------------------------------------------------------------------------
\6\ https://ww2.arb.ca.gov/sites/default/files/2020-09/basics-
notes.pdf.
Carbon Intensity Benchmarks for Gasoline and Diesel Fuel and their
Substitutes
------------------------------------------------------------------------
Gasoline Average CI Diesel Average CI
Year (gCO2e/MJ) (gCO2e/MJ)
------------------------------------------------------------------------
2019 93.23 94.17
2020 91.98 92.92
2021 90.74 91.66
2022 89.50 90.41
2023 88.25 89.15
2024 87.01 87.89
2025 85.77 86.64
2026 84.52 85.38
2027 83.28 84.13
2028 82.04 82.87
2029 80.80 81.62
2030 onwards 79.55 80.36
------------------------------------------------------------------------
The net result of the biofuel mandates has been a surge in
investment in renewable diesel capacity in recent years, with
additional capacity expected in the coming years. Based upon survey of
industry participants, AES estimates that biofuel refining industry
capacity will increase from 734 mm gallons to 1,550 mm gallons by the
end of 2021 and increase by an additional 68% to 2,610 mm gallons by
December 2022. AES has identified nine renewable diesel plants that are
currently in operation, with annual operating capacity as large as 275
mm gallons. By the end of 2022, AES estimates that a total of 19 plants
will be in operation, capable of producing over 2.6 B gallons.
Beyond 2022, there are at least nine additional projects that are
planned and have been announced that would increase industry capacity
to produce renewable diesel to well over 4 B gallons. AES believes that
several of these announced projects will not materialize, and that it
is possible that domestic renewable diesel capacity will ultimately
peak at 3-4 B gallons.
Estimated Potential U.S. Renewable Diesel Production Capacity
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: AES, Industry Estimates.
Role of the Renewable Fuel Standard in Driving Increased Soyoil Demand
The Renewable Fuel Standard (RFS) was established by Congress via
the Energy Policy Act of 2005 (P.L. 109-58) and expanded in 2007 by the
Energy Independence and Security Act (P.L. 110-140). Both of these
statutes amended the Clean Air Act to create the RFS which requires
that transportation fuels sold in the U.S. contain a certain volume of
renewable fuels. The U.S. Environmental Protection Agency (EPA)
administers annually the required volume obligations (RVO) under the
RFS by setting minimum volumes to be included in the annual fuel
supply.
Under the RFS, EPA sets an overall volume for based on target
volumes for conventional biofuel such as corn-based ethanol, and an
advanced biofuel mandated volume. Each advanced biofuel is assigned a
lifecycle greenhouse gas (GHG) emission value threshold relative to the
baseline lifecycle GHG emissions for gasoline. This value is measured
in ethanol equivalent gallons to standardize the RVO requirements
across different types of fuel. Each gallon of biodiesel equates to 1.5
ethanol-equivalent gallons, while each gallon of renewable diesel
equates to 1.7 ethanol-equivalent gallons toward meeting the advanced
biofuel requirement. Biodiesel and renewable diesel comprise most of
the advanced RVO quota, with cellulosic and various other advanced
biofuels filling the balance.
The advanced biofuel RVO for 2020 was established by EPA at 5.09
billion ethanol-equivalent gallons. To meet this volume, 1.8 billion
physical--or ``wet''--gallons (2.7 billion ethanol equivalent gallons)
of biodiesel and 530 million wet gallons (900 million ethanol-
equivalent gallons) were produced in the U.S. Together biodiesel and
renewable diesel supply represent about \2/3\ of the advanced RVO. The
balance was made up by cellulosic and the various other types of
advanced renewable fuels.\7\
---------------------------------------------------------------------------
\7\ Based upon data from the EPA Moderated Transaction System
(EMTS).
---------------------------------------------------------------------------
Historically, a majority of renewable fuel produced in the U.S. to
meet the advanced biofuel RVO has been biodiesel. In the coming years,
however, a growing share of the total advanced biofuel will be
renewable diesel due to its higher ethanol-equivalency and other
credits granted under state low carbon fuel programs. Based upon EPA
RINs data, domestic biofuel production during January-July 2021 rose by
3.5% to 1,373 mm gallons--this includes a 2.5% decline in biodiesel and
a 39% increase in renewable diesel production. AES is forecasting 2021
domestic biodiesel production to total 1,662 mm gallons (^9%), offset
by an 86% increase in renewable diesel production to 990 mm gallons. A
key unknown over the remainder of 2021 and 2022 is the size of EPA RVOs
for advanced biofuels, which as of early September 2021 have yet to be
proposed or established.
Domestic Production of Advanced Biofuels Biodiesel vs. Renewable Diesel
(2021F)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: EPA, AES.
Combined, in calendar 2021, AES estimates that a total of 20.5 B
pounds of feedstock will be used to produce biodiesel and renewable
diesel, an increase of 16% from 2020. This includes an estimated 9.2 B
pounds of soyoil.
Looking ahead, an already extremely tight supply/demand situation
for U.S. soyoil would be exacerbated if the EPA elects to increase the
advanced RVOs for 2021 and 2022 beyond the 2020 level.
2020 Advanced Biofuel Breakdown 2021F Advanced Biofuel Breakdown
Source: EPA. Source: EPA, AES.
Implications for U.S. Fats and Oils Availability
The annual U.S. supply of fats and oils is estimated to total 51.1
B pounds.\8\ This includes both production and imports during the 2020/
21 year. Of this total, soyoil represents 25.7 B pounds or 50% of the
total. Excluding food use, the U.S. has a total available fats and oils
supply of 26.8 B pounds to meet all other demand components--renewable
diesel, biodiesel, exports and feed/industrial use.
---------------------------------------------------------------------------
\8\ USDA Foreign Ag Service, The Jacobsen.
Estimated U.S. Fats and Oils Supply Estimated U.S. Fats and Oils
(MM Lbs) Supply--Excluding Food Use (MM
Lbs)
2020 Production + Imports
Source: USDA, Census.
Overall availability of U.S. fats and oils to meet renewable diesel
requirements is already very limited and will become an even greater
challenge in the next 2 years. Based upon estimated 2020/21 U.S. fats
and oil supplies, renewable demand will exceed the net available supply
(total excluding food and biodiesel usage) by mid-2022.\9\
---------------------------------------------------------------------------
\9\ Based upon USDA FAS and Jacobsen data; assumes 8.5 pounds of
feedstock per gallon of renewable diesel.
---------------------------------------------------------------------------
With industry capacity rising to 2.6 B gallons by the end of 2022,
renewable diesel feedstock requirements could rise to over 20 B
pounds--compared to 4.1 B during 2020 and an estimated 8.4 B during
2021. Further expansion of industry diesel refining capacity toward 4 B
gallons or more will make the challenge even greater. Markets are
already attempting to adjust to the shortfall, but the outlook for U.S.
fats and oils availability is forecast by AES to be extremely
tight.\10\
---------------------------------------------------------------------------
\10\ In January 2021, the Energy Information Agency began
publishing feedstock usage for the production of biofuels--biodiesel
and renewable diesel combined. The data indicates that during January-
June 2021, 9.1 B pounds of feedstock was used--an annualized usage rate
of over 18 B pounds. Soyoil usage during these 6 months totaled 4.1 B
pounds (45% of the total). https://www.eia.gov/biofuels/update/.
---------------------------------------------------------------------------
Estimated Year-End Feedstock Requirements for U.S. Renewable Diesel
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Post 2022 assumes capacity only rising to 4.0 B gallons (vs.
announced/planned capacity of 6. 7 B gallons.
Source: AES, Industry Estimates.
US Fats/Oils Availability
(MM Lbs)
2020/21 U.S. Supply 51,101
less
2020/21 U.S. Food Use 24,260
2020/21 U.S. Biodiesel Use 12,548
2020/21 U.S. Exports 4,223
------------
8Net Availability 10,070
------------
Potential Annual Renewable Diesel Feedstock Required
8Dec. 20 6,239
Dec. 21 12,283
Dec. 22 22,185
Post Dec. 2022 34,000
Source: USDA, EIA, AES Analysis.
Implications for Soyoil Availability and Prices
Total U.S. soyoil usage during the October-September 2020/21 crop
year is forecast to total 25.5 B pounds, roughly equal to total supply
(production plus imports). The breakdown of forecast soyoil usage
during 2020/21 includes 14.7 B pounds (58% of total usage) for food
use, 7.8 B pounds for biodiesel (31%), 1.3 B pounds (5%) for renewable
diesel and 1.7 B pounds for exports (7%).\11\
---------------------------------------------------------------------------
\11\ USDA World Ag Outlook Board, August 2021; breakdown between
renewable diesel and biodiesel is an AES estimate.
---------------------------------------------------------------------------
Due to the growth in renewable demand, the breakout of usage is
forecast by USDA to change significantly during the 2021/22 crop year.
Renewable diesel usage is forecast rise by 230% to 4.3 B pounds. Each
of the other usage categories are forecast to decline--food use
declining 7% to 13.7 B pounds, biodiesel declining 10% to 7.2 B pounds
and exports declining 15% to 1.5 B pounds.
Food use patterns for all vegoils are already being impacted by the
surge in the use of soyoil to produce renewable diesel. USDA is
forecasting a decline of 7% in soyoil food use to 13.7 B pounds. This
will be offset in part by increased use of other oils, led by canola
oil gaining 7% to 4.6 B pounds (despite drought in Canada). Overall
usage of the nine major vegoils is forecast to decline by 0.6% to 24.2
B pounds, driven primarily by a lack of supply.
2020/21 U.S. Soyoil Usage (B Lbs) 2021/22F U.S. Soyoil Usage (B Lbs)
The impact of the dramatic growth in renewable diesel production
has created an extremely tight U.S. supply/demand situation for soyoil
as well as other fats and oils. This has led to a doubling in the price
of soyoil futures over the past year.
Because a significant share of the renewable diesel plants requires
refined (RBD) soyoil, an even greater concern has been availability of
RBD soyoil. Because RBD soyoil is required by both food users and more
than \1/3\ of renewable diesel producers, a severe availability problem
for RBD soyoil has already developed.
AES expects renewable diesel plants currently requiring RBD soyoil
will invest in ``pre-treat'' capabilities over the next 12-24 months--
this will give these plants the latitude to use a wider variety of fats
and oils. However, in the near-term, the demand for RBD soyoil for
renewable diesel will remain large and continue to trend higher,
creating a significant challenge in meeting both food and renewable
diesel demand for RBD soyoil.
U.S. RBD soyoil total demand (food and renewable diesel) was steady
between 2014/15 and 2019/20 averaging 14.3 B pounds. However, during
2020/21 RBD soyoil usage surged to 16.1 B pounds during 2020/21, driven
entirely by a sharp increase in the use of RBD soyoil to produce
renewable diesel.
Looking ahead, demand for RBD soyoil during 2021/22 is forecast to
rise by 14% to 18.4 B pounds. While the use of soyoil for food during
2021/22 is expected to decline by 7%, this will be more than offset by
an expected 230% increase in the use of soyoil to produce renewable
diesel.
U.S. RBD Soyoil Demand (B Lbs)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
US soyoil refineries operate with limited excess capacity, and thus
the surge in demand for RBD soyoil during 2020/21 has led to a sharp
increase in the premium paid for RBD soyoil over futures (the
``basis''). The basis for RBD soyoil is typically less than $.04 per
pound but has risen to as high as $.30 per pound in recent months--a
seven-fold increase from the long-term average premium.\12\
---------------------------------------------------------------------------
\12\ The Jacobsen.
---------------------------------------------------------------------------
The shortfall in RBD soyoil is expected to become more extreme
during 2021/22 as RBD soyoil demand is forecast to increase by an
additional 14%. Eventually (12-24 months from now) the amount of
renewable diesel requiring RBD soyoil may decline, as renewable diesel
plants add ``pre-treat'' capabilities and are able to use a wider
variety of feedstock. However, in the near-term, availability of RBD
soyoil will remain a major challenge.
Soyoil prices, including both futures and RBD soyoil have surged in
response to a sharp increase in the amount used to produce renewable
diesel. Prices peaked in early June--soyoil futures reached $.713 per
pound (+154% vs. a year earlier), while RBD soyoil reached a record was
at a record $1.04 per pound (+347% vs. a year earlier. Prices have
eased in recent months but as of early September remain 80-100% higher
than a year earlier.\13\
---------------------------------------------------------------------------
\13\ Chicago Mercantile Exchange, The Jacobsen.
---------------------------------------------------------------------------
The current economics imply soyoil prices (both futures and RBD
soyoil) will remain at extreme levels during the coming year. Further,
in the case of RBD soyoil there remains an availability risk that
should not be overlooked. The bidding war for RBD soyoil between food
interests and renewable diesel producers is likely to continue for at
least the next 12-24 months.
Soyoil Futures & Refined (RBD) Soyoil Prices (Cents/Lb)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Market Solutions: How and When Will Markets Adapt to Rising Renewable
Diesel Production
As the use of soyoil and other fats and oils increases further in
the coming year, prices have the potential to rise further and
availability will remain a concern. End-users in both the food and
renewable diesel sector have highly inelastic demand, as witnessed
during the past year.
With soyoil prices rising dramatically, the current shortfall will
eventually be resolved, but it will require 2-3 years of supply/demand
adjustments. These include these seven expected adjustments:
Near-term--beginning to occur[:]
(1) Declining U.S. soyoil exports: As the U.S. has become
uncompetitive in world markets, export demand for U.S.
soyoil has begun to decline (2020/21 exports are forecast
to decline by nearly half to 1.5 B pounds). The USDA is
forecasting a 15% decline in export during 2021/22.
(2) Reduced use of soyoil to produce biodiesel: From the 2020/21
total of 7.8 B pounds, use of soyoil to produce biodiesel
is forecast by AES to decline to 7.2 B pounds during 2021/
22. Achieving the forecast decline is predicated upon the
EPA establishing a reduced annual advanced biofuel mandate
for 2021 and 2022.
Medium-term--expected to occur during the next 12-24 months[:]
(3) Adding ``pre-treat'' capabilities at renewable diesel plants
that currently require RBD soyoil: There currently are four
plants in operation that require RBD soyoil, and an
additional three plants that will initially require RBD
soyoil to operate (total potential demand of 5.5 B pounds).
Each of these plants is expected to invest in pre-treat
capabilities, and eventually (in 12-24 months) have the
capability to use a variety of feedstock in the production
of renewable diesel.
Longer-term: 24 months and beyond[:]
(4) U.S. imports of Canadian canola/canola oil: U.S. supplies of
canola are expected to increase modestly during 2021/22
(+0.4 B pounds vs. 2020/21). However longer-term, Canada
has already announced plans to increase their crush
capacity from 11.0 MMT to 15.6 MMT by 2023/24--enough to
add over 4 B pounds to the North American vegoil supply.
The additional canola oil will be used to displace soyoil
in food use and renewable diesel production.
(5) Additional U.S. crush capacity: U.S. producers have announced
plans to add over 100 mm bushels of crush capacity over the
next 2-3 years, increasing the supply of U.S. soyoil by 1.1
B pounds.
(6) Development of other non-food oilseeds: Several alternative
oilseeds that produce inedible oil are under discussion
(e.g., camelina and jatropha). These hold longer-term
potential, but the scale and timetable are uncertain.
Soyoil (and particularly RBD soyoil) is expected to remain in
extremely tight supply for the next 24 months. Beyond that, over the
next 24-36 months, the high prices and reduced availability of soyoil
(and particularly RBD soyoil) is expected to be largely ``remedied,''
primarily through the seven economic dynamics outlined above if current
estimates hold true. Supply and demand adjustments should eventually
make the availability challenges diminish.
However, the resolution of the shortfall in U.S. soyoil supply over
the next 24-36 months is not certain, and several critical assumptions/
risks that could compound the availability problem need to be
recognized:
Weather: if U.S. soybean or Canadian canola production is
reduced due to adverse weather, the availability and price
challenges in the vegoil markets will continue.
Expansion of LCFS to Other States: Currently only California
has implemented a LCFS program, but other states (OR, WA, MN,
MO), as well as Canada, are implementing or considering
adopting a program similar to the LCFS. If the LCFS expands
beyond California, the availability and price challenges facing
the vegoil market would become greater.
Maintaining or Expanding RFS Mandate Levels: If the EPA
maintains or increases the annual Renewable Volume Obligations
(RVOs) from 2020 levels (particularly for advanced biofuels),
the Federal requirements will drive demand for soyoil and other
fats and oils higher, and thus exaggerate the already tight
supply of soyoil.
Appendix
What is Renewable Diesel:
Renewable diesel is a biomass-based diesel fuel that is chemically
the same as petroleum diesel fuel. It may be used in existing petroleum
pipelines, storage tanks, and diesel engines. It can be produced from a
variety of biomass materials but is almost exclusively produced using
fats and oils. It qualifies as an advanced biofuel under the Renewable
Fuel Standard (RFS) program.
Renewable diesel is produced through various thermochemical
processes such as hydrotreating, gasification, and pyrolysis. This
differs from biodiesel (methyl ester), which is produced through a
chemical process involving the introduction of a catalyst (methanol).
Because renewable diesel is chemically the same as petroleum diesel, it
may be used in its pure form (called R100) or mixed/blended with
petroleum diesel.\14\
---------------------------------------------------------------------------
\14\ https://www.eia.gov/energyexplained/biofuels/biodiesel-in-
depth.php.
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2020 EPA Renewable Volume Obligations
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Renewable Diesel vs. Biodiesel
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Current U.S. Renewable Diesel Plants and Capacity
Current Est. Annual U.S. Renewable Diesel Capacity
As of May 2021: 900 MM Gallons Annually
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. Soyoil Food Use vs. Biofuel Use (B Lbs)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: USDA, AES.
Hearing Insert
Mr. LaMalfa. You mentioned too that you--was it 70 percent of
ships leave the U.S. with empty containers, or in some cases no
containers, because they have left them on the dock because
they are in a hurry to get back?
Mr. Durkin. Correct.
Mr. LaMalfa. Has the 24/7 port order helped to change that
situation any?
* * * * *
Mr. LaMalfa. So it is not in place yet?
* * * * *
Mr. LaMalfa. My time is out, but I would hope the panel, in
other questions, would you emphasize what things we could be
fixing right now to get results right now in other questions?
Thank you.
* * * * *
The Chairman. Yes. And if you could provide those in writing
back to him, we would appreciate it. Thank you. And now the
gentlelady from Louisiana, Ms. Letlow, is recognized for 5
minutes.
February 9, 2022
Dear Congressman LaMalfa,
Please find below, my response to the question asked at the
November 3, 2021, House Agriculture Committee hearing on ``the
immediate challenges to our nation's food supply chain.''
Ports Efficiencies
Since the outset of the pandemic and the associated supply chain
challenges, ABA has been active in briefing Congress, the Department of
Transportation, and the Federal Maritime Commission on how delays can
disproportionately harm bakeries seeking timely and necessary imports
of ingredients and supplies. While official reports from select ports
have seen some delay time improvements, including the West Coast ports
of Los Angeles and Long Beach, industry reports indicate the opposite.
Despite isolated improvements, port efficiencies remain a major
challenge, even after the Christmas rush. On the whole, American ports
are moving more goods than they ever have and the ability to continue
baking production often relies on consistent and timely access to
imported supplies.
As port efficiencies remain a major challenge, ABA is cognizant of
the multi-faceted nature of this problem. The baking industry has
struggled with its own workforce shortages and understands how that can
hamper the effectiveness of any logistical operation. As detailed in
the hearing, ABA remains supportive of government policies that seek to
address staffing shortages and allow for maximum employment. ABA has
also supported the Ocean Shipping Reform Act of 2021, that really seeks
to address and diminish the power ocean carriers have over the process,
establishing minimum service standards and bringing transparency to
detention and demurrage changes. In congruence with other importers,
this legislation is supported by a wide coalition of agricultural and
food manufacturing entities seeking reliable port access, whether for
import or export purposes.
Cross-Border Vaccination Policy for Truck Drivers
A recent development since the November 2021 hearing is a new
policy mandating the COVID-19 vaccine for truck drivers delivering
goods between the U.S. and Canada. The North American agricultural
supply chains are deeply intertwined. The policy to require truck
drivers to be fully vaccinated will create additional strain on the
truck driving workforce and cause additional supply chain issues.
Specifically, for the baking industry, it has a considerable impact on
grain shipments from Canada to the U.S., which is a significant
ingredient for bakers. ABA asks that various exemption and testing
options be provided to truck drivers to ensure the supply chain is not
disrupted.
Edible Oil
Since the November 3 hearing, the Environmental Protection Agency's
(EPA) issued proposed annual Renewable Volumes Obligations (RVO) under
the Federal Renewable Fuel Standard (``RFS'') Program (Docket EPA-HQ-
OAR-2021-0324). As I mentioned in my previous Committee testimony, I am
greatly concerned that EPA's proposal to increase annual volumes of
subsidized biofuels for 2022 will further heighten the ongoing edible
oil supply crisis the food industry is experiencing. Additionally, I
testified before EPA at their January 4 RFS Public Hearing and re-
emphasized my previous concerns. I also shared that in its proposed
rule development, EPA used out of date economic impact data on the
edible oil supply to develop the proposal. The Clean Air Act requires
EPA to correct and update its Regulatory Impact Analysis to use
accurate and current food and commodity economic data. The actual price
for soybean oil for 2020/21 was 75% higher than the assumption used by
EPA. The actual price of soybean oil for 2021/22 was 91% higher than
EPA's assumption. These faulty assumptions prevent EPA from recognizing
the cumulative, incremental, soybean oil cost to consumers of nearly $8
billion over 2 years. Further, I emphasized that EPA should work
closely with USDA to understand and accurately analyze this significant
impact.
I was alarmed when the divergence of vegetable oils for use in
biofuels led to a tripling of soy oil prices during 2021. Consequently,
for some food companies and bakers, edible oil literally will not be
available at any price due to diversion of edible oil from food
production to fuel production.
EPA's proposed RVO levels would further worsen the problem. For the
reasons listed above, to avoid exacerbating inflation and the edible
oil supply crisis, EPA should set biodiesel and renewable diesel
volumes for 2022 and future years no higher than actual production for
2021. The current price shock and supply crisis threatens to intensify
the inflationary pressures that are being felt in the general economy,
impacting American families at the kitchen table. ABA is asking that
EPA use its statutory authority under the RFS program and consider food
and commodity prices when finalizing the upcoming RVOs for biodiesel
and renewable diesel. It would be helpful for Congress to also
encourage U.S. EPA to accurately update their regulatory impact
analysis with current data and to use their statutory powers as they
should when setting the biodiesel and renewable diesel RVOs as the
Agency finalizes this important rule.
Thank you,
Ed Cinco, Schwebel's Baking Co.,
On behalf of the American Bakers Association.
______
Supplementary Material Submitted by Greg Ferrara, President and Chief
Executive Officer, National Grocers Association
Insert
Mr. LaMalfa. You mentioned too that you--was it 70 percent of
ships leave the U.S. with empty containers, or in some cases no
containers, because they have left them on the dock because
they are in a hurry to get back?
Mr. Durkin. Correct.
Mr. LaMalfa. Has the 24/7 port order helped to change that
situation any?
* * * * *
Mr. LaMalfa. So it is not in place yet?
* * * * *
Mr. LaMalfa. My time is out, but I would hope the panel, in
other questions, would you emphasize what things we could be
fixing right now to get results right now in other questions?
Thank you.
* * * * *
The Chairman. Yes. And if you could provide those in writing
back to him, we would appreciate it. Thank you. And now the
gentlelady from Louisiana, Ms. Letlow, is recognized for 5
minutes.
January 26, 2022
One of the biggest challenges for independent retail supermarkets
and the wholesalers that serve them is the acute labor shortage. The
pandemic has driven able bodied people out of the workforce and many
simply aren't returning. This impacts everything from truck drivers,
where we face a shortage of 80,000 to 100,000 drivers to warehouse
workers to in-store customer facing positions. While our industry is
adjusting to this new reality, including embracing more technology, the
reality is we need more workers and we need them now. Congress should
take up the challenge to help fund training programs ranging from truck
driving to butchers, bakers to chefs that give our young people and
those who are currently facing barriers to employment the tools they
need to develop marketable skills that lead to good quality careers.
The other challenge impacting the independent supermarket industry
is the lack of competition which has caused hundreds of local
supermarkets to shut down over the years, leaving communities without
access, while also impacting local producers who have fewer outlets to
sell their goods. Strong, local communities are the key to a healthy
American economy, which is why Congress and the Administration should
be doing everything they can to ensure we have a strong, competitive
food supply that ensures local communities can thrive.
Respectfully Submitted,
Greg Ferrara.
______
Supplementary Material Submitted by Mike Durkin, President and Chief
Executive Officer, Leprino Foods Company; on Behalf of International
Dairy Foods Association
Insert 1
Mrs. Axne. . . .
So, Mr. Durkin, my question--as my State of Iowa is our
nation's second largest exporter of ag products, I am concerned
about how some foreign-owned shipping companies are essentially
dictating trade. They are bringing in imports into our ports,
but yet they are leaving with empty ships, without our products
being exported on them. This is very contrary to standard
import/export trade. Can you elaborate on your testimony on how
the Ocean Shipping Reform Act can address this problem, and
other solutions that we might act on here in Congress?
Mr. Durkin. Two of the key components of that shipping reform
bill, one is that it would put a limit on terms of the empty
containers that are going back. There was always a portion of
that did go back--given the import/export imbalance, but that
number was at around ten percent prior to COVID, and now we are
at 70 percent, so there clearly is an issue that has kind of
escalated to a point--where I call this, obviously, is a
crisis. And then the second component of that is when those
orders get rolled, and we lose those bookings, as I mentioned,
there are fees from--demurrage fees, and other excess charges
that us, as well as other companies, have to handle. And I
notice--that is a big component--a second component of the
Ocean Shipping Reform Act that would help.
And, again, I can't emphasize enough how quickly--if we can
get this thing--get it kind of--I know it has bipartisan
support, how quickly we can get this bill passed and approved,
and I think that would be a big help.
The correct response is:
The actual % empty containers going back pre-COVID was under
60% (source: Hoard's Dairyman *). The average rolled bookings
pre-COVID was 10%.
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* https://hoards.com/article-31036-west-coast-port-woes-pile-up-
for-dairy.html.
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[https://hoards.com/article-31036-west-coast-port-woes-pile-up-for-
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Hoard's Dairyman Intel--Thursday \1\
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\1\ https://hoards.com/articles.sec-137-1-hoards-dairyman-intel---
thursday.html.
Oct. 21 2021 08:01 AM
West Coast port woes pile up for dairy
By Stephen Cain, National Milk Producers Federation \2\
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\2\ https://hoards.com/by-author-662-1.html.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The West Coast receives top billing in any discussion of ports and
dairy exports. Roughly \2/3\ of all U.S. dairy exports, on a product-
volume basis, leave the United States via the West Coast. On a milk
solids equivalent basis, that number jumps to roughly 85%.
The importance of the West Coast as a dairy export center cannot be
understated--and over the last 18 months, it has been put to the test.
Greater trade volume, labor constraints, global container shortages,
and higher operating costs have strained a system that's inadequately
prepared to deal with it.
The result?
Delays and congestion that's limiting U.S. dairy's opportunity to
expand on what's already record demand for its products overseas.
The congestion is centered around Southern California, where a
staggering 75 vessels at times have been waiting to berth in the Los
Angeles and Long Beach ports. Average wait times are approaching 10
days . . . some vessels have waited 20 days to berth. U.S. consumer
purchases are the most immediate cause of the congestion.
This U.S. Retail Sales chart below shows the level at which
consumer retail spending has incrementally grown over the last decade
compared with the tremendous spike over the last year.
U.S. Retail Sales
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
That's created a shipping container imbalance driven by the huge
demand for high-value products out of Asia. To put that demand in
dollars, the average amount shipping companies are charging per
container leaving Asia bound for the U.S. West Coast is currently
around $8,000--that rate had reached a dizzying height of over $15,000
only a few short weeks ago.
Comparatively, the average cost per container headed to Asia from
the West Coast is, while still record high, much less, at around
$1,200. This difference has led to a further compounding issue of an
increasing number of empty containers being sent back to Asia in an
attempt to save a few days in transit time; the faster a shipping
company can get a vessel back to Asia, the faster it can benefit from
the higher freight rates.
Shipping companies would rather eat the cost and ship a vessel back
to Asia empty than wait for a full load of products to ship back. The
chart below shows the increasing percentage of empties leaving select
West Coast ports.
Percentage of Empties Boarded in LA-LB-Oakland
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Unfortunately, dairy isn't immune to the congestion, and like other
industries, it's attempting to divert product through other ports. In
the 12 months leading up to June of this year (latest data available),
dairy exports out of West Coast ports dropped nearly 10% while dairy
exports out of the East Coast and the Gulf climbed 30% and 22%,
respectively.
But in many cases, diversion isn't economically viable, given the
inland shipping costs of moving product to a port further away, country
of destination, and labor constraints. Adding to the bad news,
congestion won't clear up in the short-term. Dairy likely will struggle
with port congestion through much, if not all, of 2022.
Despite all of this, though, dairy continues to show its
resiliency. U.S. dairy exports over the last 12 months are up 10%; a
testament to the strength of the entire industry and the strong global
demand for our products. While the water ahead may (literally) look a
little choppy regarding export logistics, the U.S. dairy industry will
continue to do what it is does best; produce high-quality dairy
products for consumers, both domestically and abroad.
Hoard's Dairyman Intel 2021
Insert 2
Mr. LaMalfa. My time is out, but I would hope the panel, in
other questions, would you emphasize what things we could be
fixing right now to get results right now in other questions?
Thank you.
Mr. Durkin. Yes.
The Chairman. Yes. And if you could provide those in writing
back to him, we would appreciate it. Thank you. And now the
gentlelady from Louisiana, Ms. Letlow, is recognized for 5
minutes.
Thank you for this important question and opportunity to respond in
writing for the record. It is imperative that we take immediate action
to help alleviate the bottlenecks at the ports. All sections of the
supply chain are interdependent and resolving one area alone will not
solve the issue. The following are suggestions that would have
immediate impact:
1. Provide immediate incentives for carriers to load U.S.
agricultural exports awaiting shipment vs. leaving with
empty containers. This could include prioritized berthing
access, reduced terminal fees or financial incentives for
shipping loaded outbound containers. Currently 70% of the
containers leaving the U.S. are empty.
2. Prioritize perishable goods: It is not uncommon to give
preference to perishable goods in trade scenarios; for
example, the U.S.-Mexico-Canada Agreement has provisions
built into its Chapter on Sanitary and Phytosanitary
Measures that allow for expedited import check procedures
for perishable goods. Similar provisions could be applied
to loading goods for export.
3. Temporarily halt detention, demurrage, and penalty fees that are
related to rolled and omitted bookings. Carriers penalize
the exporters by charging daily fees for sitting in a yard
waiting for the next booking. This compounds the problem,
holding up much needed equipment such as chassis and
further exacerbating the downstream supply chain issues.
This year, our company has been invoiced more for detention
and demurrage than we have for freight from the two
carriers who export most of our goods. They are currently
incentivized to leave goods accruing penalties, if that
were to be halted, they may have more incentive to load
goods.
4. Expand port hours of operations beyond the LA and LB ports, for
example Oakland, Houston, Seattle) and incentivize labor to
help clear congestion in off hours. Include all operations,
not just crane operations.
5. Review chassis availability and how to efficiently turn
equipment. If suggestions 1-3 above are put into action,
carriers will have incentive to load containers and will be
disincentivized to cancel or roll bookings if they are not
accruing penalties. This will free up the chassis currently
held up with loaded goods ready for export and allow them
to be released back into the supply chain to move
additional containers. At any given time, we have 100-175
loaded containers sitting on chassis waiting to be loaded.
6. Provide waivers on trucking restrictions for both trucks and
drivers that eliminate capacity. For example, provide a
waiver to allow gross vehicle truck weight limits to
increase from 80,000 lbs. to 91,000 lbs. with an additional
sixth axle. This configuration complies with the Federal
bridge formula and is shown to have better braking capacity
than 80,000-lb., five-axle trucks. This adjustment would
allow manufacturers to transport products more efficiently
while also reducing industry's carbon footprint.
7. Cosponsor and support the quick passage of the Ocean Shipping
Reform Act of 2021 (H.R. 4996). Congress should pass the
Ocean Shipping Reform Act of 2021 which would address
unreasonable detention and demurrage charges, export cargo
bookings, and other carrier practices that are currently
hurting U.S. agricultural exporters.
______
Supplementary Material Submitted by Jon Samson, Vice President of
Conferences, Executive Director, Agriculture & Food Transporters
Conference, American Trucking Associations
Insert
Mr. LaMalfa. You mentioned too that you--was it 70 percent of
ships leave the U.S. with empty containers, or in some cases no
containers, because they have left them on the dock because
they are in a hurry to get back?
Mr. Durkin. Correct.
Mr. LaMalfa. Has the 24/7 port order helped to change that
situation any?
* * * * *
Mr. LaMalfa. So it is not in place yet?
* * * * *
Mr. LaMalfa. My time is out, but I would hope the panel, in
other questions, would you emphasize what things we could be
fixing right now to get results right now in other questions?
Thank you.
* * * * *
The Chairman. Yes. And if you could provide those in writing
back to him, we would appreciate it. Thank you. And now the
gentlelady from Louisiana, Ms. Letlow, is recognized for 5
minutes.
Thank you for the opportunity to speak on current and future
solutions. Due to ongoing high demand, but particularly during the peak
shipping season we saw in the third and fourth quarters last year,
shipping lines returned empty containers to Asia from U.S. ports rather
than loaded agriculture export containers because they were able to
extract higher profits from Chinese and other Asian manufacturers
seeking expedited loading of consumer goods bound for the United
States.
Initiatives like the 24/7 port order are a part of the longer
answer towards improving cargo throughput and efficiency at our ports.
Trucks working at our ports also need inland warehouse facilities to
remain open for longer hours so that goods can be dropped off or picked
up, better notifications and data sharing to enable loaded agriculture
export cargo to be prioritized and loaded, and infrastructure
improvements to reduce bottlenecks and congestion.
Improvements under the Infrastructure Investment and Jobs Act will
help to alleviate some of those problems. We also welcome the inclusion
of the Ocean Shipping Reform Act by the House of Representatives in the
America COMPETES Act and hope to see that language, especially changes
to detention and demurrage penalty charge practices, enacted into law.
Finally, commercial partners are working to improve data
standardization and real-time cargo visibility to improve supply chain
planning. All of these elements can play near- and long-term roles in
ensuring resilient agriculture supply chains.
______
Supplementary Material Submitted by Rod Wells, Chief Supply Chain
Officer, GROWMARK, Inc.; Chairman of the Board, Agricultural Retailers
Association
Insert 1
Ms. Schrier. Thank you, Mr. Chairman. Well, supply chain
dysfunction made worse by the pandemic was first brought to my
attention over a year ago by hay farmers in Ellensburg,
Washington. Since then, I have been in frequent communication
with growers and exporters all around the 8th District, and
even around the country, about these issues that they are
facing, and I am hearing it from my colleagues as well. It has
become more apparent to others.
For more than a year, these farmers have shared with me how
pandemic conditions, but also the behavior, the really bad
behavior, of foreign-owned shipping carriers, you could almost
refer to them as a cartel, are hurting their industry. They are
threatening export markets, they are threatening relationships
that have been built up over decades with foreign purchasers,
and the costs and the availability of transportation to both
domestic and export markets continue to be a big challenge for
wheat, cherry, apple, pear growers, hay growers in my district.
I would mention that, even with trucking, some growers in my
district have said that the cost for a truck to the East Coast
has more than doubled in the last year, and others say that the
cost to move fruit just to a port to be loaded on a ship for
export costs as much as the entire trip did just about a year
ago. And a lot of you know this, because you are living it.
There has been some discussion about the Federal Maritime
Commission, and, Mr. Wells, in your testimony you talked about
how it could be doing more to alleviate the backlog at our
ports. I was wondering, because sometimes it feels like they
just don't have the teeth to do what they need to do,
especially since we have no American shipping companies to
compete, I was wondering what teeth you think the Commission
has, what more they can do to enforce rules, and in addition to
the Ocean Shipping Reform Act of 2021, which I am proud to
support, what else can Congress do to help?
Mr. Wells. Yes, great questions. Frankly, I probably need to
get back with you, Congresswoman, on that. I am not up to speed
fully on the maritime and the port, given my central Illinois
background. But if I could get written comments back to you, I
can address that question at a later time.
November 11, 2021
Hon. Kim Schrier,
United States House of Representatives,
Washington, D.C.
Dear Congresswoman Schrier:
Thank you for participating in the U.S. House of Representatives
Agriculture Committee on November 3, 2021, regarding The Immediate
Challenges to our Nation's Food Supply Chain. During your time for
questions, you noted supply chain disruptions were brought to your
attention by hay farmers in the 8th U.S. Congressional District.
Farmers across the nation are experiencing supply chain challenges like
you described and are interested in seeing steps taken to restore
supply chain integrity, while also learning what actions will be best
long-term for our country.
You noted that there has been discussion regarding the Federal
Maritime Commission, questions about their authority, and if they are
doing enough to help. What teeth does the commission have, what more
can they do to help shipping, and what more can Congress do?
Legislation you are cosponsoring, Ocean Shippers Reform Act (H.R.
4996), is a step Congress can take now that would address a number of
challenges we reviewed at the hearing. The legislation would be a
critical move toward improving port oversight, operations, and taking
steps toward addressing unfair demurrage and detention practices
impacting agriculture exports.
Listed below are additional actions that could be taken and are
consistent with the Agricultural CEO Council recommendations to the
President:
Direct the U.S. Department of Justice to review the existing
Shipping Act law to determine if the enforcement tools in that
act can be activated to gain compliance with the other
provisions of the act setting forth reasonable practices.
Establish an interagency working group focused on
facilitating agricultural exports.
Sponsor initiatives that increase operational tempo,
including increasing gate operations, to include port
authorities, terminal operators, labor, ocean carriers,
shippers, and truckers.
Encourage and support the expansion of dual transactions, to
improve port efficiency, for motor carriers of all firm sizes.
Encourage investment in an expansion of the overall supply
of containers.
Provide Federal support for deployment of port and national
data sharing portals such as already developed by the Port of
Los Angeles.
Incentivize ocean carriers to increase export flows by fully
utilizing their existing capacity.
Increase coordination between the Federal Maritime
Commission (FMC) and the Surface Transportation Board on
oversight of multi-modal container shipments to ensure that the
FMC and the Shipping Act apply to the complete international
transit of goods from origin to destination.
Provide public support for and any necessary resources
towards the activities the FMC is undertaking on this issue,
including the Interpretive Rule on Demurrage and Detention and
other enforcement and administrative actions.
We know supply chain disruptions involve a number of challenges
converging at a similar point in time. It will likely take a number of
actions to improve our supply chains, so they are less vulnerable in
the future. Passing the bipartisan infrastructure bill will be helpful
in addressing our nation's infrastructure needs. Additional actions
Congress could take include passing a working H-2A program to help fill
labor shortages in agriculture, consider additional flexibility in
Hours-of-Service rules so trucking can respond in a timely manner to
periods of high demand, consider increasing weight limits, and focus on
constructing new 1,200 long locks on our inland waterway system to
efficiently meet the capacity demands of modern shipping.
Attached is a comprehensive list of potential actions assembled by
the Agriculture Transportation Coalition. You may find several valued
suggestions.
We look forward to working with you and other Members of the U.S.
House Agriculture Committee to improve our supply chains to meet the
demands of a strong economy.
Sincerely,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Rod Wells,
Chief Supply Chain Officer, GROWMARK,
Chairman of the Agriculture Retailers Association.
attachment
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Inventory of Supply Chain `Solutions'--November 2021
The Agriculture Transportation Coalition has been asked by U.S.
Government agencies, the White House, and Congressional Committees for
`solutions' to the supply chain crisis--big or small, easy or not.
This Inventory of Supply Chain `Solutions'--November 2021, was
proposed by exporters, importers, port leaders, truckers, terminal
operators (very confidentially), public officials such as Governor
Newsom, and most importantly, 8those closest to the crisis, the
membership of the AgTC. Some could be implemented immediately, some
already are, others will take years, some are logical but
controversial, some sound simple, but none are. That does not mean
these shouldn't be considered and as appropriate, pursued aggressively.
Most would agree: the status quo is not sustainable.
Each of these 64 `solutions' requires a more detailed description
and discussion of the feasibility, cost, benefits, interests of various
stakeholders, the short-term and long-term impacts on the supply chain.
We are glad to discuss, and add others. We encourage private parties
and/or governments to consider these, add other `solutions', and as
appropriate, implement.
The agriculture shipping community continues to urge, together with
importers, exporters, service providers, passage of H.R. 4996, the
bipartisan Ocean Shipping Reform Act of 2021 introduced by Rep. John
Garamendi (D-CA) and Rep. Dusty Johnson (R-SD).
Feel free to contact the AgTC team at: [email protected].
This list of `solutions' is organized as follows:
1. Marine Terminal Operations/Trucking into Terminals
2. Additional Land/Warehousing--Near Ports and Inland
3. Trucking Costs and Truck Driver Shortage
4. Information/Transparency of the Supply Chain Investment
5. Rail Service at Inland Rail Ramps for Ag Access to Marine
Terminals
6. Chassis Shortage
7. Ocean Carrier Practices; Federal Maritime Commission Enforcement
8. Creating a Competitive Marketplace
9. Federal Agency Contribution to Increased Export and Import
Fluidity
10. Federal Financial Assistance for Agriculture Lost Sales,
Transport Costs, Product Damage
11. Restoring Port Authority Control over Port Operations
1. Marine Terminal Operations/Trucking into Terminals
a. Expanded marine terminal gate hours; while 24/7 would be ideal,
however, opening the gates just 2 hours earlier in the
morning (``flex'' hours), and perhaps another hour in the
afternoon, would help immensely.
b. Stagger lunch hours rather than completely shut down terminals/
cranes/gates in the middle of the day.
c. Street turns--various methods. For instance, truck hauling an
import container out of the terminal, after dropping
container and chassis at importer DC or other location,
either hooks up a container (full or empty) and returns to
the marine terminal. Alternatively, after dropping the
import container, proceeds to an exporters facility to hook
up a loaded export container and returns to the terminal.
This reduces congestion and cost and trucking shortages, by
converting two round trips, to just one round trip.
d. Earliest Return Date: At West Coast ports follow example of many
East Coast ports where the ERD is `frozen', meaning no
demurrage charge assessed against the shipper if the ERD
changes. Further, carriers/terminals must allow sufficient
time for the shipper to collect a container from the
terminal, and then unload/load it, and return it to the
terminal. Currently carriers are providing as little 12
hours!
e. Set aside Saturdays and Sundays for dedicated removal of
containers of the largest volume (number of containers to
be determined) importers, from the terminals. Those
importers (or the ocean carriers) who arrived those
containers, to pay for the terminal operations (longshore
labor) on those days.
f. Peel-off piles--to expedite the unloading and evacuation of
containers from marine terminals. This requires planning
and information sharing by the foreign shipper, the
carrier, the marine terminal here, the importer, and the
truckers.
g. Automate all or at least some marine terminal operations. Install
the automation that is operating at major ports globally.
h. Suspend the PierPass appointment system, which is not working as
intended
i. Suspend marine terminals' dual transaction requirements for
trucks at marine terminals
j. If a trucker shows up for a container and it is not available,
the terminal must pay $500 for a truck not used.
k. If the terminal takes more than 2 hours to turn a truck inside
the terminal then the terminal must pay $100/hour or part
thereof.
l. If a carrier refuses to take back an empty, or a booked loaded
export container, then the carrier must pay a penalty of
$500 for each violation
m. If a carrier requires a trucker to go to a different facility to
either drop an empty or pick up a chassis, the carrier will
have to pay a charge of $500. per violation
n. As appropriate, move homeless encampments that interfere with
truck access to the marine terminals.
o. Terminal congestion caused by `box rules'--see Chassis section
p. Determine if carrier practices to provide certain champion
account importers lengthy ``free time'' (which means no
detention or demurrage charges), and generous chassis
terms, reduces their incentive to remove their containers
off the terminals. (Compare to small/medium importers who
get only 2, 3 or 4 days free time, no waiver of demurrage/
detention). Similarly, if carriers pass port authority-
imposed container dwell fees onto some shippers, but not
others, does this constitute a Shipping Act violation?
q. West Coast Labor Agreement Uncertainty. As always, the
approaching expiration of the PMA-ILWU contract (July 2022)
creates uncertainty. At this time of extreme stress on the
supply chain, perhaps PMA and ILWU could alleviate (or
delay) the uncertainty by early agreement to extend the
current contract another year.
2. Additional Land/Warehousing--Near Ports and Inland
West Coast marine container terminals abut densely populated
cities, with minimal room for expansion (in contrast to East and Gulf
Coast ports with ample acreage to expand container capacity). So when
cargo volume surges, or congestion slows the ability to evacuate
containers from the terminals, west coast terminals can be (and
currently are) overwhelmed. As the containers crowd the terminals,
productivity drops. Thus the urgent need to find `space' for
containers, off the terminals.
a. On the terminals: Level set free time at the terminal for all
importers and exporters, to create equal incentives to
expedite removal of containers, and make space to work the
terminals. See item 3.p. above.
b. Container storage close to marine terminals:
i. Immediately acquire land near ports for storing shipping
containers and
logistics. Expedite permitting or re-zoning that is
necessary for land ac-
quisition.
ii. As per City of Long Beach, allow higher stacking of
containers.
iii. Find and improve (only as essential) unused lots in the
vicinity of the
marine terminals, where containers can be temporarily
stacked.
iv. To expand inventory of local container sites, cities in the
port areas
should amend or suspend local zoning/land use
restrictions in order to
provide land for excess container storage near the
ports.
v. CA state agencies should aggressively find land to
temporarily store cargo
and to expedite leasing on state-owned land.
vi. Increase the number of employees at warehouses that are
holding agri-
cultural products through Federal incentive programs
for employment.
c. Space within 2 hours of marine terminals: Develop inland
terminals, even if just rudimentary truck and storage
yards, within 1 or 2 hours of the ports. A California
example is ``French Camp'', in the Central Valley, serving
as a container yard to which containers can be removed from
Oakland marine terminal, and serving Central Valley
destined and originating cargo. Investments in these rural
areas will create additional jobs and economic activity.
d. Inland Ports: Ports on the east coast have multiple `inland
ports' where cargo can be brought, loaded on train, and
moved 100 to 200 miles to the ports, and enter the marine
terminals, thus avoiding and reducing truck congestion at
the marine terminal gates. Loaded import containers can be
brought back to these inland load points as well. But there
are no such facilities at U.S. West Coast ports. Some sites
have been identified in the Central Valley, which could
create economic activity and employment opportunities for
Rural America. CA state and local agencies must facilitate
streamlined approval and implementation of these
facilities.
3. Trucking Costs and Truck Driver Shortage
a. Nationally: Increase our restrictive national uniform truck
weight limits (lowest in the world) to the global standard
(adopt the Canadian model, currently in place in various
states, including WA, OR, ID, etc.
b. California Truck Weights: CA truck weight limit (80,000 lbs GVW)
is lowest in the U.S., should adopt weights long in place
on designated freight corridors in other states (105,500
lbs GVW with extra axle). Current restrictions mean that
cargo requiring two trucks throughout the world, require
three trucks in California, adding to congestion, truck and
driver shortages. While such weight increase to the global
standard is urgently needed nationally, increasing weight
limits on certain CA truck corridors, as proposed by
Governor Newsom recently, is most urgent at this moment;
this would be immensely effective in reducing the number of
trucks on the roads, reducing congestion, limiting the
truck driver shortage.
c. Washington and California. Modest increase in two-axle trucks
would reduce truck, chassis and driver shortages.
d. Immediately reduce age for eligibility for training and testing
for Commercial Driver Licenses, to 18 years. Currently 21
years and above. This will increase the number of drivers,
lower the average age of the aging trucker driver pool.
e. Allow for those in the U.S. Military who are trained to operate
large equipment to qualify for their CDL. Since they are
qualified to operate large machinery in the U.S. Military
they should be well trained and qualified to operate trucks
and should qualify for a streamlined process to receive
their CDL.
f. Delay or Suspend U.S. DOT Restrictive Rules for CDL, to be
effective Feb. 7, 2022 which will further reduce truck
driver supply.
g. Extend Hours of Service: for draymen, either a set number of
hours per day or a formula based on when they get on line
outside the terminal until they are outgated (perhaps 1
hour extra HOS for every 2 hours of waiting). For over-the-
road truck drivers, consider modest adjustments to the HOS
formula to increase efficiency, and increase safety.
h. Terminals must pay for the trucking cost if trucker arrives
timely for marine terminal appointment, but the container
is not available.
i. Carrier must pay trucker if it refuses to accept an empty
container return, or if it requires the trucker to take the
empty container to a location different from where the
container was picked up for the same carrier.
j. CA Air Resources Board requirements on drayage trucks are
uncertain, mandating technology that is either non-existent
or unaffordable, imposing uncertainty and hesitation to
invest in increased trucking capacity.
k. For safety and unhindered cargo movement, remove the homeless
encampments which are in and around goods movement
corridors. This is a safety risk for the homeless in those
areas.
4. Information/Transparency of the Supply Chain Investment
a. Single Real-Time Data Portal: Create a single data portal that
tracks cargo movement shipping availability; trucking wait
time; terminal appointments and gate operations, cargo cut,
equipment location and availability, etc., to allow better
business operations and logistics. Mandate participation by
all port stakeholders--particularly the marine terminals,
ocean carriers, chassis providers. Start with one portal
for the entire LA/Long Beach port complex, then expand to a
. . . .
b. National Supply Chain Data Portal, to include all ports and
inland rail ramps.
k. Ocean carriers should report to port authorities within 1 day of
leaving and arriving at all U.S. container ports the
accurate number of loaded export containers, empty export
containers, and import containers. All U.S. container ports
should provide such total numbers to the FMC on at least a
monthly basis, and published.
5. Rail Service for Ag Access to Marine Terminals
Note: Rail service is critical to the movement of agriculture
exports from locations, distant from the coasts, where much agriculture
is grown and processed. Efficient on-dock rail and near-terminal
transload facilities are vital for ag exports. Congestion and service
shortcomings at inland rail ramps directly impact coastal marine
terminal operations. The following is not intended to be comprehensive
inventory of rail supply chain matters, but rather, focused on some of
the most apparent factors determining ag access to the coastal
terminals.
a. Inland rail terminals should seek adjacent space for storing
containers short-term from nearby communities.
b. Inland rail terminals should expand operating hours and, as with
port terminals, start to ramp up to 24/7 hours of operation
with incentives for off-hours use to truckers and BCO's.
c. Railroads should identify possible additional container storage
and intermodal service at other rail terminals that are
currently little or non-used for container service.
d. Railroads should participate in the individual port central data
portals, and in the National Supply Chain Data Portal.
e. Railroads should work with port authorities to develop or expand
inland load facilities (AKA `inland ports') serving the
coastal ports.
f. Railroads, at their inland rail ramps, should not enforce or
apply ocean carrier restrictions on chassis choice.
6. Chassis Shortage
a. Additional land will allow for empty containers to be moved and
stored, freeing up chassis for use.
b. Remove trade barriers that increase costs of chassis being
exported to the U.S.; and/or stimulate U.S. manufacturing
of chassis for U.S. ports.
c. Ocean carriers should provide chassis at the same cost, and set
``free time'' (no detention or demurrage) for their
champion account importers at same terms as they do to
smaller/medium importers, to assure all importers have
equal incentive to get containers off chassis and off
terminals.
d. Any available chassis should be eligible to carry any container.
End ``box rules'': some ocean carriers require their
containers to be carried only on chassis owned by a
particular company. When that company's chassis are not
available, even if those of other brands are idle nearby or
if the trucker has his own chassis, the trucker must drive
around to find the `right' chassis. Until then the
container can sit on the ground.
7. Ocean Carrier Practices; Federal Maritime Commission Enforcement
a. Mandate carriers provide their shipper customers, terminals,
truckers with accurate data of arrival times, loading
windows, cargo cut, container return dates (ERD) and
continuously update (as airlines do for their flights).
b. Mandate carriers contribute all necessary data to each port's
central data portal
c. Incentives for export carriage (vs. mandate); could include non-
monetary options like preferred berthing access (first-in-
line status) for carriers agreeing to increase export
carriage
d. International ocean carriers, should be required to carry our
U.S. exports (as long as they can be loaded/carried safely,
and tendered timely, and are destined for the ports to
which the carrier is already scheduled to arrive).
e. Establish at the FMC a shipper advocate to resolve disputes
between a carrier or terminal and the U.S. exporter or
importer.
f. Prohibit ocean carriers from ``marking up'' marine terminal
demurrage charges as set forth in their published tariffs.
Typically, the marine terminals' demurrage ranges from $20/
day to $40/day. But the carriers add another $100 to $200/
day, then invoice the BCO.
g. Enforce the Federal Maritime Commission's Interpretive Rule on
Detention and Demurrage, which declares many current
charges to be ``unreasonable'' (and thus a violation of the
Ocean Shipping Act), as they are imposed even when the
container is not available to the importer, exporter,
trucker.
h. Require carriers to certify compliance with the FMC D & D Rule as
a condition to invoicing a shipper for such charges.
i. Provide informal mechanism at the FMC allowing a shipper who is
unfairly charged D & D or any fee by an ocean carrier, to
submit the charge to the FMC (informally, without lawyers);
the FMC will investigate, and if finding failure by carrier
to comply with the D & D Rule, order waiver or refund of
the charges, and as appropriate, impose Shipping Act
penalties.
j. Prohibit ocean carriers from imposing D&D or other charges on 3rd
parties with whom they have no contractual relationship--
freight forwarders, customs brokers, truckers.
k. Prohibit demurrage or detention charges when a container is being
held by a government agency for inspection or other purpose
l. Earliest Return Date--reasonable notice: carriers must provide
accurate ERD, may not charge detention/demurrage when the
carrier changes it.
8. Creating a Competitive Marketplace
The Justice Department should assess if the current structure of
ocean container shipping services is limiting competition (facilitating
freight rate increases and control of capacity).
9. USDA and CBP Contribution to Increased Export/Import Cargo Fluidity
a. USDA Inspection Services (APHIS, AMS, FSIS, etc.)--due to long
delays of product leaving the port allow for inspections
and associated documentation to allow for those delays.
Having to re-inspect product, after an initial inspection
and approval for shipment, causes additional delays that
are unnecessary.
b. Expanded CBP/APHIS hours of operations to prevent inspection/exam
bottlenecks and impeded increased port hour operational
success
c. CBP should review its import enforcement and facilitation
processes, including for instance, policies relating to
``holds'', intensive exams, advance import cargo data
sharing with ports/ terminals, and initiate changes which
would increase import fluidity through the terminals and to
the importer. CBP should share with Ports the vessel
arrival information and container contents it gains through
AMS filing, to give the ports and terminals time to plan
for container processing prior to the vessel's arrival.
10. Federal Financial Assistance for Agriculture Lost Sales, Transport
Costs, Product Damage
a. Farmer Payments for Product Loss or Sales as a Result of Port
Delays:
i. Loss of sales based on previous 2 year export sales.
ii. Delayed arrivals at scheduled export destinations.
iii. Rotten or lost product arriving at ports of entry. With
increased delays
of product arriving at ports of entry perishable
products arrived rotten or
damaged causing customers to seek payment for lost
product and sales.
b. Transportation Cost Off-set:
i. Transportation costs for freight of U.S. products
domestically is sky-
rocketing due to fuel costs and a shortage of truck
drivers. This puts U.S.
farmers, ranchers and processors at a disadvantage when
competing
against low-cost imported product; and increases the
cost of products for
consumers. USDA should prioritize funding to a program
that off-sets the
sky-rocketing transportation costs for producers.
11. Restoring Port Authority Control over Port Operations
Port Authorities which control terminal operations and policies can
operate them in the public interest; several Southeast states are
``operating ports''. U.S. West Coast ports are ``landlord ports'',
leasing port property to companies which control terminal operations
and pricing. If state laws were changed to allow Port Authorities to
take control over marine terminals, would Port Executive Directors be
able to take steps to increase terminals' efficiency and more
reasonable pricing?
Summary
Each of these 64 ``solutions'' requires a more detailed description
and discussion of the feasibility, cost, benefits, interests of various
stakeholders, the short-term and long-term impacts on the supply chain.
We are glad to discuss, and add others. We encourage private parties
and/or governments to consider these, add other `solutions', and as
appropriate, implement.
Feel free to contact the AgTC team at: [email protected].
Insert 2
Mr. LaMalfa. You mentioned too that you--was it 70 percent of
ships leave the U.S. with empty containers, or in some cases no
containers, because they have left them on the dock because
they are in a hurry to get back?
Mr. Durkin. Correct.
Mr. LaMalfa. Has the 24/7 port order helped to change that
situation any?
* * * * *
Mr. LaMalfa. So it is not in place yet?
* * * * *
Mr. LaMalfa. My time is out, but I would hope the panel, in
other questions, would you emphasize what things we could be
fixing right now to get results right now in other questions?
Thank you.
* * * * *
The Chairman. Yes. And if you could provide those in writing
back to him, we would appreciate it. Thank you. And now the
gentlelady from Louisiana, Ms. Letlow, is recognized for 5
minutes.
January 31, 2022
Hon. Doug LaMalfa,
United States House of Representatives,
Washington, D.C.
Dear Congressman LaMalfa:
Thank you for participating in the U.S. House of Representatives
Agriculture Committee on November 3, 2021, regarding The Immediate
Challenges to our Nation's Food Supply Chain. During your time for
questions, you noted the significant number of shipping containers
leaving the U.S. empty and raised a question regarding the impact the
24/7 port order has had on this dynamic. You also asked the panel for
their inputs regarding points of emphasis that might achieve quick
results.
The Agricultural Retailers Association and GROWMARK appreciate your
focus on getting America's supply chain functioning in a manner that is
productive for agriculture and our nation's overall economy.
Supply chains across the county continue to experience challenges.
As stated in my written testimony, many of the agricultural products,
from essential crop inputs used to produce a sustainable supply of food
to our country's exports, utilize our waterways and ports. Whether
these products arrive from other countries or originate in America,
they are an essential contributor to enhanced supply chain resiliency.
There has been a serious port backlog since early 2021 impacting this
flow of products.
Congressman LaMalfa, in your comments you mentioned providing
flexibility to transportation rules for a period of time to allow for
supply chains to catch back up. In my written testimony we proposed to
provide flexibility to weight limits during the non-freezing and
thawing time periods in our country to allow for more efficient truck
loads to be delivered with increased weights. We proposed calling this
effort ``Resupply America''. A practical proposal would be to allow
increased road weight limits to 88,000 pounds for trucks. The increased
number of 18-20 year old drivers allowed in a truck driver pilot
program approved in the infrastructure bill is a start and needs to be
expanded as soon as reasonable. Flexibility in the Hours of Service
program, as you suggested, would be a good opportunity to support our
nation's drivers to help supply chains catch up. Each of these
proposals, and any others, could be considered in an effort to Resupply
America.
We note the 24/7 port order has not been implemented to this point.
Many other sectors of the supply chain will need to coordinate, have
more flexibility with current rules, and become more efficient if
expanded working hours can improve the supply of goods through our
ports. We continue to feel it is important for the Federal Maritime
Commission (FMC) to act. FMC should leverage its authority to limit the
impact of rising demurrage and detentions costs to shippers which
eventually impact consumers.
Thank you for cosponsoring and helping the House of Representatives
pass the Ocean Shipping Reform Act, H.R. 4996. We look forward to
timely action in the Senate so this proposal can become law as soon as
possible. We realize it will take a collection of actions to experience
a recovery in the supply chain in 2022.
Sincerely,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Rod Wells,
Chief Supply Chain Officer, GROWMARK,
Immediate Past Chairman of the Agriculture Retailers Association.
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Submitted Questions
Questions Submitted by Hon. Salud O. Carbajal, a Representative in
Congress from California
Response from Jon T. Schwalls, Executive Officer, Southern Valley Fruit
and Vegetable, Inc.; on behalf of Georgia Fruit and Vegetable
Growers Association
Labor
Question 1. Back in March, the House passed the Farm Workforce
Modernization Act of 2021, which I am a cosponsor of.
I am happy to see that the Georgia Fruit and Vegetable Growers
Association recently recognized the urgent need to pass this bill, but
I am concerned that industry groups are not expressing enough support
for the Senate to prioritize passage.
What are your biggest challenges finding and retaining labor in the
fruit- and vegetable-grower, packer, and processor sectors?
Question 1a. Are there existing Federal policies that could help
alleviate some of these challenges?
Food Security
Question 2. Food banks report sustained demand still due to the
economic hardship from the pandemic, now complicated by their ability
to feed their community as they are facing many of the same cost
increases, labor shortages, and other impacts from the supply chain
crunch.
What could the USDA do to better support your industry, such as
incentivizing local procurement or addressing last-mile costs, that
help take on current supply chain challenges and would also help the
nation support food banks and reduce food insecurity?
Answer 1-2. February 14, 2022
Dear Congressman Carbajal:
Thank you for this question. There are currently two major
challenges.
First, production input costs are increasing at a much higher rate
than perishable commodity prices. The average perishable commodity
price increase from the last 2 years is approximately 1.3%. This does
not align with the significant increase in input costs. Input cost such
as fertilizers and soil nutrients during the last 2 years has increased
between 125-300%; the cost of crop protection products increased on
average by 30%, the cost of farm fuel has increased by more than 100%.
The input cost increases are not sustainable without an increase in
consumer pricing. However, low-income families will continue to be
impacted by price increases to fresh fruits and vegetables. Studies
show a lack of fresh fruits and vegetables in a child's diet has a
higher likelihood of diabetes and obesity. With already limited access
to fresh fruits and vegetables in many areas (exacerbated by the
pandemic, supply chain logistics, and increased cost) children have
less access to produce. Increases in input costs will only lead to
continued increases in food prices.
The second challenge is the significant shortage of domestic
workers interested in applying for and taking up seasonal agricultural
jobs. Consequently, domestic farmers and ranchers are forced to turn to
the H-2A program to source temporary foreign workers. Southern Valley
participates in the H-2A Visa work program due to the lack of a
reliable, willing, and able seasonal farm workforce domestically.
A survey performed by the National Council of Agricultural
Employers (NCAE) of all 50 State Workforce Agencies (SWA's) in 2020
found that of the 97,691 H-2A jobs that were certified in the period
March 1, 2020, to May 30, 2020, only 337 domestic workers applied for
the positions.
As a domestic producer, the H-2A program is very cumbersome and
extremely costly. In addition to the required wage rate which is 214%
higher than the Federal minimum wage, it costs an employer
approximately $4.90 per hour on top of the hourly rate to employ
workers under the H-2A program. In addition to all the administrative
costs, H-2A employers are required to provide to H-2A workers free
housing, meals or kitchen facilities, free transportation to and from
housing, reimbursement of all travel expenses to and from the U.S. for
H-2A workers including bus or plane fare, meal costs, visa costs, etc.
These free benefits are not considered as W-2 wages by the U.S.
Department of Labor (DOL) when determining wages for H-2A workers.
As this trend continues, more and more farmers will be forced to
close or move operations to another country. The ag industry will see
an increase in bad actors cutting corners to make a profit, thus
tarnishing the industry's reputation.
Today, according to USDA, over 60% of the fresh fruit consumed in
the U.S. and over 35% of the fresh vegetables are imported from our
foreign competition. Wages in Mexico average $1.50 per hour. Wages in
Guatemala average $1.75 per hour. Wages in Canada average $9.00 to
$12.50 per hour. All while the U.S. average for H-2A workers is $15.56
per hour. This is not sustainable. Therefore, you are more likely to
find foreign sold in your neighboring San Luis Obispo grocery stores
over California grown produce. Producers need a foreign labor program
wage.
Unfortunately, proposed Federal policies have the ability to create
more harm than good. For example, the Department of Labor's proposed
ruling on Adverse Effect Wage Rate for the H-2A program seeks to
increase the wages of all workers based on any one single duty that a
worker might perform. Farmworkers performing agricultural duties should
be paid based on the prevailing wages comparable to other farmworkers.
We need a common-sense application of this.
Thank you in advance for your question and leadership on such an
important issue.
Respectfully,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Jon T. Schwalls,
Executive Officer,
Southern Valley Fruit and Vegetable, Inc.
Response from Greg Ferrara, President and Chief Executive Officer,
National Grocers Association
Question 1. Would you say the trend towards consolidation in the
food supply chain has had an impact on grocers, especially the smaller
ones?
Question 2. And what can we do to ensure there is still a
competitive market out there that doesn't lead to more disruptions
which effects consumers options at stores and prices of items like
beef?
Answer 1-2. January 26, 2022
NGA does believe consolidation in the food supply chain, including
the significant growth of retail power buyers over the years, has had a
negative impact on consumers and communities. As these retail power
buyers have grown in size, their influence over suppliers has also
grown to the point where they are often able to dictate favorable terms
from suppliers that other smaller competitors in the marketplace do not
have access to. Due to the lack of enforcement of antitrust laws, such
as the Robinson-Patman Act, suppliers are often faced with an
unwinnable solution; comply with the power buyer demands or risk losing
their business. As a result, smaller competitors are at a significant
disadvantage, unable to get access to new products, the best
promotions, terms, or as we have seen during the pandemic, appropriate
allocation of product. Unable to remain competitive, we've seen
communities lose their local supermarket, which has a negative economic
ripple effect on rural and urban communities. We believe proper
enforcement of existing antitrust laws, such as the Robinson-Patman
Act, will go a long way to rebalancing the scales so all competitors
have a fair shot at winning the customer's business and ensuring all
consumers have access to the products they need, when they need them.
Respectfully Submitted,
Greg Ferrara
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