Shipping the new normal
Shipping challenges have been a defining feature of the past couple of years, largely fuelled by the COVID-19 pandemic.
While the world appears to have found some kind of ‘new normal’, it seems the shipping industry may have found one of its own.
Port congestion and a general lack of available containers continues to provide challenges for both importers and exporters.
In the dairy industry, the impact of such challenges is reverberating through the entire supply chain, from the inputs bought on-farm to the end product being shipped to the world.
Tight global supply and strong demand have inflated Australian grain prices from the start of this year, with port congestion adding fuel to the fire.
Here at home, the grain supply chain has faced logistical challenges from farm to port, with unrelentless global demand adding to the port capacity squeeze.
While harvest in the Northern Hemisphere typically shifts focus away from Australian grain during July to November, lower than expected yields has held interest for Aussie grain steady.
With another record harvest approaching and no sign of transport bottlenecks easing, growers have been increasingly keen to clear last season grain from storages.
As a result, average wheat prices across much of Australia dropped between three per cent and nine per cent during August.
Similar to grain, tight global supply and robust demand for fertiliser has seen prices surge over the past two years, backed by rising shipping costs.
Australia is by no means a significant importer of fertiliser product, however local production shortfalls means a large portion of product used is purchased from overseas.
This has exposed Australian buyers to delayed shipments and product security, with such uncertainty flowing through to farmers.
Port congestion has been a widespread challenge across the world, making delayed shipments an expectation in the current climate.
Dairy importers have been procuring larger volumes over less frequent shipments (where shelf life allows) to try and mitigate this supply insecurity.
As such, the typical time frames in which buyers purchase their product have begun to shift.
Additionally, high shipping costs have propelled above average dairy export commodities, as importers search for where to secure product.
Moving forward, with another bumper harvest on the cards for Australia and strong global demand for grain showing no signs of wavering, this is likely to keep pressure on shipping operations.
While plentiful supply usually causes prices to fall, such demand will ensure grain values stay elevated, only tempered by the inability to ship the product out fast enough.
Continued port congestion will also be a bugbear for Australian dairy exporters.
With COVID-19 and isolation periods a way of life now, port procedures are likely to be continually impeded by the pandemic, which will weigh on procurement activity for all importers.