22 September 2011
Despite rising trade between Costa Rica and the United States, regulatory pressures, consumer demand and the rapidly changing global economy are forcing companies across the supply chain to rethink the way they do business.
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“There is a constant pressure on the [shipping] cost and obviously that goes into trying to be as competitive as possible and keep fruit shippers happy,” said David Ross, executive vice president and director of SeaFreight Agencies at WorldCity’s Trade Connections on Sept. 16.
The event also launched WorldCity’s first-ever Costa Rica TradeNumbers publication, which examined the nearly $14 billion worth trade between the U.S. and the Central American nation in 2010. Of Costa Rica’s top
With so much of Costa Rica’s trade depending on agriculture, issues like food security, shipping times, fuel costs, ship efficiencies and customs clearances all pose a challenge to getting fresh produce on the shelves of U.S. stores.
Ross said the Port of Jacksonville has become an attractive place to bring in produce while the company has also been looking at adding stops in the Caribbean to increase the dollar value of each shipment. At the same time he said “one thing we’re focused on is reducing transit time from 10 days to five days,” and “looking for ships that can give you efficiency of speed, are fuel friendly and at the same time… balance that with having to get the product to market.”
On top of that he said SeaFreight has also started a trucking division to have greater control of the shipping process so it can ensure customers that their shipments will arrive on time.
When it comes to cutting costs, producers in Costa Rica and Central America “have been doing this for 100 years,” said Marvin List, a produce industry consultant and partner at PuraVida Farms, and have been experimenting with ways to maximize production and squeeze more produce onto ships, but there are some factors they can’t control.
The “safety and security of the moving of the goods has a cost impact [that] comes from inside the organization and the exporting country,” List said. In the “U.S. we’re trying to protect of food security supply chain and carriers are required to do a whole lot.
“A lot of times… you can spend a lot of money on food safety and security and you’re food isn’t safer or more secure,” he added.
“The smugglers know our schedule and all shipping lines’ schedules and they understand vessels and aircraft are the method to move their product as well,” said Ross of SeaFreight. “I can’t tell you how much time goes into the security of the container, the security of the vessel.”
At the same time the cost of producing and moving goods has risen simply due to currency fluctuations.
“About two years ago [the exchange rate] was 600 colóns person dollar, today it’s 500,” said J. Antonio Bejarano, general manager for Banco Internacional de Costa Rica. “It’s good from the outside, but for the exporter who’s been affected quite a bit they cannot do anything with their products and they have to be competitive.”
The exchange rates effects everything from the prices of ships, which David Ross said rose from about $8,000 a day last year to anywhere between $14,000 and $15,000 per day today, to a farm’s profitability.
“The strengthening of foreign currency against the dollar has caused exporters huge headaches, million-dollar headaches,” said List. A “500 hectare grower says ‘my labor costs did not change and just on the exchange rate I’m upside down a million dollars a year.’”
Outside of traditional shipping and logistics companies, supermarkets like Kroger’s and discount retail giants Target and Walmart are looking to bypass produce importers and are going straight to the source.
Though that strategy looks like it may cut carriers out of the supply chain, it may provide a different kind of opportunities.
Logistics companies with ships and assets across the region ready to pick up a container to fill a supermarket’s quota for the week will be the ones to benefit.
“We then become the carrier side or the logistics side of that,” said Ross of SeaFreight. “It’s true independence.”
WorldCity’s Trade Connections quarterly event series is sponsored by Seaboard Marine, American Airlines Cargo, Flagler Development, Miami International Airport and the Port of Miami. The next Trade Connections event is Dec. 9.