Nuts to Houston?

By Jock O’Connell

Rumors seem to go a long way down at the general store. “My cousin Wilbur says that he heard a guy up in Oakdale got so fed up with congestion at Oakland he sent a couple of containers of almonds out through Houston last week,” reported Farmer Edgar. “Why, I heard that someone down Visalia way just did the same thing,” chimed in Rancher Dolores. “Yup, word is it’s gotten so bad at Oakland that everyone’s shipping almonds through Houston nowadays,” confidently added Grower Merle.

Not surprisingly, chit-chat like that might easily and quickly get around. Even reporters might catch wind of it, especially if they work at a publication that covers agriculture. So it was my phone buzzed the other day: “I hear Houston’s the place to send your almonds these days?”

Nuts, I replied in my best imitation of General McAuliffe. (If you’ve never heard of Anthony McAuliffe’s one-word reply to a German offer of surrender at Bastogne during the Battle of the Bulge in December 1944, you probably know as much about the United States Army as Tucker Carlson.)

So, what’s the story (or non-story) here? Once upon a time, a fair amount of America’s almond crop (almost all of which is grown in California’s Central Valley) was shipped to markets in Europe and the Middle East via the Port of Houston. Exhibit A shows the history of that trade since 2005.

What happened to minimize Houston’s share of the almond export trade was not so much that almond growers stopped shipping their product to Houston – although they did. What really induced the shift away from the Texas port was that almond exporters started shipping more of their nuts in containers. As Exhibit B testifies, between 2005 and last year, the portion of almond exports transported in containers doubled, to 89.2% from 44.1%.

As Exhibit C reveals, the principal beneficiaries of the shift from bulk to boxes were California’s big container terminals but most of all the Port of Oakland, the maritime gateway closest to the center of the state’s (and therefore the nation’s) almond production. With the transition to boxes, the Bay Area port’s share of the almond export trade jumped to 82.0% in 2020 from 52.9% fifteen years earlier.

Well, so much for history. The issue of port congestion is a here-and-now concern. Are we indeed seeing an uptick in exports through Houston in the past few months? Is a jammed-up Oakland being abandoned by almond shippers?

The short answer is not so’s you’d much notice. To be sure, there has been a small bump in almond shipments through Houston. May, for example, did see 1,044 metric tons of almonds depart from the Texas port, which boosted the Gulf Coast port’s share of the almond export trade to 1.1% from 0.4% a year earlier and from 0.2% the May before then.

But, as Exhibit D illustrates, Houston’s share of the seaborne almond export trade still registers as a barely blip. By comparison, Oakland’s share this May was 87.9%, up from 84.3% last May and from 85.2% in May 2019. If Houston gained at anyone’s expense from West Coast port congestion, the victims would be the Southern California Ports of Long Beach and Los Angeles. Their combined 10.3% share of seaborne almond exports in May declined to 14.3% and 11.0% the previous two Mays.

At the end of the day, when the sheep come home, the data show there has lately been a meager boost in the already meager volume of almond exports through the Port of Houston. Idle hearsay about the imminent demise of the Port of Oakland as a major conduit for almond exports is nonsense. Interestingly, the last time there was an appreciable surge in almond exports through Houston came during the latter stages of the labor-management dispute that slowed the pace of container movements through West Coast ports in the fall and winter of 2014-2015. After averaging a 1.9% share of almond exports in the year leading up to the slowdown, Houston’s share jumped to 6.3% in February and then to 12.4% in March and 9.0% in April, before falling back to levels that seldom journey above two percent and ultimately dwelled below one percent until this spring.

There’s no compelling reason to think that the Port of Oakland will not eventually regain those lost slivers of the almond export trade, as it had in the past.

A Foreboding on Forecasting

I’ve been watching various cargo forecasters implying that the end of the surge in containerized imports might be in sight only to those whose models come equipped with binoculars. I have no reason to doubt these outlooks. But I do have a problem with their methodologies, which are typically weighted to emphasize (often exclusively) economic factors such as employment growth, GDP increases, the value of the dollar, household consumption, etc. Of course, the modelers will normally allude to non-economic considerations such as changes in trade policy. But those are hard to quantify and so are generally left out of the forecasting methodology.

The economists who produce forecasts generally have only their reputations at stake. Modern attention spans being what they are, the risk to one’s good name is hardly a deterrent to an off-the-mark forecast. A useful, if very seldom used synonym for the business of forecasting is haruspication, which perhaps fittingly sounds a lot like what old-time baseball players used to do with their chewing tobacco between pitches, or even onto their pitches. Of course, no one doctors the ball today, we are assured.

Anyway, those who do have an appreciable financial stake in gauging trade flows over the next several months are apt to be a good deal hedgier than professional clairvoyants. Anyone reading the press should be aware of the testy state of relations between Washington and Beijing. So, if I’m an importer who sources a lot of my merchandise from China, I’m probably guessing it might be best to fill my warehouses with merchandise well beyond the level my market research staff are telling me consumers will want to buy this coming fall and winter. I might even be willing to pay a premium price for getting those goods into my stateside inventory just in case the balloon goes up.

If there are more than a few importers thinking the same grim thoughts, certainly the import surge won’t have much reason for ending anytime soon.

Disclaimer: The views expressed in Jock’s commentaries are his own and may not reflect the positions of the Pacific Merchant Shipping Association.