Turning a Silk Purse into a Sow’s Ear

By Jock O’Connell

A study out of the University of California’s Giannini Foundation last month garnered a fair amount of buzz from the agriculture industry’s media before spilling over into the mainstream press and eventually plopping down in the public policy arena. That route to fame was almost predestined given the splashy title, “‘Containergeddon’ and California Agriculture”, the authors bestowed on their work.

To some observers, the current situation at California’s ports may indeed resemble the End of Times prophesied in the Book of Revelations. So, for those of an especially apocalyptic frame of mind right now, a glancing reference to Armageddon might not appear altogether inappropriate. At least, we should be grateful the authors did not opt for some variation on the even more overworked “mother-of-all” meme. Still, the title evidently proved impossible for many editors to resist, and so the study’s claims have been widely and verbatimly shared.

The co-authors, by the way, are Colin A. Carter, Sandro Steinbach, and Xiting Zhuang. Carter is a Distinguished Professor of Agricultural and Resource Economics at UC Davis. His two coauthors are, respectively, an assistant professor and a Ph.D. student in the Department of Agricultural and Resource Economics at the University of Connecticut (rhymes with Yukon).

While their views slamming the competitiveness of the state’s seaports are their own, the authors used TEU numbers supplied by PIERS and Bloomberg’s World Container Index as the statistical grist for their model, whose basic premise is that fewer numbers of outbound loads should almost always result in reduced earnings for exporters.

That seems reasonable enough…if all you’re doing is counting large metal boxes. As we shall see, there are many paths to the truth, and other, less crude ways of measuring agricultural trade. But before disputing the authors’ findings, let’s hear their central claim.

“We found that container¬ized agricultural exports from Cali¬fornia ports were $2.1 billion (or 17%) below their counterfactual level due to port congestion between May and September 2021.

…supply chain disruptions caused a 9% reduction in total TEU exports from May to September, compared with the total TEU exports for the same timeframe in the previous year. This adverse effect peaked in September when California’s ports exported about 25,000 fewer containers filled with agricultural products than in May 2021, a 22% decline.”

I have no idea why the months from May through September of last year should hold a special fascination for the authors. California farm exporters have been up in arms about maritime shipping issues for a much longer period than that. Apart from the possibility that there was some unused data laying around, it is unclear why these five months were picked. They are certainly not months that are representative of exporting during the full crop years of most of California’s major farm export commodities.

A larger problem with the study’s concern about last year’s May-to-September drop in shipments through California ports is that the state’s containerized agricultural export trade in September is nearly always below containerized agricultural exports in May. In only one other year since 2010 did September exports exceed shipments in May, and that was in 2020 as the COVID pandemic descended on the planet. Overall, since 2010, U.S. government data show that the value of containerized agricultural exports through California ports in September fell an average by 9.3% from May of the same year. To cite one germane example, since the 2014-2015 crop year, walnut export tonnage in September has averaged 56.3% of May’s volume, according to figures from the California Walnut Board. So while the headline-grabbing fall-off slope the authors identify may have been unusually steep, it was by no means unusual.

The methodology mystery deepens with the study’s contention that California tree nut producers came up short by a shade over a half-billion dollars. For the record, the Agricultural Issues Center at UC Davis collects the state’s agricultural trade data on behalf of the California Department of Food and Agriculture. In its latest report, AIC ranks almonds and pistachios as the state’s two most valuable farm exports, with walnuts in fifth place behind dairy products and wine. So tree nut exports are a big business in California.

The study from the Departments of Agricultural and Resource Economics at UC Davis and UConn contends that the state’s tree nut exporters not only “lost about $520 million in foreign sales” last year but that “the overall level of tree nut exports is lagging substantially behind the pre-congestion levels, including the 2018 or 2019 harvest-season export volumes, which points towards very significant export losses for this sector of California agriculture.”

Come again? Are the authors arguing that pandemic-era port congestion not merely affected the state’s tree nut export trade last year but also somehow reached back in time to thwart exports of tree nuts even before the pandemic arose? That’s nuts.

But that’s not all. The study’s contentions about the trade in tree nuts through California seaports and that alleged $520 million loss begs to be tested using readily available metrics other than sheer TEU tallies. I have two in mind. Both the Foreign Trade Division of the U.S. Census Bureau and the marketing organizations overseeing the almond, pistachio, and walnut industries are excellent sources of detailed and timely export statistics.

What insights might these data sources bring to bear in understanding the extent to which exports of California tree nuts though California’s ports fell – if at all – in last year’s May-September period?

Let’s start with Exhibit A, which presents the relevant May-September export statistics for California’s most valuable agricultural export, almonds. According to the California Almond Board, the marketing group that keeps pretty close tabs on almond production and shipments, exports of both shelled and inshell almonds last May to September totaled 767,573,331 pounds, an 18.1% bump over the same period the year before. Moreover, last year’s exports from May through September were up 42.4% over the identical months in pre-pandemic 2019.

Moving on to pistachios, California’s second most valuable agricultural export, Exhibit B reveals the May-September pistachio export numbers as compiled by the Administrative Committee for Pistachios. Exports of pistachios in last year’s May-September period amounted to 191,667,870 pounds, just over double the volume that was exported a year earlier. Last year, pistachio export tonnage in May-September was even higher by 5.0% than in the May-September months in 2019. Virtually all pistachios in the U.S. are grown in California. They are typically shipped abroad in containers, mainly through the notoriously congested Ports of Los Angeles and Long Beach.

Finally, how about walnuts, the farm product ranked as California’s fifth most valuable agricultural export? As a glance at Exhibit C reveals, walnut exports in May-September 2021 totaled 85,691 tons, an 18.3% gain over the same period a year earlier and a 41.1% improvement over the May-September months in 2019.

Just to remind readers: the new UC Davis/UConn study alleges that port congestion last year cost the state’s tree nut exporters $520 million in lost sales between May and September. That was definitely one of the study’s headline-grabbing allegations. So it’s very remarkable that, while a model built on the campuses of the University of California at Davis and the University of Connecticut at Storrs purportedly churned out a half-billion-dollar loss to California’s tree nut exporters, a much different conclusion emerges from the export figures compiled by the tree nut industry’s own marketing organizations.

Is there another voice to be heard in this discussion? Yes, and it is a particularly authoritative voice. U.S. Customs and Border Protection and its predecessor agencies have been keeping tabs on imports and exports since 1789. For export shipments valued at more than $2500, shippers must provide documentation to Customs that describes the contents of containers, their value, and their weight along with their destination and mode of transport. The raw data are then forwarded to the Foreign Trade Division (FTD) of the Census Bureau, which is the official source of U.S. trade statistics.

Data from the FTD are especially useful because they can tell us how many metric tons of tree nuts were shipped in containers through California seaports in any given period. As a bonus, FTD can tell us the dollar value shippers assign to those exports.

So what do the numbers from the FTD indicate? Exhibit D shows in metric tons the volume of containerized exports of California’s three principal tree nuts during recent May-September periods through California ports. Presumably, if these ports are gumming up the works, we shouldn’t see robust growth. But growth is in fact what the numbers show.

And here’s the parallel Exhibit E showing the declared value of those tree nut exports from May through September in recent years.

The Foreign Trade Division calculates that the declared value of tree nuts exports shipped in containers through California ports last May-September totaled $2.12 billion, a 25.6% increase over the same period a year earlier. Yes, these are gubmint numbers, but they are numbers based on the values shippers ascribe to their outbound cargos. And, as we all know, farmers are no more likely to falsify the value of their exports than they are to lie on their federal tax returns.

So here we are with wildly different depictions of what happened over a five-month period last year. On the one hand, there is the UC claim that port congestion cost tree nut exporters $520 million in lost sales last year. On the other hand, we have evidence of sharp year-over-year increases in both export tonnage and declared value of tree nut exports last May-September as reported by the tree nut marketing groups as well as the federal government.

Are there any other parties weighing in on this matter? Well, as a matter of fact, there is this new study out of the University of California’s Giannini Foundation. Yes, the same study we’ve been talking about found that 2,000 more TEUs full of tree nuts found their way through California’s ports in May-September 2021 than in the same period a year earlier. The authors termed that a “slight” increase. Given the tribulations affecting the maritime supply chain and the charges farm exporters have been hurling at shipping lines, any increase at all might be regarded as something of a miracle.

And so, children, that’s how a silk purse can become a sow’s ear.

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