A squeezed supply of refrigerated shipping containers has caused shipping rates to rise 10 percent to 25 percent since last spring, pushing up prices for frozen and chilled food.
And rates are expected to go higher as shipping lines implement federal security regulations aimed at thwarting terrorism.
Already consumers are paying higher prices for produce such as cherries from Chile and honeydew melons from Guatemala. The fruit is shipped in 20-foot to 40-foot refrigerated boxes, called “reefers.”
Reefers are in tight supply partly as a result of the mad cow disease scare; 1,800 containers of U.S. beef are quarantined in Asian ports as inspectors look for traces of the disease.
Many others, used to transport food and medical supplies for the war effort in Iraq, have been stranded in the Middle East since spring.
Food wholesalers like Nick Doumouras, who depends on refrigerated containers to import food, have been forced to pass on additional costs to groceries.
Each week Doumouras, who owns Olympic Wholesale Produce & Foods in Chicago, imports 6,000 cases of honeydews and 5,000 cases of cantaloupes, which fill 8 to 12 containers. His shipping rates have jumped an extra 50 cents per case, or $400 to $600 per container.
He has no other way to move the fruit.
“I can’t get my produce without refrigeration,” said Doumouras, who imports from Honduras and Guatemala. “Produce won’t survive the trip without being cold.”
To offset the costs Doumouras slaps an extra $2.25 for the cantaloupes and $1.75 for the honeydew on each package he distributes to grocery stores.
Some wholesalers are swallowing the increased importing costs, fearful of losing customers.
But mom and pop stores that have had to pay higher prices to distributors are passing on those costs to consumers.
Steve Ismael, who owns Fantastic Produce on North Milwaukee Ave., for example, now charges $2.99 for imported honeydews, up $2 from what he was charging in 2002. Within the past year, the wholesale price he pays for a box of avocados imported from Chile rose to $31 from $26. He sells the avocados for 99 cents each, up 20 cents from the previous year.
“When the prices are high, the customer will buy two pounds of tomatoes instead of five pounds,” he said.
Upscale grocery Fox & Obel on East Illinois Street charges customers 20 percent above the 2002 price for Chilean cherries, nectarines, peaches and apricots, said store president Cary Attar.
“A 20 percent increase is more than the amount we make on produce,” he said. “The costs have to be passed along. There’s no way around it.”
Reefers are refrigerated versions of the metal freight containers familiar to Chicagoans who ride the Orange line. Empty reefers can be seen stacked high along the train tracks near Midway Airport.
Both reefers and regular containers are designed so they can easily be removed and switched to trucks and trains from ships. They often are stacked on decks of ships longer than three football fields. Millions of containers ply the globe’s trade routes.
One of the largest players is Maersk Sealand, with a fleet of nearly 1 million containers. It supplied containers for the Iraq invasion.
“We really don’t have any reefer shortage in America,” said Tom Boyd, North American spokesman for Maersk.
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American President Lines Ltd., which owns 15,000 20-foot containers, provided containers to the U.S. military for Iraq and neighboring countries.
“The supply [of reefers] is tight but we’re still able to respond to all of the requests from our customers,” said Scott Dailey, spokesman for American President Lines. “With a tight supply, we have to manage our logistics well and manage our fleet carefully.”
Still, shipping rates for containers are expected to rise because of increased security requirements.
“Additional charges can be expected over time as government agencies adopt [security-related] standards and eventually require costly deployment of new cargo scanning, equipment tracking, and `smart’ container seal technologies,” said Niels Erich, spokesman for the Westbound Transpacific Stabilization Agreement, an umbrella organization of freight lines in Oakland, Calif.
Some companies have avoided the extra shipping costs because they own their own fleets.
Cincinnati-based Chiquita Brands International Inc., for example, transports its bananas on its own boats from its Central America plantations.
But smaller food shippers cannot escape the increasing costs to ship.
Ian Rahal, president of Rahal Foods Inc., a Northlake importer of fruit juice concentrates, said he is worried that freight companies could raise refrigerated transportation rates by 30 percent in 2004.
Rahal imports from North and South America, Europe, Africa, and Asia. His refrigerated shipping rate from Chile to East Coast ports has risen from $3,600 a container four years ago to $4,100 last year.
Shipping costs for refrigerated exports have also gone up.
According to the U.S. Department of Agriculture, rates from U.S. to Asian ports rose by 12 percent for refrigerated shipments and 11 percent for dry shipments for the first nine months of last year.
The average rate for using a refrigerated container was $3,693 last October.
But Northfield-based Kraft Foods Inc., whose budget for nationwide shipping via reefer containers stands at less than 1 percent, expects increases in coming months.
“We’ve seen transportation costs of all types going up, including refrigerated intermodal,” said Kathy Pernu, a Kraft spokeswoman. “We’ve seen predictions that refrigerated container transportation costs could increase anywhere from 2 to 7 percent in 2004 over 2003 across the industry.”