Cash Market Moves

By Mary Kennedy
DTN Basis Analyst

The International Longshore and Warehouse Union (ILWU) officially announced on Aug. 4 that members voted to ratify a three-year extension of its master labor contract.

The contract extension between the ILWU and Pacific Maritime Association (PMA) representing port terminals and carrier employers is expected to provide for five years of labor peace on the West Coast ports.

The current contract was set to expire July 1, 2019; the historic three-year extension covers workers at all 29 West Coast ports through July 1, 2022. The contract will provide increased wages, maintain health benefits, and increase pensions for the 20,000 members of the ILWU. Specific amounts have not been disclosed.

Midwest Shippers Association said that they, and many shipper and exporter trade organizations, "encouraged the ILWU and PMA to come to an early agreement to negotiate and extend a contract, rather than delay and devolve into another dramatic port 'slowdown' conflict that led to untold billions of dollars in losses for importers and exporters as supply chains ground to a halt during the 2014-2015 contract negotiations."

Remember back in 2014 when both organizations started contract discussions in May, as they hoped to avoid problems when the contract expired on July 1, 2014. Eventually, they agreed to continue working under the current contract and continue talks. Fast forward to February 2016, when the White House finally said it would intervene in stalled labor talks at West Coast ports. The labor secretary met with both parties, urged them to complete a new contract or the talks would be moved to Washington, D.C., meaning then-President Barack Obama may get involved.

Finally, after nine months of failed negotiations, severe slowdowns and disruptions at ports in California, Oregon and Washington, an agreement between the ILWU and PMA was finally achieved in late February of 2015. Containerized agricultural exports, including soybeans, soybean meal, grain and meat, were affected. Given the need to transport them in refrigerated containers, meat exports were arguably the agricultural export most severely affected by the slowdown.

In an Aug. 7, 2017, news release, PMA President James McKenna said, "This first-of-its-kind contract extension is great news for the maritime industry and the nation, setting the stage for reliable and productive cargo operations for years to come. This agreement also continues to provide ILWU workers with a generous wage and benefits package during a time of great change in the global maritime business."

Mike Steenhoek, executive director of the Soy Transportation Coalition, told DTN, "We consider this contract extension as welcome news for agriculture and other industries that rely on a predictable and reliable West Coast to meet the demands of our international customers. U.S. agriculture has worked tirelessly over the years to establish itself as the most cost-effective, reliable supplier on the international marketplace.

"Unfortunately, that reputation can diminish in a moment due to unrest between dockworkers and port operators. This unrest has reinforced the logistics axiom that one should avoid putting all one's eggs in one basket. Agriculture and other industries continue to explore opportunities to diversify their supply chains so disruptions that occurred a couple years ago have less of a punitive impact in the future."

During the nine-month slowdown, agricultural exports, many of them perishables, ended up rotting in warehouses because vessels either sat at berth or went somewhere else to avoid the slowdowns. Some container exporters rerouted to the East and Gulf Coast ports, and some of that business never came back to the West Coast even after the contract settled.

"While we are pleased the contract extension has increased the likelihood of stability on the West Coast, it is important to pursue all supply chain options to ensure we remain the preeminent supplier in the global marketplace," concluded Steenhoek.

Mary Kennedy can be reached at mary.kennedy@dtn.com

(ES/AG)