The price of No. 1 recycled pallets reaches $15 with reports of $18 up to $20 in Southern California.
By Kevin Hecteman
Consider the humble pallet: It’s an unglamorous but crucial part of the food supply chain, the platform upon which agricultural commodities ride as they travel from farm to packinghouse to grocery store and points between. And these days, there aren’t nearly enough of them to go around.
It’s the latest shortage confronting farmers who have also seen shortages of qualified employees, water and other supplies and services needed to grow and transport crops.
“I know that the shippers and growers are paying more attention to their pallet availability,” said Chris Christian, senior vice president of the California Strawberry Commission, “whereas that might not have been something that they were keeping an eye on on a daily basis. It’s just been more about, how are they managing the pallet availability for their operations?”
The commission was one of more than a dozen agricultural groups in the U.S. and Canada that sent a letter in mid-May, explaining the problem.
“Part of that is to make sure that our customer partners in the supply chain are aware of the shortages and the impact on the produce industry and supply of produce,” Christian said.
Brent McClendon, president and chief executive of the National Wooden Pallet and Container Association, said his industry “is one of many working to adapt to unprecedented shifts brought on by the pandemic.”
“We understand U.S. sawmills are working hard to increase capacity and meet strong consumer demand,” McClendon said in a statement, adding that the association “continues to participate in various coalitions to support policy issues that can alleviate these recent challenges.”
The soaring price of lumber is one of the prime drivers of the pallet supply crunch, said Lindsey Snowden, general manager of Valley Pallet in Salinas.
Between homeowners flocking to big-box stores and lumberyards to buy wood for home-renovation projects and an increase in new-home construction, “the price of lumber just really skyrocketed,” she said. “It’s up, I think, about 400% year over year.”
With the rise in lumber prices, Snowden said, customers have switched from new pallets to recycled pallets, which she said: “certainly put a squeeze on the recycled-pallet market”—and caused her company to run low.
“We’re producing as much as we can possibly produce every day, and we’re selling that,” she said. “We’re getting a lot of calls from a lot of agricultural customers, especially in the Salinas Valley, right down into Santa Maria and Oxnard.”
Christian said the pallet shortage affects different farmers in different ways. Though there have been some harvesting disruptions, she said she has not seen anything “that’s significantly affected shipment.”
Strawberries have reached peak season, she said, “and the cost and availability of pallets is yet another significant increase in production and supply costs that has really hit our industry, as well as other industries, this year.”
Pallet manufacturer Snowden said lack of skilled employees represents another limiting factor. She said her company has had problems “getting enough people into our manufacturing facilities to keep up with demand. We’re really stretched for labor right now.”
All that has driven up costs.
“If you’re talking about a recycled pallet, we’re seeing markets around $15 for a No. 1 pallet,” Snowden said, using the designation for the best-quality pallet. “In some of the coastal regions, we’re seeing higher than that—we’re hearing $18, $20 in Southern California.”
Constructing new pallets—if you can find the lumber and the people—is even more expensive.
“We’re seeing manufacturing costs skyrocket from 150% to 200%, probably,” Snowden said, which then carries over to pallet prices. “If you look at the same time last year, we were selling new pallets for $12, $12.50. Today, they’re nearly $40, and all of that is in material and labor.”
Navigating these times calls for good relations between suppliers and customers, she said.
“It’s really about being proactive,” Snowden said. “That’s one thing that we are talking to all of our customers about—planning as best as you can, having multiple suppliers if you can, and finding a supplier that’s able to offer you alternative solutions.”
And if you can’t get ahold of any pallets?
“I don’t know any alternatives,” Christian said, noting that strawberry farmers “use pallets for everything. We need pallets to take packaging out into the field. We need pallets to bring product in from the field, for cooling operations and for loading operations, transportation.”
The purpose of getting the word out about pallet supplies now, she said, is “recognizing the shortage and the cost issues,” and making sure customers “are aware of that and are able to work with their suppliers to try and increase the availability of pallets, as well as potentially modifying or providing exceptions to customer-specific pallet requirements.”
Strawberry farmers expect to ship 7.5 million to 8 million trays of strawberries during the next four weeks, and Christian said despite the tight supply of pallets, “we are not seeing widespread disruption” in the harvest at present.
But Snowden warned the shortages may linger.
“A lot of white-wood manufacturers and recyclers are planning that this year, at least for the duration of 2021, this is going to be our new normal,” she said.
“I don’t think that supply is going to catch up to demand this year,” Snowden added. “We’re going to have to wait for demand to meet supply,” which, she said, could occur in 2022.
All this is new to what’s generally a stable business, Snowden said.
“It’s an incredibly unique time,” she said. “We’ve never seen this, I don’t think, really in the history of this business. Everybody’s trying to navigate it one day at a time, because there’s so many rapid changes.”
(Kevin Hecteman is an assistant editor of Ag Alert. He may be contacted at email@example.com.)
This article is reproduced with the permission of the California Farm Bureau Federation.