Discovery Ramblings - May 21, 2021

Discovery Ramblings - May 21, 2021

Randy Hooper - Discovery Organics

So what the hell is going on?  Who thought wooden pallets would be the produce industry issue of the moment, but it is real and scary.  Can you imagine, as a retailer, getting a call that “hey, we have your order ready, but nothing to put it on.”  Or a farmer, desperate to ship a truckload of freshly harvested lettuce being told that he can only get 16 pallets this week. 

Do we worry about this?  You bet.  And there will come a time when we will have to build our own so we never have to cancel an order, but at the current price of lumber, it is insanely expensive.  New pallets that we used to be able to buy for $12 are now selling for $35 locally, with no guarantee you can get them.  With the current price of lumber, we don’t think we can churn one out ourselves for less than $45, doing them manually, one by one - and we have no guarantee that we will get them back within the Lower Mainland, and zero chance of getting them back shipping to the Interior, the Island, or the Prairies.  I know that sounds crazy expensive.  A moderate sized new home needs a lumber package for framing, roof, cladding etc. of about $60,000 (2019), or $120,000 (2020), or currently $200,000 (2021).  So a new moderate sized house costs $140,000 more to build than 2 years ago.  Someone is getting rich off this!

A pallet shortage is affecting the produce industry in many ways. (Photo courtesy Michael Gaida/Pixabay)

There is much discussion within the produce wholesale industry of having a pallet surcharge, simply as an incentive for retailers to hoard pallets and return them, or a way of recouping additional expenses for pallets we say goodbye to forever on orders shipping outside our “pallet re-capture” zone in our local delivery area.  When we buy product from US Farms, there is always a pallet surcharge of $8 – 10 – 12.00 (US). That will likely soon go up as well (in fact… it already has with some shippers charging $20 US).  If nothing changes, our pallet bill could hit $100,000 this year, where just a few years ago, we could get all we wanted for free, and worst case scenario paid $5 for good quality used.

This isn’t a BC problem – it’s a Canada and the US problem. 

Now, what you are probably not aware of is the high degree of control out there in the world about what wood you can or cannot use for pallets because of possible bug infections.  So if any pallet is produced in any country going to another country that could have wood that is potentially infested with little bugs that would create havoc in their new home it has to be treated.

You may notice on some pallets there is an ICCP stamp and serial number burned into the side of the pallet.  The US and Canada both require that any pallet coming from Mexico, for example, has to be chemically treated, or heat treated (like kilning) to kill any bugs.  Then the pallets have to be inspected so when we receive a shipment, the actual pallets have a phytosanitary permit, and the lot code from the pallet certifier (ICCP) is on the documentation. 

The same applies even within the U.S., where some pallets cannot be shipped from one part of the country to another – at least for their first use, and I can’t give you an example – but a pallet made from pine, for example, made in Oregon, wouldn’t be able to be used to ship Oregon products to, say Georgia.  Dumb example.  But explains the unique situation when there is a shortage, and already the industry is asking the powers that be to suspend pallet wood restrictions in the near future to keep produce moving, with something to move on.

Here are a few other links diving deep into the issues:

'Acute' pallet shortages putting fresh produce supply at risk

Pallet problems add more costs to supply chain

Ag's latest headache: a shortage of pallets for shipping produce