The coronavirus pandemic has shaken and rearranged trade and supply chains in Miami-Dade County, home to PortMiami and Miami International Airport, global hubs for international trade. It has also pushed the country into an economic downturn, causing a collapse in demand for many products. But this enormous trade system — which includes importers, exporters, logistics firms, freight forwarders, warehouses, customs brokers, transporters and others — continues to function even as it deals with shortages of merchandise, demand spikes, business closings, import delays, sick employees, and the need to reduce personnel.
Many local companies feel the impact. Among them:
▪ Part of the building materials cargo A Customs Brokerage in Doral ordered for clients is stranded in China and other countries of origin due to manufacturing and port shutdowns caused by the Corona virus, said Gabriel Rodriguez, president of the family-owned firm with 50 employees.
▪ Miami importers and distributors of cut flowers account for most of the cut flowers brought into the U.S. and provide jobs for about 6,000 people. But as the economy slumped, demand for cut flowers collapsed.
▪ And Fru-Veg Marketing in Miami, for one, must work hard to balance future production of fruits and vegetables on foreign farms with the demands of American shoppers struggling though a recession.
No one know for sure how deeply the virus will affect U.S. trade. It could decline by nearly $1 trillion this year, to the lowest point in a decade, if the current economic crisis is similar to the financial collapse of 2008-2009, according to a recent article in Forbes by Ken Roberts, president of WorldCity, a Miami-based multimedia company specializing in international trade.
Nor is it clear today how flexible supply chains will be as production in China, Europe, Latin America and the U.S. catches up to strong demand for scarce items like medical supplies, testing equipment, surgical masks, gowns and respirators.
Trade relationships, now under strain, will endure the crisis, one expert said.
“The actual trade relationships between countries do not change much, nor do those between buyer and seller if they are long-term relationships, just because of an economic downturn, political strife, financial problems, natural disasters or health pandemics,” said Jerry Haar, professor and executive director for the Americas at Florida International University’s College of Business. “They ebb and flow, but they do not dissolve,” he said.
Haar also pointed out that services make up an enormous share of the region’s trade balance: “For South Florida, services — tourism, hospitality, foreign students, law and accounting services — is where we will be knocked for a loop.”
“With the global economy exhibiting sluggish performance even before the pandemic, COVID-19 is the equivalent of a kick to the groin to someone who already has a double hernia,” Haar said.
The entire supply chain has been disrupted by coronavirus, said Gary Goldfarb, chief strategy officer at Interport Logistics, an international trade logistics, distribution, warehousing and supply chain enterprise in Miami. “Prior to the shutdown in the U.S., we had a shutdown in Asia,” he said.
For instance, China — PortMiami’s biggest supplier of imports — closed in January for its traditional Lunar New Year celebrations but didn’t open up afterward due to the virus. However, because sea cargo from Chinese ports typically takes 30-35 days to reach PortMiami, some merchandise ordered weeks or months ago has been arriving.
Air cargo through Miami International Airport was down slightly during the first two months of 2020, but its traffic remains vigorous, thanks in part to the need for medical equipment and supplies.
“MIA may not be flying too many passengers now, but they have been receiving cargo flights regularly and cargo charters as well,” said Goldfarb, who has decades of experience in South Florida trade and logistics. “Easy to tell. Go to MIA on any afternoon at 6 p.m. and see how many cargo planes are on the ground. Come back at 8 a.m. and they are not there,” he said.
MIA is a key international shipping and reception center for vaccines, medicines and medical equipment.
Cargo carriers at MIA are critical in meeting currently insatiable demand for surgical masks, gloves and gowns; digital non-contact thermometers and COVID-19 tests kits (now being made in Chile); and flower imports from Latin America.
Even though handling of freight continues at PortMiami and MIA, it is not clear what will happen as the recession progresses this year, or if employees who become infected with coronavirus will slow cargo processing.
MIA is a global supply hub. It is the top U.S. airport for international freight, and one of the leading freight movers internationally. In 2019, MIA handled more than 2.3 million tons of cargo (including mail), down 1.54 percent from the previous year. The dollar value for the full year was over $58.8 billion. For the first two months of 2020, MIA’s total trade fell 1.74 percent to $9.57 billion compared to the same period in 2019.
The value of all trade (exports and imports) moving through PortMiami last year was $26.6 billion, according to an analysis of U.S. Census Bureau data by WorldCity, a Miami-based multimedia company specializing in international trade.
In the first two months of 2020, trade value was $4.16 billion, up slightly from the first two months of 2019, according to WorldCity data.
According to trade expert Alice Ancona, the pandemic is “really a black swan event.” Ancona is senior vice president and COO of the World Trade Center Miami, the local division of an international organization promoting global trade.
“Prior disruptions were caused by global recession or geopolitics, and weren’t health-related,” Ancona said. “There is a massive global demand for pandemic related products, so supply chains are bending and transforming in ways they have never been bent before. We are undergoing an extraordinary and epic shift in demand. We went from buying consumer goods like TVs and apparel and cosmetics to buying face masks and gloves and other medical supplies, all in a matter of weeks. We are adapting.”
“This is a transformative event, and I would not flat-out say that trade is down so much as it has changed. We’re undergoing an extraordinary and epic shift in demand.”
Here’s how some Miami-based companies are adapting to the new conditions:
▪ Fru-Veg Marketing keeps feeding clients despite severe fall in demand: Miami-based Fru-Veg Marketing works in a complex business environment under normal conditions. In the time of coronavirus, it’s even more challenging.
“We work to feed the whole country, and parts of Canada,” said Conchita Espinosa, founder, owner and CEO of Fru-Veg, an importer and distributor of produce from Europe and Latin America. “Basically we are distributors and we work on behalf of farmers,” Espinosa said. “We determine the curve of production and figure out volumes of different products from different growers year round.”
After that, Espinosa and her team — who sell to supermarkets and wholesalers — need to determine how much produce clients will need at specific times and what price to charge.
For example, the company has to keep track of when clients will stop receiving avocados from growers in Mexico and the U.S., and when (and how many) avocados they will need from the company’s growers in Peru. Demand for avocados is off sharply because restaurants and cruise lines aren’t buying them.
Aside from avocados, Fru-Veg deals with blueberries, grapes, kiwis, apples, asparagus and other varieties of produce. It imports about 80 percent of products.
Fru-Veg receives most of its produce through PortMiami, but it also takes delivery of shipments at MIA and Port Everglades. The company also has a warehouse in Philadelphia for clients in the Northeast.
Espinosa said her business recently felt the impact of the coronavirus as the economy abruptly cratered: “We were going gangbusters until the last week of March, and then we saw a slowdown in supermarket demand.”
Suddenly, planning, sales volume and pricing became unpredictable: “It’s difficult to predict demand for our products in June, July and August, because we’re in an unprecedented situation. We don’t know how much demand will be down and we don’t know how long this will last. We’re trying to fit supply to demand.”
So far, Fru-Veg is limiting the volume of kiwis and avocados it’s purchasing for upcoming delivery, and working with farmers and clients on future demand for other produce. There have been no layoffs among the company’s 17 full-time employees.
“We’re spacing out our workers and closing the Miami warehouse early,” Espinosa said. “Prices are depressed and unpredictable. There are a lot of people unemployed, and we’re going into a recession.”
▪ Cut-flower importer not wilting: Bill Fernandez, president of family-owned Continental Flowers in Doral, imports cut flowers from South and Central America and sells them to about 800 wholesalers and supermarket chains in 48 states.
“Our sales are way down because many retail florists [who buy flowers from his wholesale customers] either closed down or were closed down by government regulations,” said Fernandez, who founded the company in 1974.
Continental sold about 3 million boxes of cut flowers in 2019 but saw its sales fall to about 30 percent of normal for this time of year as florists began closing their shops across the U.S. several weeks ago. “We order shipments ahead of time from farms in Colombia, Ecuador, Peru, Costa Rica the Dominican Republic and other places, and we had to throw away a lot of stock,” he said. Most of Continental’s flowers arrive by air freight to MIA, and are kept chilled during their journey to retail clients. Some hardier flowers arrive by ship.
Weddings and parties were canceled or postponed, and New York — an important sales point for Continental — shut down entirely, he said.
Since mid-March, Fernandez has adjusted his orders from overseas farms and recently has seen sales rise to about 50 percent of normal. Supermarkets, which never closed, are key sales points for cut flowers. Individual florists, who always filled some orders locally online or by phone, now depend totally on these orders and deliver all purchases to customers.
Nonetheless, Fernandez had to lay off 10 of his 55 warehouse employees and cut back hours on others. All work procedures have been adjusted to ensure adequate physical distancing among workers.
“Cargo planes don’t want to fly half empty, so they arrive in Miami 3-4 days a week, instead of seven,” Fernandez said.
Fernandez said that if business does not return to normal, many flower farms in Latin America — including some his company owns — will face serious economic problems since the U.S. is their principal market. Continental is applying for government assistance under the CARES Act for small businesses and is looking for a sales uptick for Mother’s Day, on May 10. “We’re hoping that if people can’t visit their mothers and bring flowers, they’ll order them by phone or online.”
WHAT’S HAPPENING IN MIAMI’S IMPORT SECTOR?
Air freight and ocean cargo are still being moved from PortMiami and Miami International Airport to warehouses and businesses in Miami-Dade, as well as to other parts of Florida and the rest of the country.
But there are many slowdowns and adjustments due to the virus, government orders closing nonessential businesses, stay-at-home regulations plus a host of other factors, said Ivan Barrios, president and CEO of the World Trade Center Miami, the local office of the World Trade Center, an international organization promoting global trade.
According to Barrios:
CUSTOMS BROKER HOPES FOR ‘WAVE OF INCREASED IMPORTS’
A Customs Brokerage, a family-owned business based in Doral, is experiencing a 20-25 percent drop in business due to the virus-related manufacturing and port shutdowns internationally, as well as to the still unresolved trade conflict between the U.S. and China.
“We import general building materials for our customers, a lot of stones, tiles and slabs,” said Gabriel Rodriguez, the company’s president.
The brokerage receives imports from China, India, Spain, India, Brazil, Ecuador and other countries. Clients include building contractors and distributors.
“We are still receiving imports, but we’re seeing an overall reduction of 20 percent plus in cargo volumes,” Rodriguez said. “This is consistent with what is being reported at the national level for port volumes.”
The company, primarily a customs broker and freight forwarder, also offers warehousing, global transportation, e-commerce and logistics services. About 80 percent of its business is ocean cargo, the remainder air freight.
“We know that some cargo for our clients has been stranded in countries of origin due to various shutdowns,” Rodriguez said.
People working in trade and logistics expect China to shut down each year for a week or so to celebrate the Lunar New Year, he said, but the country did not open up again because of the coronavirus.
“The issue became that one week stretched to over one month and our clients struggled to source their cargo during this time,” Rodriguez said. India recently announced a three-week shutdown of all stores, manufacturing and nonessential business. “We’ve seen a huge increase in demand for medical supplies and food products, but pretty much everything else is on the decline.”
A Customs Brokerage has worked with importers and exporters of medical supplies in the past and is now actively engaged in this sector.
While the company’s sale are in a slump, Rodriguez is hoping for improvement:
“We are expecting that, as time continues, there will be a wave of increased imports to restock shelves. We hope and trust that will be sooner rather than later.”
A Customs Brokerage has about 50 employees, including warehouse and office staff.
“We’ve applied for government loans but we’re keeping everyone on. The last thing I want to do in a family business is let people go,” Rodriguez said.
Source: Miami Herald