Ethanol production receives significant governmental support, note the experts. Corn converted to ethanol is putting untold pressure on the entire food industry, creating inflation in the industry, warns Harlan at USCS. “This is a huge problem for many of our customers, as it is driving up farm prices to record levels. This also has a significant effect on other crops, as farmers will divert land into corn production and overlook growing other vegetable crops. This will affect the food industry significantly.”
The PRW industry is an excellent reflection of seasonality in American life, explains Kaplan. “Hams get stored for holidays and briskets for St. Patrick’s Day. Pork bellies had always gone into freezers this time of year but they are trading at the unheard-of price of over $1.50 a pound, compared to the 60 cents or 70 cents a pound they were trading at a few years ago. Bacon producers wonder if they should store bellies at these alarming prices, or if they hope for price decreases this summer.”
China is a significant factor in any discussion these days about the state of any industry. Its burgeoning middle class now has a disposable income allowing it to feed its desire for U.S.-raised beef, pork, chicken, and turkey, notes Kaplan. “We will continue to see the export of more U.S. grains and meats than we have ever seen.”
All of these market factors mean lower inventories for the PRW industry, explains Kaplan. “These situations can actually present opportunities to our industry, which are higher turn rates, since warehouses depend on high turn rates for their revenues. Seasonal products turn only a few times a year, while exported products require only freeze-and-ship handling and higher turns.”
More Inspections, Harsher Fines
Probably one of the biggest changes in the industry causing significant angst are governmental mandates and regulatory compliance issues, notes Michael Henningsen, chairman and president of Henningsen Cold Storage in Hillsboro, OR [see “OSHA Imposes Stricter Enforcement Policies,” page 8]. “We have always operated safely and efficiently, but now there is a lot more governmental paperwork and it’s becoming more costly and onerous to comply.” The primary focus is safety compliance for facilities housing 10,000 pounds or more of anhydrous ammonia which is the refrigerant used in the cold storage industry.
There is a marked shift in the methods employed by agencies like OSHA and the EPA, report the experts, citing an alarming increase in state and federal regulatory activities such as invigorated inspections and investigations by OSHA, the EPA and state DEPs. “We have been in this business for over 22 years, yet we have never seen the likes of the almost punitive regulatory activity such as we are seeing today,” notes John Galiher, president and CEO of Preferred Freezer Services in Perth Amboy, NJ, echoing others in the industry.
This is a concern for the entire industry, adds Harlan at USCS. “We all want to assure our facilities are safe and that our industry is acting responsibly from an environmental perspective. But when regulatory agencies have a financial incentive to find deficiencies, I believe it corrupts the system.”
Henningsen reports that PRWs are required to have written documentation plans in place that detail any possible scenario that could go wrong in the warehouse relating to ammonia usage. “For experienced operators, this is all intuitive and involves procedures we have been doing for years and years,” he states. “Now we are put in the position of documenting what we’d do if the wind blows this way or that way.”
This change in policy began a little over a year ago, leading many to wonder if these harsher-than-ever fines have more to do about federal and state revenue shortfalls than with food safety. The fact that few warnings are being issued for deficiencies, as there had been historically, is troubling the industry. Instead, companies are just being slapped with harsh fines.
To comply with all of these additional requirements, PRWs have had to add more staff in order to monitor every single changing law and regulation, says Galiher. “So it’s gone from a monitor-into-compliance to a fine-into-compliance environment, and there is a big difference between the two. I don’t believe companies with excellent histories of complying should be fined before they are given at least a reasonable amount of time to fix what could be construed as a minor deficiency.”