Do the high energy prices have an impact on cold storage facilities? According to Brent Erenwert with Brother's Produce, demand for cold storage continues to skyrocket. The company rents out cold storage space in Houston, San Antonio, and Dallas, TX. Erenwert has a few explanations for the extremely high demand.
"Lots of build-up product from overseas is coming into the US right now, and holiday stuff is starting to enter the country," he said. However, the need for cold storage is not just generated by high supplies but also due to the demand for produce continuing to be strong. "In addition, it is not possible to expand or build new cold storage facilities at the moment. There is a huge shortage of refrigeration units, which makes it impossible to increase capacity. I am tapped out of space myself," said Erenwert.
Costs are up
High demand and limited availability usually result in high prices. Indeed, cold storage fees have gone way up, also at Brother's Produce. "However, it is not just factoring in supply versus demand. Fees have seen an additional increase due to high energy prices. "Electricity costs are sky high; our energy bill has almost doubled." Insurance fees have also seen a steep incline. "The costs of insurance have increased significantly as it has become so much more expensive to fix loss events," Erenwert said.
High demand for cold storage is a nationwide trend. "Due to port issues in California, some companies have been diverting away from the West Coast, putting more pressure on other areas in the country."
For Erenwert, Houston continues to show the biggest shortage of space because it is a port city. The cold sector is virtually non-existent, and many products are being stored in other areas, adding more layers of costs. Due to all the issues the supply chain is currently faced with, Erenwert expects large corporations to look for storage in local markets. "I expect storage will be put in essential areas, that will become a common model."
What is next? "I don't think relief will come soon. The damage is pretty deep; I expect things to be worse in 2023 before they get better."
Contact:
Brent Erenwert
Brother's Produce
Tel: 281-830-6323
brent@brothersproduce.com
www.brothersproduce.com