Almonds, an error and some questions...Badlands Journal editorial board
Badlands has been consistent in writing that Merced is the largest almond-producing county in the state, nation, world and universe. Badlands is in error. According to the state Almond Board's statistics, Kern, Fresno and Stanislaus exceed Merced in almond production. Kern remains the largest producer, steady at 20 percent after 20 years. Merced and Stanislaus have diminished their slice of the pie by a few points in the last decade, while Butte has ceded place to Madera in the high single-digit category and San Joaquin County has dropped into the "all others" category since the late 1980s. The greatest increase has been in Fresno, lumped in with "all others" in 1988-1989 statistics, but last year accounting for 18 percent of the state's production.
Farm prices (per pound) in the last five years surged to a high of $2.81 in 2004-2005, but fell back to the $1.55 range, where they were in 2003-2004.
At the end of last year, total bearing almond acreage in the state stood at 615,000, non-bearing at 125,000. New plantings surged to 49,281 acres in 2005-2006, the highest number of acres recorded, and dropped back to 14,381 in 2007-2008, the lowest new-planting figure since 1992-1993. The two low figures might be related to drought.
The latest Merced County Agricultural Commissioner's report (2007) lists 88,131 bearing acres of almonds, 3,616 non-bearing, down from 4,575 non-bearing acres in 2001. The only other number we will burden you with is the $60 million local developer Greg Hostetler had reportedly invested in almonds by September 2007.
How do almond growers that weren't engaged in speculative real estate development or other lucrative non-agricultural pursuits cope with the increase in supply caused by investors who are not farmers but need tax write offs for profits?
Is the "impatient money" of real estate seeking tax write offs simply adding to the perennial Valley problem of overproduction of favored commodities? How will the ever-expanding California almond crop, more than half of which is exported, fare in the global recession?
Badlands Journal editorial board
The Wall Street Journal
Looking for Gold in Them Thar Trees
Investors Rush Into Almonds, But Will They Stick Around As Prices Slip, Costs Rise?...Malia Wollan
Greg Hostetler is a real-estate developer who builds subdivisions in California's Central Valley. But the past few years, he's gone nuts.
To be precise, Mr. Hostetler has been building a sideline in almonds, spending $60 million to buy and plant 4,500 acres of trees since 2000. This year, he plans to shell out at least another $5 million to plant an additional 1,000 acres.
"The almond market is looking a lot better than the housing market right now," he says.
Mr. Hostetler isn't the only newcomer jumping into California's almond game, where orchards now stretch down the Central Valley from Red Bluff in the north to Bakersfield in the south. In the past few years, doctors, lawyers, pension-fund managers and pro football Hall-of-Famers, among others, have all snapped up farmland in the state to plant almonds as world-wide demand for the nut has grown by 11% between 2001 and 2006. And despite some concerns on the horizon, many of the newer growers remain optimistic.
"Everyone knows that almonds are a great investment," says Monterey, Calif., restaurateur Dominic Mercurio, who has teamed with football commentator John Madden to purchase nearly 400 acres of almond orchards, spending more than $3 million since they bought their first 25 acres in the late 1990s. Mr. Mercurio says he and the former Oakland Raiders coach intend to buy at least another 600 acres in the next few years.
While some investors have been lured to almonds because of agricultural tax breaks, the recent rush has mainly been spurred by a boom in demand, partly fueled by high-protein diets such as Atkins and South Beach. The industry has also assiduously marketed the cousin of the peach and the plum, touting it as filling, high in antioxidants that fight colon cancer and good for the heart. The upshot: Between 2001 and 2006, the industry says, annual consumption of almonds in the U.S. grew by more than a quarter, exceeding a pound per person.
That's good news for California's agricultural sector since more than 80% of the world's almonds are grown in the state, flourishing in the Central Valley's fertile soil and a climate similar to the Mediterranean where almond trees have thrived for centuries. The nut is the state's biggest agricultural export -- ahead of wine, strawberries and cotton -- worth more than $2.7 billion a year. Overall, California has 730,000 acres of almonds now, up from 389,000 acres in 1980, according to the U.S. Department of Agriculture. The department forecasts a record 1.33-billion-pound almond crop for 2007, up 19% from 2006.
But many of the people jumping into almonds are doing so even as prices for the nut have been sliding. In 2005, farmers received $2.80 to $4 per pound of almonds. Now, about a third of the way through the almond harvest, farmers are getting $1.50 to $1.80 per pound. In a classic agricultural cycle, high crop prices resulted in a rush to plant trees, leading to a market glut of nuts. Meanwhile, almond production costs have alsorisen -- especially for the bees that pollinate the flowers and the diesel oil that fuels the machines that shake the nuts from the trees, sweep them from the ground and truck them to market. Recent salmonella worries have also led to new rules for pasteurizing almonds with either heat or chemicals, adding additional expenses for growers and processors.
"A lot of people are jumping on the tree-nut bandwagon," says Mike Iliff, senior appraiser for Fresno Madera Farm Credit, an agricultural lender. "They'll plant and grow and keep doing it until they drop the price down and satiate the market. You can always depend on agriculture to stab itself in the foot."
All of this has roused the ire of some longtime almond farmers, who say the newcomers are driving up land values and driving down nut prices. Second-generation farmer Stuart Woolf, who farms in Fresno and Madera County, says the ranch adjoining his 10,000 acres is up for sale at "an inflated price." The per-acre price for almond orchards in 2006 in Madera County was $8,500 to $15,000, up from $3,500 to $8,500 in 2000, according to theAmerican Society of Farm Managers and Rural Appraisers.
Though Mr. Woolf would like to own the neighboring property himself, he says "some doctor who knows nothing about farming is likely going to buy it." That makes him worry that almonds have become more about land speculation than agriculture. He calls people like him who know the farming business and want to invest for the long haul, "patient money."These days, he says, he sees a lot of "impatient money" in almonds.
Hartley Spycher planted his first almond trees in 1960, now has 500 acres of the nuts in Turlock, Calif., and is planting 80 additional acres this year. He is less concerned about land than he is about water, worrying that as more people punch wells into the ground to irrigate their orchards, water will become scarce. Still, he says it's a free market. "If I was 18 years old, I'd be more worried," says the 70 year old.
Almonds first landed in California with Franciscan monks in the mid-1770s aboard Spanish ships bound for missions along the coast. Serious cultivation didn't begin until the 1870s, when pioneers planted hardier varieties deep in the state's interior, particularly in the Central Valley.
Since 1950, the nut has had its own marketing arm called the California Almond Board; almond farmers fund the group through a mandatory fee. In the mid-1990's, the board launched international marketing efforts to increase international sales, funded scientific research and succeeded in getting the Food and Drug Administration to certify almonds as "heart healthy." At the 2006 Oscars and other celebrity events, the board evenarranged to have the nuts tucked into VIP goodie bags.
That rising profile of almonds helped attract the newcomers, including Silicon Valley developer and lawyer John Vidovich. Mr. Vidovich, who started getting into almonds in 1998, has since become one of the state's larger growers with 15,000 acres of the nuts."The world needs more almonds," he says. "Almonds help sell other products like cereal and chocolate."
Mr. Hostetler, the Central Valley real-estate developer who is now planting more almond orchards, says his $60 million investment in the nut so far is "a little better than break even," but he'll know more after this year's harvest ends next month.
Mr. Hostetler, who still spends three-quarters of his time in the property business, says he isn't worried about the huge quantity of almonds slated to fall from the trees this season, or the thousands of acres being planted with new trees this year. When he drives his pickup truck out between the dusty rows of trees, he says he sees nothing but bountyand profit on the horizon.
"Almonds are like Las Vegas," says Mr. Hostetler, who eats almonds everyday and keeps a stash in his office. "It keeps growing, people keep thinking it's gotten too big, but still there aren't enough rooms."
Housing authority member suspended
Federal government acted because Bowman faces seven criminal complaints...SCOTT JASON
The federal government has suspended Patrick Bowman from his position on the Merced County Housing Authority because of his pending criminal case.
The U.S. Department of Housing and Urban Development, which funds the authority, sent a letter to Bowman's Los Banos home explaining that his removal was necessary because the allegations are "contrary to the government's interest in maintaining the integrity of its programs."
Bowman has been charged with seven felonies, including diversion of construction funds, embezzlement, falsified corporate records and criminal conflict of interest.
The charges stem from his job at Merced County Office of Education and his role in Firm Build, a nonprofit that taught troubled youth construction skills. Until its demise, Firm Build had a close relationship with the Housing Authority and office of education.
"I have determined that immediate action is necessary to protect the public interest because this criminal complaint is evidence of the irregularities seriously reflecting on the propriety of further federal government dealings with you," HUD acting director Henry Czauski wrote. "Given the seriousness of the allegations, I have determined that your immediate suspension is necessary to protect the public interest."
The suspension is temporary, pending the outcome of Bowman's criminal case, which has been proceeding slowly due to its complexity.
Ralph Temple, Bowman's attorney, did not return phone calls for comment. A call to Bowman's cell phone was not returned.
The suspension can be challenged within the next 30 days, though if false statements in defense are given, the department can pursue a civil or criminal case.
Bowman is employed as an administrator with Merced County Office of Education. He has an annual salary of $104,764. He's not supervising anyone and is working on a curriculum for Valley Community Schools and Juvenile Hall.
The Merced County Board of Supervisors was forwarded a copy of the letter last week by the District Attorney's Office.
The suspension adds a third vacancy to the authority, which had two other members resign in the past year. The board is planning to make appointments in the coming months, county spokeswoman Katie Albertson said.
Firm Build went bankrupt in mid-2007, prompting a District Attorney's Office investigation that lasted 15 months and culminated in September with the arrest of Bowman, program manager Rudy Buendia III, administrative manager Joe Cuellar and secretary Christina Ledezma.
The Board of Supervisors appointed Bowman to the Housing Authority in May 2008, after the nonprofit had collapsed and was in the midst of a well-known probe into its failure.
According to investigative reports, from May 2005 to December 2006, Bowman directed $120,000 from the office of education to Firm Build for projects with no connection to the school.
The office of education's automotive training center project at Castle Commerce Center was never opened up to competitive bidding for construction, as investigators believe it should have been. Instead, Firm Build was named the general contractor, though no contract was ever signed. The project's cost ballooned to $1.25 million.
The conflict-of-interest charge comes from investigators finding evidence that Bowman had Firm Build renovate his home.
A preliminary hearing -- when a judge determines if there's enough evidence to go to trial -- is scheduled for August.
The Housing Authority, which is charged with creating affordable homes for the county's poorer residents, has been handicapped by a dysfunctional and dwindling board.
Deidre Kelsey, chairwoman of the Board of Supervisors, has heard allegations from both sides, sometimes contradicting each other.
"The allegations have been far-flung and wild. I'm pretty well confounded," she said.
Joe Ramirez resigned last year and Tom May left in March. The meeting last week was canceled because there wasn't a quorum.
Kelsey said she hopes new members and the conclusion of the criminal trial will resolve the Housing Authority infighting.
"Our board needs to have a full-functioning and legitimate local (Housing and Urban Development) board," Kelsey said. "We truly miss the partnership we could forge."
Our View: Lawmakers block water reform
Constituents' growing anger making it harder for politicians to hide.
The politicians are scrambling for political cover as California's water crisis gets more serious because of a third year of a drought and environmental restrictions on how much water can flow in the Golden State.
They don't want their constituents to know they've been ducking this issue for years so they periodically fire off news releases demanding action.
But they are the ones who have been standing in the way of getting anything done. That dirty little secret is finally getting out to California residents, and many are becoming angry.
In Fresno last week, the water debate got rowdy and at one point there was the possibility of physical confrontations among some protesting the government's lack of action. All this makes fine political theater, but it's time to tone down the rhetoric if we are going to get a comprehensive water plan that meets all the needs of California.
Gov. Arnold Schwarzenegger and the Legislature have an opportunity to come together behind a plan that would create surface storage, expand underground storage through water banking and dramatically increase water availability through conservation efforts.
But getting this agreement would mean sitting down with the warring factions, chiefly environmentalists who oppose dams and farming interests who think dams are their salvation.
Both sides have overstated their cases, and that gives Schwarzenegger and Democratic leaders in the Legislature a lot of room to negotiate.
But it also will take the cooperation of the federal government. The feds must help pay for new water projects and take another look at environmental laws that restrict water flows.
California's congressional Democrats, especially House Speaker Nancy Pelosi, cannot remain silent on this issue any longer.
Water politics are complicated, but a solution can be found because everyone knows the issues, and what's at stake. The various sides have been making the same arguments for decades.
They must be willing to compromise because stubbornness is the only thing standing in the way of a comprehensive water plan.
We believe that even in a drought year there is adequate water available for farm, urban and environmental uses if we manage this crucial resource properly. That means having balance in our water policy and a willingness to find common ground.
California's population has doubled since the last major water project was built in the state, and demand for water has gone up by an even greater factor.
The political pressure for a water deal has been increasing because big water users in Southern California cities have become concerned.
It was one thing when Los Angeles political interests could side with environmentalists against Valley farmers. But now L.A. residents are facing water rationing, and that's making their elected leaders nervous.
The time couldn't be better for a comprehensive water plan. Let's step back from the finger-pointing and get this resolved for all Californians.
Valley's air quality's getting better -- let's keep it up...Seyed Sadredin. Sadredin is the executive director and air pollution control officer for the San Joaquin Valley Air Pollution Control District.
This summer, let's build on the momentum of cleaner air. Let's commit to making one change in our daily routines for air-quality improvement.
During winter 2008-09, the valley's air quality was among the cleanest in decades, and most of the credit goes to valley residents for doing their part. In response to educational messages from the San Joaquin Valley Air Pollution Control District, residents from San Joaquin to Kern counties heeded calls from community leaders to cut back the use of residential fireplaces.
As a result, the number of days with "good" air quality increased dramatically and the number of "unhealthy" days dropped by 50 percent, valleywide. In fact, we had no "unhealthy" days in Fresno County.
Let's keep the momentum going. Can you make one change, such as riding a bike to work or carpooling? How about using an electric lawn mower or making your home more energy efficient? Take your pick from a wide array of clean-air choices you can find at www.healthyairliving.com.
We the people can do much to clean our air. In fact, we cannot achieve our clean-air goals through business regulation alone. Valley businesses, including agriculture, already are subject to some of the toughest air regulations in the nation. A few changes in our daily routines can achieve a great deal of reductions in air pollution at little or no cost. In fact, much of what we can do as individuals will save us money and improve our health.
More than ever, in these tough economic times, we must use our resources wisely and strategically. Some question spending resources on public education and argue for more expensive regulations on businesses. We at the air district contend that we must supplement effective regulations with a healthy dose of public education and participation.
Despite a great potential for dividends, however, no one should underestimate the challenge that comes with asking the public to accept some responsibility. Asking people to use their cars and fireplaces less frequently triggers strong emotional reactions.
This year, the air district plans to spend about 30 cents per person in the valley to get the word out. We hope to do this through our year-round Healthy Air Living initiative, which replaced the old Spare the Air program.
Reaching out to more than 3.5 million people in three different media markets is not an easy task. Aside from traditional media, we hope to engage the public through "new media" such as Twitter and Facebook (become a friend), face-to-face gatherings in community events such as Healthy Air Living Chats and many other public events throughout the valley, and partnerships with businesses, teachers and students.
Help us get to cleaner air by getting the word out to friends and relatives. The air district is providing a great opportunity with a series of free, informal, public meetings this summer in every county in the air basin, including in Merced County on Thursday (Merced) and Stanislaus County on July 21 (Salida). For a complete schedule, visit www.healthyairliving.com.
We hope to see you there. Together, we can clean up the air.
Los Angeles Times
Inhaling a heart attack
Research links smog to devastating effects not just on lungs but on hearts, brains and fetal development...Greg Critser. Greg Critser is the author of "Fat Land," "Generation Rx" and the forthcoming "Eternity Soup: Inside the Quest to End Aging."
Not long ago, Jesus Araujo, a cardiology researcher at UCLA, parked a cage full of transgenic mice alongside the 110 Freeway. As a control, he placed another group in a less-polluted space on the Westside. Araujo was interested in learning more about how smog affects the heart and whether bad air could help explain the persistence of heart disease after 25 years of cholesterol management, statins and endless lifestyle advice.
On collecting the mice several weeks later, Araujo made a troubling discovery: The mice exposed to freeway air presented a terrible blood profile. Their HDL, the so-called good cholesterol, had been rendered dysfunctional.
"We've known for some time that bad air is associated with heart problems," Araujo said. "But this got our attention."
The ultrafine particles in polluted air, he posited, "could be undermining so much of the progress we've made in this area."
The epidemiological community has long worried about the effect of smog on the lungs. But research on the health effects of bad air is now expanding, and the news is not good.
Smog, it turns out, can have devastating effects not just on lungs but on hearts, brains and fetal development.
Work coming out of Mexico City, increasingly L.A.'s sister city in the environmental sciences, has documented how amyloid plaque, one of two suspect brain proteins associated with Alzheimer's, increases with exposure to air particles, especially in children and young adults. Research originating at UCLA and USC shows how ultrafine particles, or UFP, initiate the so-called inflammatory cascade that leads not only to brain diseases but asthma and chronic obstructive pulmonary disease.
New research in environmental pediatrics has demonstrated a consistent, dose-dependent relationship between expectant mothers living in high-emissions-adjacent housing and premature births, low birth weights, birth defects and respiratory diseases. In a recent report, the UCLA Institute of the Environment concluded that the problems were of such magnitude as to "require drastic changes to motor vehicle and transportation systems" over the next decades.
USC scholars are blazing new paths as well. Over the last 20 years, they have invented ways to concentrate particles from the freeway, assess their specific toxicity in human doses and then test various hypotheses with lab animals genetically engineered to physiologically respond like humans. They can even track real-time daily human exposures to ultrafine particles.
On any given day in Los Angeles, mobile smog units are out measuring how pollution ebbs and flows on a neighborhood-by-neighborhood basis. Research subjects wear "personal ambient pollution" backpacks to track how individuals experience different loads of smog throughout their day, part of which may be spent in a low-pollution environment, part in a high. Through modern genomics, we also now know that several highly prevalent gene mutations make some people more susceptible to pollution, and that others make them less susceptible.
What -- besides moving to Fargo -- can we do? A few recent successes are heartening, among them new regulations on truck exhaust and improvements to filtering systems used by schools that are near freeways. And, as usual, public health officials are working to increase awareness and advocating for new regulations and funds for more research.
But we need to go further. Every person in Southern California should be able to find out what the "inflammatory load" is in their neighborhood; they also should know where the region's "emissions hot spots" are located. (One way might be to amend this newspaper's weather page to include readings of ultrafine particles within the critical 1,500 feet of major motorways.) And we need an independent counterpart to the Southern California Air Quality Management District, one charged with implementing breakthrough science to mitigate the effect of ultrafine particles on health.
As was the case in the city's first war on smog about half a century ago, there will be resistance to this new body of science because it brings unwelcome news. Industry will hate any new regulations. Some solutions will surely upend traditional political alliances, pitting affordable-housing advocates, for example, against those advocating environmental justice.
With leadership, Los Angeles can find a way to reconcile those interests. It did so 40 years ago, and it can do so now. An increasingly hazy world is waiting.
Justices OK dumping mine waste into Alaskan lake
The Supreme Court approves the draining of gold mine debris into a small lake. The Bush administration had labeled it 'fill' rather than pollution to make the dumping comply with the Clean Water Act...Jim Tankersley and David G. Savage
Reporting from Washington — The Supreme Court gave its approval Monday for waste from a gold mine in Alaska to be drained into a mountain lake, dealing environmentalists their fifth defeat this court term and lobbing another controversial Bush administration policy into President Obama's lap.
The 6-3 ruling upheld a decision by the George W. Bush administration to label the planned drainage from Alaska's reopened Kensington mine as "fill" rather than pollution. The Clean Water Act forbids pollution of rivers, lakes and bays, but it also allows the Army Corps of Engineers to move dirt and gravel "fill" into waterways to divert the stream or build a dam.
Environmentalists said that draining the Alaska mine waste into Lower Slate Lake would kill the lake's fish, and that the ruling opened the door for similarly destructive dumping in waterways across the nation. But they also said the Obama administration could effectively nullify the ruling, and several other cases that conservation groups have lost recently at the high court, by issuing new rules to supersede Bush-era policies.
"It's been a tough, tough term for the environment" at the Supreme Court, said Tom Waldo, an attorney for the environmental group Earthjustice, who argued the Alaska mine case on behalf of conservation groups. "But these problems are fixable by the current administration, and we hope they'll take measures to do that."
The owner of the mine, Coeur d'Alene Mines Corp., said in a news release that it would push to start production at the mine by the second half of 2010. Industry allies hailed the decision. "If you're going to have mining, you've got to put [the waste] somewhere," said Virginia S. Albrecht, an environmental lawyer at Hunton & Williams in Washington who represents public and private entities regulated by the water act. "What happened here was, the corps said this was the least-damaging, practicable alternative."
Environmentalists have suffered a series of setbacks at the Supreme Court this term.
In November, the court overturned a judge's order in Los Angeles that sought to protect whales from the Navy's high-powered sonar that is used during training exercises off the California coast. The 7-2 decision said the judge's order unduly interfered in the Navy's anti-submarine training.
This spring, the high court threw out a challenge to the timber clearing sales in the national forests on the grounds that environmentalists did not have standing to challenge the government in court.
The justices also protected the owners of aging power plants that might be forced to upgrade their facilities to protect wildlife. In a 6-3 ruling, the court agreed with the Bush administration that the Environmental Protection Agency could weigh costs of the upgrades in deciding whether a change was needed.
In another ruling, the court shielded some corporations from paying to clean up a contaminated site.
Monday's case centered on plans to reopen a gold mine 45 miles north of Juneau that has been closed since 1928. The mine operators plan to employ a technique that over the life of the mine would dump some 4.5 million tons of sandy crushed rock -- mixed with water and laced with aluminum, copper, lead and mercury -- into a small but deep mountain lake.
In allowing those plans to move forward, the court cited ambiguities in the Clean Water Act and an informal Bush administration memo that dictated how to interpret them. "We accord deference to the agencies' reasonable decision," Justice Anthony M. Kennedy wrote for a majority that included Chief Justice John G. Roberts Jr. and Justices Clarence Thomas, Antonin Scalia, Stephen G. Breyer and Samuel A. Alito Jr.
Environmentalists said the Obama administration could still revoke the mine's dumping permit or issue new rules that redefine how to classify "fill" under the law. EPA officials' only response to Monday's decision was to issue a statement saying they were reviewing the ruling "and its potential implications regarding EPA's authority to ensure effective environmental protection under the Clean Water Act."
Maersk says container market to shrink more than 10%...Bloomberg News
A.P. Moeller-Maersk, owner of the world's largest container shipper, said cargo volumes may drop more than 10 percent this year and show no growth in 2010 as the industry suffers a "completely unprecedented" decline.
"We will have a substantial loss this year and next year will be equally difficult," Eivind Kolding, chief executive officer of the Copenhagen-based company's Maersk Line container unit, said Monday in an interview. "We have been quite disappointed by the market development in April and May."
Maersk fell as much as 5.7 percent in Danish trading after Kolding said that a 10.3 percent decline in annual container numbers forecast by Drewry Shipping Consultants Ltd. is "a fair estimate" and that the drop may be even bigger after volumes tumbled 15 percent in the first five months. A "worrying" balance between supply and demand won't level out until 2015 and further job cuts will be needed following a 24 percent reduction in the past 18 months, he said.
"There's a long way to go before Maersk Line records a satisfactory profit," said Dan Togo Jensen, an analyst at Handelsbanken in Copenhagen with a "reduce" recommendation on the stock. "We estimate that Maersk's volumes will drop by between nine and 10 percent this year."
The container industry, which transports manufactured goods by sea, is in its first year of contraction as consumers in Western economies rein in spending. The market has expanded by more than 10 percent most years since containerization went global in the 1970s. The worst year until now was 1982, with 4.6 percent growth, according to Drewry, which three months ago had predicting only a 5.3 percent contraction in volumes.
Maersk was trading down 1,400 kroner, or 4.5 percent, at 30,000 kroner as of 12:44 p.m. in Copenhagen. The shares have tumbled 48 percent in the past 12 months, causing the company to relinquish the title of Denmark's most valuable business to insulin maker Novo Nordisk.
Freight prices have also dropped as shippers compete for a declining number of contracts and new vessels ordered during the boom period enter the market. Rates are down to 1990 levels, Kolding said, pushing operating margins to "record lows."
"Getting lower down from this point will actually mean you have to pay the customer to take his business," the executive said. "There is a floor and we are quite close to that now."
London-based Drewry predicts that global container-market capacity will grow 8 percent this year and 10 percent in 2010. The industry will lose a combined $20 billion before interest and tax, compared with a $5 billion profit in 2008, it says.
Maersk Line, which operates 470 vessels and owns 1.9 million containers, lost $559 million in the first quarter of this year as its rates dropped 24 percent from a year earlier and volumes fell 14 percent.
The shipper will seek to cope with the decline by cutting costs and improving customer relations to hold on to its 15 percent global market share, said Kolding, 49. It won't try to take orders from competitors, he said.
"If you start going for market share in a declining market, it will only create an even stronger downward spiral," Kolding said. "At this level, we all lose substantially."
Parent A.P. Moeller-Maersk, Denmark's largest company by sales, also owns the Nordic region's second-largest oil and gas explorer, a 20 percent stake in Denmark's largest bank, Danske Bank A/S, and a tanker unit. The group said May 12 it may have a net loss this year, the first since World War II, because of the container unit.
The container industry will consolidate over coming years once trade picks up, Kolding said, adding that he has no regrets over Maersk's two biggest acquisitions, the 1999 purchase of Sea-Land Service Inc. and the 2005 takeover of Royal P&O Nedlloyd NV.
"There are further opportunities to get your costs down if you grow in size," he said, adding Maersk isn't seeking further acquisitions "at this point."
Closely held Mediterranean Shipping Co., Maersk Line's biggest competitor, has an 11.4 percent share of the global container market, while CMA CGM SA controls 7.4 percent, according to AXS Alphaliner. The remaining top 27 companies have market shares of between 0.3 percent and 4.6 percent.
Swire Shipping will fire 200 people, about 40 percent of its workforce, Lloyd's List reported yesterday, citing General Manager Toby Smith. The container line is also cutting routes in response to weaker U.S. and European demand.
Maersk Line, which transports about 20 percent of China's container goods, has reduced its labor force to 17,500 people from 23,000 at the beginning of 2008 and will cut more jobs, Kolding said, declining to give a specific number.
"We have some further opportunity for rationalization," he said.
U.S. home sales fall in May despite low prices and tax incentives
Last month was better than April, as usual, but sales nationwide fell 3.6% from a year earlier. The West bucks the trend with an 8.7% increase...Peter Y. Hong
U.S. home sales in May continued to fall below levels of a year ago, despite lower home prices and tax incentives for buyers, according to figures released by a trade group today.
May home sales were down 3.6% from the same month last year, the National Assn. of Realtors reported. The industry group based that figure on the seasonally adjusted annual rate of home sales, which is the number of homes that would sell for the entire year based on May's sales rate.
At that pace, 4.77 million homes would be sold this year, which would not match the previous May's annualized sales rate of 4.95 million homes. The actual number sold last year, however, ended up at 4.91 million homes.
The Realtors group, nevertheless, noted that May sales this year increased from the previous month, aided by historically low mortgage interest rates and an $8,000 federal tax credit for first-time buyers, said the organization's chief economist, Lawrence Yun. But a sales increase is typical from April to May, which is usually one of the stronger months for homes sales.
The total number of homes sold in May was 451,000, or 6.6% below the year-earlier number, but it was up 9.2% from the 413,000 homes sold in April.
The median U.S. home sales price for May was $173,000, down 16.8% from the previous May, the Realtors group reported.
First-time home buyers accounted for 29% of May purchases, up from about 19% of sales a year earlier but down from 40% a month earlier. Repossessed and distressed properties made up 33% of sales.
Yun noted that first-time buyers are concentrated in the lower-priced segment of the market, which is also where most distressed sales occur.
The Realtors group's data show a dramatically different home sales picture across regions.
In the West, where foreclosures abound and prices have fallen more sharply than in the rest of the nation, the number of homes sold rose 8.7% in May over the previous year. Those gains were offset by double-digit declines in the South and Northeast and an 8.5% drop in the Midwest.
The number of homes on the market fell 3.5% to 3.8 million in May, the report said. At the current sales pace, it would take 9.6 months to sell those homes, compared with 10.1 months in April. The historical average inventory level is a roughly six months' supply.
As falling prices attract buyers, rising interest rates present another challenge to the housing market. The rate on a 30-year fixed loan has averaged 5.42% so far this month, up from 4.86% in May, according to Freddie Mac. The rate reached 4.78% in April, the lowest level since records began being kept in 1972.
Yun said some sales have been delayed or canceled because of "faulty" appraisals. He said buyers have been rejected for loans because of appraisals that give undue weight to foreclosed home sales.
Richard Dugas, chief executive of Pulte Homes Inc., one of the nation's largest home builders, told an industry conference today that sales would continue to be sluggish.
Dugas said low consumer confidence and difficulty obtaining mortgages would continue to weigh on sales.
"I'm not here today before you to call a bottom for our industry," he said.