Air Remains Mode of Choice for Perishables Shipments
By Jim Wilkinson, Perishables Sales Manager, International Division, Yusen Logistics (Americas) Inc.
Will perishables continue to take to the skies? It appears so. While overall global air volumes have remained flat in recent years, the perishables and pharmaceutical segments are two bright spots on the horizon. Both rely on air transport for speed and efficiency in transporting time- and temperature-sensitive cargo and increasing demand for these products will continue to fuel their growth.
In the perishables arena, health-conscious consumers want the freshest produce and meat available on the market, especially among certain commodities, such as fresh fish, sushi, seasonal produce like cherries and high-end prime cuts of meat. These high-value goods are more likely to be shipped by air. And with a growing global middle class which will more than double by 2030, there is more disposable income to afford these desirable food items.
Within certain commodities, however, we are seeing the market shift from air to ocean because of improved transit times and reduced transportation costs, coupled with the latest temperature-control, air exchange and humidifying technologies like Maxtend which allow shippers to maintain freshness for longer periods of time.
But for many commodities and deadlines, air freight represents the safest mode of transportation given the requirements of certain market segments, ensuring seamless cold chain integrity. Air cargo will always have a role in the perishables supply chain and we expect that market to grow.
TPP Agreement to boost perishables market
The perishables market may be boosted by a new trade agreement, which is expected to have a major impact on global food trade. The TPP (Trans-Pacific Partnership) is a trade agreement between the United States, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam to improve market access for all participants.
TPP eliminates or reduces tariff and non-tariff barriers across substantially all trade in goods and services. It covers the full spectrum of trade, including goods and services trade and investment, so as to create new opportunities and benefits for businesses, workers and consumers.
The agreement covers approximately 40 percent of the global marketplace and will have a significant impact on the U.S. food and agricultural sector. U.S. food and agricultural exports to the world reached an all-time high of more than $148 billion in 2013. Of that total, the U.S. exported more than $58 million to TPP countries. The tariff elimination should help to increase that figure.
For the meat industry, it translates to a more competitive position in key Japanese and Asian markets especially with respect to Australian beef. The passage of the Japan-Australia Economic Partnership in 2014, which lowered the tariff on beef imports to Japan, gave Australia a competitive advantage over the U.S. But the TPP levels the playing field.
UAE, Africa and South Africa offer great opportunity for U.S. red meat exports. South Africa recently opened its markets to U.S. beef imports as well as U.S. pork. Emerging markets in South America and Southeast Asia will help fuel new opportunities for U.S. protein exports. The fact is the global population will continue to grow as will the need for sustainable sources of food.
Africa’s population will more than double to 2.4 billion within the next 40 years, according to a major study. The U.S. is unique in its agricultural capacity which would suggest a bright future for our farmers, ranchers, exporters and the transportation industry which facilitate the movement of those goods to overseas markets.
The strong U.S. dollar continues to erode exports as well as slower foreign economic growth. The Middle East is still largely dependent on imported foodstuffs, but lower oil prices will have an impact on these economies.
West Coast labor issues have lasting impact
West Coast labor issues continue to be a thorn in the side of U.S. meat exporters to the Asia markets. Uncertainty and rising port costs will continue to impact economic opportunity and export value. The pork industry in particular continues to suffer the effects of lost business and customer concerns over the potential risk to the supply chain which resulted from this event. This, in conjunction with the Russian ban in EU pork, allowed these competitors to get a foothold in a market they previously had limited success.
Last year’s labor issues, however, were a boon for our air freight division. We had a situation where we had more than 50 containers of chilled meat that had to be rerouted by air. They were sent from Oakland, CA, to various airports on the West Coast and inland. It was a lot of work, but it enabled us to ensure that our clients received their perishables on time and intact.
It will be vital for the transportation industry to be forward thinking in terms of infrastructure and the technologies that drive efficiency and contain costs. The airfreight industry will always be a vital link between the consumer and producer. The velocity of international business will only enhance the need for time critical and time sensitive transportation.