Some products favor air, but ocean has made advances with technology improvements

In 2014, the shipping consultancy Seabury came out with a report showing shippers were increasingly choosing ocean over air for perishables. That conclusion wasn’t a huge surprise: advances in technology made the longer and less-expensive sea voyages more feasible.
But a recent report from Transport Intelligence tells another story. That report concluded that air cargo is growing in the perishables sector, at least inbound to Europe.

How do we explain this paradox?

Crossborder sales of perishable products is one of the fastest growing segments in international trade. With millions of people around the world being lifted out of poverty, they can afford to diversify their diets with more meat, fish, dairy, fruits, and vegetables. This is especially true in lower-income countries, where demand is increasing at a 17-percent annual clip. The expansion of crossborder trade in fresh foods creates opportunities for farmers and exporters as well as the transportation and logistics services providers that move the goods.

Advances in cold chain technologies and transportation enable foods to stay fresh while moving efficiently across long distances. The use of refrigerated containers has particularly helped, accounting for more than 50 percent of global refrigerated cargo. In the maritime sector, the share of containerized refrigerated transport capacity climbed to 72 percent in 2013, up from 33 percent in 1980, according to research from the University of Calgary.

These facts tend to support the conclusions reached by the Seabury report, which found that “a pronounced shift is taking place from air cargo to ocean transport.”

“A decade ago, tomatoes were just as likely to be transported by air as in a reefer container,” said Derek Brand, a Seabury maritime advisor, who authored the report. “Today, tomatoes are transported almost entirely in containers. The same holds true for numerous other perishable commodities.”

The shift identified by Seabury translated to about 100,000 TEU, or 5.4 million tons of cargo per year, going by ocean instead of air, a fact which, according to Brand, accounts for the 2.6 percent average growth in air cargo since 2000. Without the modal shift identified by Seabury, air cargo would have grown at an average annual rate of 4.5 percent.

One possible explanation for the discrepancy between the Seabury and Ti findings is the the latter uses data for three specific agricultural sectors—flowers and trees, vegetables, and fruits—and not for refrigerated trade as a whole. The report noted that Europe’s cold chain market “had a slow year in 2016” with growth in extra-EU trade of agricultural products estimated at 0.7 percent. But the three subsectors examined in the report grew nicely—at 33.6 percent, 6.4 percent and 2.8 percent respectively. That means that the data generated by trade in flowers and trees, vegetables, and fruits aren’t necessarily reflective of the perishables sector as a whole.

Furthermore, the data presented by Ti shows that, in the case of vegetables and fruit, volumes carried by both air and ocean grew between 2012 and 2016, in both cases pretty much at the same rate. In 2012, around five million tons of vegetables were carried by sea in the EU trades while 250,000 tons went by air. In 2016, a little over six million tons went on ocean carriers while around 310,000 tons were loaded on aircraft.

In the case of fruit 10 million tons went by ocean in 2012 as opposed to 175,000 tons by air. In 2016, 13 million tons were carried on the waters, while around 200,000 tons were carried in the skies.

The market for trees and flowers tells a different story. In that case, around 350,000 tons went by sea in 2012, peaking at 400,000 tons in 2015 before dropping off to around 350,000 tons in 2016. In the case of air, 250,000 tons of trees and flowers were carried in 2012; 400,000 in 2015; and around 420,000 in 2016.

It appears that only in this subsector—by far the smallest of the three considered—was there an arguable modal shift from ocean to air. In the case of the other two, air is carrying more, but so is ocean. Still, given the growth in air, the report’s conclusion that “each product category shows an increasing emphasis on the importance of air transport” is justified.

The Ti report allows that technological innovations would tend to support an increase in ocean transportation for perishables over air. The explanations for the growth in air in the subsectors studied are particular to the trade involved. European consumers understandably appreciate buying flowers from Kenya, for example, within 48 hours after they are cut. Kenya, at over 160,000 tons, was the largest exporter of flowers to the EU in 2016, and improvements at Nairobi’s Jomo Kenyatta International Airport means that shippers have a quicker way of transporting their produce.

Short-term factors have also have contributed to the increase in air-freight volumes. When shippers see port congestion, they look to the skies for an alternative. “Poor harvests and crop yields can also make a difference,” the report noted. “It means retailers have to look to different parts of the world to get their products and air freight is the quickest way of shipping replacements quickly. Events such as the El Nino weather phenomenon have caused disruption in the farming sector in recent years, impacting the global agricultural supply chain.”

The bottom line is that, while the conclusions of the Ti report may be encouraging for air cargo carriers, they don’t predict a long-term trend without further data and a broader look at the perishables marketplace. “Strong global trade…is set to continue,” the report noted, “and this will aid volumes both modes of transport.”

As things stand now, the traditional factors that play into modal choice still prevail, including distance between origin and destination, the size and weight of the shipment, the required temperature environment, and the perishability of the product. The advice the Ti report provides air cargo providers resonates well: “Air freight carriers,” the report concluded, “will need to innovate in the same way ocean freight carriers have done.”