The Food and Agriculture Organization of the United Nations (FAO) has projected a global population increase that would consequently require raising food production by approximately 70 percent by 2050. With the population expected to grow by 2.3 billion people by 2050, the ability to effectively transport food is absolutely essential.
Some of the biggest challenges will be felt in the developing world, which is faced with sub-par infrastructure and high population growth.
William Duggan, vice president of refrigerated services for Maersk Line, North America, states that there is an increasing market growth in areas that have an emerging population, such as Eastern Europe, Africa and Latin America.
“There’s been a lot of growth of refrigerated cargo moving to these areas,” says Duggan. “People want access to better quality food for their family and that’s one of the things we see moving forward.” This trend implies that market demand for high quality food will continue to excel.
Additionally, in Europe and the U.S., there is an ongoing move towards creating more sustainable reefer trade. Consumers want to be sure they’re getting the healthiest food products available while the refrigerated transportation market seeks a greener footprint.
Another noticeable trend is the movement away from conventional breakbulk to the containerization of food shipments. Maersk estimates that approximately 70 percent of refrigerated cargo is currently in containers. For example, in the banana trade, bananas were moving primarily in breakbulk three to four years ago, but have now moved toward containers.
“The movement has switched to about 80 percent containers, 20 percent breakbulk, wherein the past it was 80 percent breakbulk, 20 percent containers,” says Duggan.
Lastly, reefer carriers are growing concerned that the financial feasibility in the refrigerated transport market is currently not being realized—to the point where it’s no longer sustainable in some respects. In an effort to regain financial sustainability, carriers have started the process of increasing their reefer rates.
Rising reefer rates
There are various factors surrounding the increase in reefer rates, one of which is energy costs. An increase in reefer rates is one way to offset the current rise in fuel and electricity costs for both the carriers and refrigerated containers/equipment.
“The container itself is roughly three to four times more expensive than a dry container and the maintenance and repair of a refrigerated container is also much higher,” says Vince Rankin, senior director of reefer trade for Scottsdale, Arizona-based APL. “The container [either] requires electric power when it’s in the terminal, or on a ship it requires a generator, which burns fuel when it’s being transported.”
Port congestion is another issue that has an indirect effect on reefer rates. Port congestion can be caused by numerous factors such as bad weather, accidents, under-developed ports or a seasonal peak in volume. With ocean carriers focused on moving their shipments to and from ports in a timely manner, the cost of operating their reefers therefore becomes much higher when delayed due to port congestion.
In order to further alleviate port congestion and encourage growth in the reefer trade, many ports are undertaking projects to expand both port and cold storage facilities.
Port, cold storage expansion
In October, the Port of Miami, known as the Cargo Gateway of the Americas, announced plans to deepen the port’s channel to 50 feet (15.24 meters). According to Port of Miami officials, the deeper channel is expected to double cargo traffic while creating approximately 30,000 jobs in the process. Construction is scheduled to begin in early 2013.