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While airline passenger load factors are at record lows, American Airlines (AA) recently broke a weight record in shipping a commodity not thought of as typical air cargo. There is more than enough demand to haul soybean seeds for AA to schedule a Boeing 777-300 for all-cargo flights from Buenos Aires to its hub in Miami. The company’s record-breaking flight on April 16, 2020 hauled over 115,000 pounds of palletized seed bound for the U.S. farm belt. AA has been in this business for over a decade; but it is just one part of its recently expanded all-cargo schedule of 46 flights per week from the U.S. to Europe, Asia and South America. Apart from soybean seeds the haulage of essential equipment to fight the COVID-19 pandemic is one way to validate keeping passenger aircraft in the air.
Even though most of the U.S. economy was on lockdown, the planting season for soybeans held to its standard March through May schedule. The Coronavirus Food Assistance Program (CFAP) was announced on April 17, 2020 by the U.S. Department of Agriculture (USDA). Of the $19 billion of program funds, $16 billion was earmarked to relieve farmers and ranchers impacted by losses due to oversupply for the 2020 marketing year. USDA will also be purchasing and distributing fruits, vegetables, dairy and meat products at a monthly rate of $100 million per commodity type in order to supply food banks and other organizations which support the needy. Due to the seasonality of farming, CFAP was necessary to prevent a collapse of much of the U.S. food supply chain heading into the summer. One thing in farming is certain – if there is no planting there is no harvest.
More than 115,000 pounds of soybean seeds wait in the Buenos Aires cargo terminal before their flight to Miami.
Like most of today’s supply chains, the process of food production and distribution covers many miles and many countries. When it comes to international trade in seeds, air cargo provides speed (albeit at a price) while ocean vessels provide low cost (albeit at the expense of time). Higher quality and/or time-sensitive seeds for soybeans, tomatoes, potatoes, etc. can be shipped by air.
The flight cycle follows the farming cycle, including a delivery of seeds gathered from harvested U.S. plants. After all, seeds beget plants which beget even more seeds. The post-harvest soybean seeds are flown back for storage in Buenos Aires where it is summer in the southern hemisphere. AA claims that this cycle of moving seeds to favorable climates improves crop yield by up to 40%. Certainly, seed vendors would not add this extra leg if there were not potential revenues to offset the extra transport costs.
Soybean seeds wait to be loaded on an American Airlines Boeing 777-300 flying from Buenos Aires to Miami.
The seed supply chain offers other opportunities for value-adding activity. Once harvested, basic seeds can be manufactured into hybrids or planted in order to be multiplied into stock seed. The stock seed can be packaged into commercial quantities of seed. These processes may take place in different countries based on expertise and economies of scale in production. In this way seeds travel the world. In other words, U.S. seeds for commercial use are produced counter-seasonally. It is this year-round production of seed via re-exporting to favorable climates that magnifies the productivity of the food chain.
Since transportation represents a transaction cost necessary to consummate trade between buyers and sellers who are separated by some distance, it is usually the case that air cargo is not associated with bulk commodities. However, the exception occurs when such items are highly valuable and/or time-sensitive. In other words, exports and imports with high value-to-weight ratios tend to move by air cargo. Data from the U.S. Bureau of Transportation Statistics confirms that the average air cargo shipment is valued at over $103,000 per ton. For ocean vessel shipments, it is only $792 per ton. Seed treatment for value-add and for expedited transport to climate-appropriate storage facilities around the world show just how complicated the modern food supply chain really is. It is something worth ruminating on during breakfast.