By: Christopher Sirota, CPCU
In 2020, the pandemic reportedly tested the ability of many stakeholders within the food supply chain. What happened, didn't happen and how are some stakeholders adjusting to mitigate future interruptions?
Knowable has reported on some of the effects of the pandemic on the global food supply chain.
The article highlights some of the short term effects the pandemic had on the food supply chain. For example:
- supermarkets had shortages in staple foods such as flour and pasta.
- farmers could not get some items to market, so many of them had to dispose of milk, eggs, and chickens.
- restaurants and other food services shut down, forcing many farmers to let their crops rot since there was suddenly no demand from their usual customers.
Fortunately, many stakeholders in the food supply chain were able to adjust relatively quickly to find new shippers, packers, and buyers, per the article. Many food suppliers also were reportedly able to repackage into small containers to sell to retailers rather than their usual buyers such as restaurants, workplaces and schools which had been closed due to lock downs--these buyers together actually totaled nearly half the U.S. pre-pandemic market, according to the article.
But many experts reportedly believe what lies in the future could be worse, especially with climate change-driven extreme weather such as droughts, floods and storms; therefore, the article notes there seems to be a trend towards seeking improvements in resiliency.
How might extreme weather make it worse? The pandemic apparently did not reportedly cause most food prices to rise in 2020. But experts note that during previous droughts which affected global harvests, such as in 2008 and in 2011, prices did rise; in other words, climate change could present greater challenges than the pandemic.
The Pandemic Revealed Some Limitations
During the pandemic some limitations in the flexibility of the food supply chain were made more obvious. For example, the according to the article:
- When two large meat packing plants in Canada were closed by COVID-19 outbreaks, the beef processing capacity for all of Canada reportedly plummeted by 40 percent.
- As mentioned above, when the pandemic caused lockdowns, many farmers who typically supplied large single commercial buyers, were suddenly forced to figure out how to sell to new, smaller buyers.
Food for Worrying Thoughts
The pandemic problems in the food supply reportedly made some expert rethink how concerning it is that most of the world depends on single sources: for example, according to the article, Russia supplies a majority of the demand for wheat, the U.S. supplies corn, and Brazil supplies soybeans. Furthermore, there is reportedly a concern that these food crops are often not genetically diverse, potentially exposing them to the risk of catastrophic disease.
Improving for the Future
The article notes there are already some indications that stakeholders in the food supply chain are seeking to become resilient.
In Thailand, for example, when the pandemic caused wholesale buyers began to slow down or cease purchases, local fishers and farmers had reportedly been able to switch to selling via mobile phones directly to local consumers; also, the article notes a major food processor had decided to diversify from a single raw material source to multiple sources.
The article also highlights a study that concluded shareholder value could be increased when a food supplier diversifies buyers; the study reportedly analyzed the potential gains from implementing the flexibility to provide food in both large commercial-sized packaging and in small packaging, despite the initial investment costs.
The article further notes that the use of technology may be accelerating because of risks revealed by the pandemic. Such developments reportedly include the following:
- An increase in online grocery commerce including from smaller food suppliers, such as local groceries: According to Supermarket news, overall online grocery sales in the U.S. dramatically increased during the pandemic, and is expected to reach over 20 percent of annual sales by 2025; in addition, post-pandemic, it seems 90 percent of online shoppers are expected to continue buying online.
- Automation of food processing and harvesting: A July 2020 article in the Wall Street Journal highlights how one meat processor may shift toward automation faster because of the pandemic; a July 2020 article in the American Society for Mechanical Engineers (ASME) looks at various automation for picking crops in greenhouses and for reducing labor on dairy farms.
- Vertical Farming: a March 2021 article in Lexology has reported that this method of farming has been well-established in Japan already, and the industry is expected to grow globally to $1.5 billion by 2030 (also see our related post here)