Current Events & Global Perspectives / April 17, 2020

How the Food Supply Chain is Adapting to Covid-19

Since the breakout of Covid-19, the pandemic has disrupted all aspects of the economy – and the food supply chain is no exception.

The immediate disruptions were widespread, ranging from a shortage of hand sanitizers and face masks to empty grocery shelves and furloughed workers. The volume of global trade declined drastically, and commercial air travel came to a standstill.

The disruptions to  agribusiness and the global food supply chain have been difficult to predict. While there is evidence of various networks in agribusiness that are coming under strain, many are slowly overcoming these challenges.

As preventive measures such as social distancing and lockdowns are put in place, various businesses, including farms, are being forced to adapt to these changes. Small farmers are particularly vulnerable, as over 70 percent of the world’s demand for food is met by small farmers.

These farms, which are essential, have to grapple with various challenges, ranging from workforce management to dealing with supply and logistics shocks.

Companies such as Nestle have already acknowledged the slowdown in the supply chain. In a recent note, CEO Mark Schneider warned that businesses should get ready for the storm.

Air freight, shipping and land transportation, which are vital to the movement of goods, especially fresh produce, are all coming under strain.

Food disruptions aren’t anything new, but the current crisis is very different from the food crisis of 2007 and 2008, which was a result of supply scarcity. The agribusiness sector now has to confront new challenges, while ensuring that that food supply keeps functioning.

The export industry is also feeling the impact of the virus. Countries such as Vietnam, Russia, and India are reportedly putting their rice exports on hold in an effort to put domestic demand.

With so many restrictions and shocks, can the supply chain in the food and agribusiness adapt to these challenges?

Preventing the health crisis from turning into a food crisis

Governments across the world are ramping up measures to protect the most vulnerable and ensure an adequate food supply.

A number of measures are already put in place. Some of these include:

Change in consumption patterns

Changes in the consumption patterns mean that the food supply chain has to look for new ways of ensuring that the final product reaches the correct consumer.

Dining out in restaurants has fallen significantly. While on one hand, this reduces demand for food that is typically supplied to restaurants, more and more consumers must cook and eat at home.

This means that deliveries typically slated for commercial establishments are now making their way to the supermarkets.

Managing the workforce

The United States government has eased restrictions for migrant workers. The migrant workforce makes up nearly 20% of the nation’s workforce in the farming sector. This is not just in the United States, but in many parts of the world as well.

Mitigating the risks of a virus outbreak, agribusinesses are already implementing plans such as breaking the workforce into smaller, more isolated groups.

But the risk of a breakout still remains a major concern as it can put extra burden on the company’s finances and supply delays.

Categorization of farmers’ markets as essential business

After initially banning all forms of social contact, some states in the U.S. have begun to realize the importance of the farmers’ markets.

Thus, many states have identified these as essential businesses to ensure that the supply keeps coming.

Places such as these are being touted as open-air supermarkets, which are more controlled. Efforts are being made to support farmers’ markets which brings the producer and the consumer much closer.

Keeping Businesses Open

All segments of the food and agriculture supply chain are taking steps to ramp up their business continuity plans, all across the world.

Queensland, Australia is one such example, where efforts are being made to maintain the reputation as a safe and ethical agriculture supplier.

Governments are also supporting such businesses, from interest free loans to temporary tax freezes.

Leveraging technology

As companies battle uncharted territory, technology is at the forefront.

Various logistics companies are making use of Blockchain technology to ensure remote access and maintain adequate means to keep the supply of food going.

This brings the advantage of lowering costs, while ensuring minimal disruption to transportation and logistics.

Health is no doubt the biggest priority. But feeding the world’s population is just as important.

There is enough food to feed the world, but the challenge lies in getting this food to the consumers. There is ample evidence that agribusiness is slowly but surely adapting to the new normal.

Disruption is not always such a bad thing. It is during tough times that innovation can open new ways of doing business, and with a little luck, the agricultural supply chain will become stronger because of this crisis.

Read more from Farmfolio.