June 17, 2022
Logistics, Logistics, Logistics
Two consistencies and one oddity marked this week. Global supply chains continued to buckle and food prices continued to creep upward. Meanwhile, shipping reform legislation passed with bipartisan support and wide approval across food and agriculture production.
Supply in Short Supply
Global food supply chains hadn’t fully recovered from the pandemic when Russia invaded Ukraine in late February. And things haven’t gotten easier since then. Leaders from across the globe are calling attention to the situation.
- The New York Times cited United Nations experts who said the war is only compounding existing food insecurity: “They were calling it a crisis even before the war began.”
- In a BBC interview, World Trade Organization Director-General Ngozi Okonjo-Iweala warned that a global hunger crisis is mounting, as Russia has cut off access to Ukrainian wheat supplies that typically feed 400 million worldwide.
- Food Ingredients First covered how vegetable fat markets are adapting to global trade upheaval. Ukraine accounts for 42% of the world’s sunflower oil exports, often imported by less-developed countries.
- Bloomberg wrote that Russian President Vladimir Putin is using the food crisis as leverage for peace talks. Secretary of State Antony Blinken has called Russia’s blockade “blackmail.”
- Global Farmer Network board member Terry Wanzek argued in a Wall Street Journal opinion piece that U.S. farmers could help fill market shortfalls, but need policy change: “The genetic-modification technologies that make my production more efficient and defend my corn and soybeans from weeds, pests, extreme weather and disease aren’t available for wheat.”
- On June 16, the U.S. House of Representatives passed the Lower Food and Fuel Costs Act (Agri-Pulse). The bill largely bolsters Biden administration food and ag policies: investigating meatpacker consolidation, establishing a food supply chain task force, boosting ethanol production and incentivizing certain farm practices.
- Rep. Glenn “GT” Thompson (R-Penn.) commented that the bill “[doubles] down on the idea that more spending and big government will feed the world” and countered with a bill that would instead deregulate agriculture.
Ongoing issues with global food supplies added to ongoing inflation. The U.S. Consumer Price Index report showed inflation sped up again in May — rising 8.6% from a year earlier and 1% from April.
- The New York Times reported the monthly CPI increase “was more rapid than economists had predicted and about triple the previous pace.”
- AgFunder News covered research findings that show that “food producer costs were 1.4% higher than consumer costs in the US as of March 2022.”
- Meatingplace shared recent government data that showed the “costs for food purchased away from home (restaurants) rose 7.4% for the 12 months ended April 30, while food bought for home consumption (grocery stores) rose 11.9% from a year ago.
- The Specialty Food Association’s State of the Specialty Food Industry Report research found that “inflation is hitting shelf-stable, center-store categories the hardest,” with soup coming in as the most-affected by inflation.
- The Associated Press declared “shrinkflation” is on the rise worldwide as manufacturers reduce package sizes to offset rising costs.
- The Wall Street Journal said some of the nation’s largest food suppliers and restaurants plan to continue raising prices as costs rise. Kraft Heinz notified retailers it would raise prices in August, while McDonald’s plans “more frequent increases but at smaller levels.”
- As prices increase on everything, NPR highlighted the inflation immunity of the rotisserie chicken despite climbing chicken prices.
Cracking the Whip on Ships
In a bipartisan vote on June 13, U.S. House of Representatives approved the Ocean Shipping Reform Act of 2022. Three days later, President Biden signed the bill into law. With exports and maritime transportation such a critical part of the global food supply, the legislation has been widely supported as it hopes to curb inflation and pork backlogs.
- Reuters reported that the bill would “allow [the Federal Maritime Commission] FMC to launch probes of ocean common carriers’ business practices and to apply enforcement measures … and would bar ocean carriers from unreasonably declining opportunities for U.S. exports under new rules to be determined by the FMC.”
- Shortly after signing the legislation, President Biden tweeted, “During the pandemic, these carriers increased their prices as much as 1,000% — the bipartisan Ocean Shipping Reform Act of 2022 allows us to crack down on those excessive hikes.”
- Progressive Farmer’s Chris Clayton reported on American Farm Bureau Federation President Zippy Duvall’s conversation with President Biden. “He [Biden] wholeheartedly agreed that we must get past the bottleneck at our ports to get America back on the move and that means breaking the logjam on Capitol Hill.”
- In a press release, National Pork Producers Council President-elect Scott Hays added, “Exports add significantly to American pork producers’ bottom line. Having more assurances that our products will reach their destination by addressing problems that have plagued our ports for years is a huge win for our industry.”
- The National Restaurant Association’s statement indicated hope for relief: “Whether it’s food, packaging, or equipment restaurants depend on, supply chain disruptions are so bad, American importers and exporters are paying the highest shipping rates ever recorded for the worst service levels ever experienced.”
- The Consumer Brands Association addressed the entire supply chain in its praise for the legislation: “The pandemic and subsequent disruptions highlighted the fragility of the complex supply chain system and the need to modernize decades-old ocean regulations to address declining maritime shipping performance and unfair practices that hurt American manufacturers, farmers and, ultimately, consumers.”
Hey, What’s Good This Week?
Walmart released its 2021 Culture, Diversity, Equity and Inclusion Report this week that highlights continued growth in representation by women and people of color in their leadership ranks, with both up roughly 2% year over year. People of color are also nearing half of Walmart’s total U.S. workforce. The multinational retailer has made significant investments in this effort over the past five years.
Short on Pungency
The Hill explained the complexities behind the Sriracha shortage, a topic that had social media ablaze with speculation: “Drought stress decreased reproductive growth parameters and pungency of pepper fruit, and that the most important factor in the production of chili peppers is the availability of water at the flowering and pod formation stage, which are critical time periods to ensure good yield and pepper quality.” The most important factor when eating Sriracha is the availability of water, too.
After McDonald’s sold most of its 850 units operating in Russia, much of the branding and menu items remained intact. The New York Post reported on an abundance of legacy Big Macs (not the renamed Bolshoi Burger) and other McDonald’s-branded materials: “Their lingering presence highlights the challenges Western companies face in extricating themselves fully from the Russian market over Moscow’s actions in Ukraine.”
Golden State, Global Cuisine
Los Angeles Times correspondent Jaweed Kaleem highlighted a recent food export: Californian cuisine. As one Parisian chef put it, “People recognize California as at the forefront of cuisine. Europeans visit Los Angeles or San Francisco and seem to decide they want a bit of them back home.” Totally.
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