Weather, disease, and global food supply chains
Today’s post is by Michael Figueroa, Project Manager at SafeSourcing
Last year California farmers are predicted to lose $3 billion due to persistent drought. Avian Flu has cost nearly $3.3 billion nationwide in the US, while the resultant egg shortage continues to wreak havoc with the market by doubling egg prices. Yields in North Korea are feared to come in as low as 50% below normal due to drought, which could pose huge humanitarian needs and market risks. The average amount of arable land needed to support an American standard of living is approximately 10 acres per capita, though as of 2012 there were only between 0.49-0.6 acres of arable land on earth per capita. The UN has stated that food production must double by 2050 in order to meet demand due to rising population as well as rising global affluence. As the world population continues to increase the number of hungry mouths on the globe, it becomes ever more vital to have a strategy for dealing with disruption in food production markets.
Unfortunately, one of the greatest challenges to this problem is understanding what all of the potential risks are. As unpredictable weather patterns emerge, we are warned to expect the unexpected by the scientific community due to global warming, and political disruptions are equally unpredictable. Though there are recommended steps for discovering the unknown variables, and managing what is known.
Identify the risks: Does your organization have a risk mitigation department? One that focuses on proactive measures to ensure continued production in a crisis, not just financial hedging?
Coordinated risk management: Form alliances with national and international producers and brokers establishing protocols for responding to shortages that protect the most vulnerable populations from food shortages.
Identify the weaknesses in your supply chains: An example would be diversification of farm location can mitigate drought risk confined by geographical location.
Move to non-biofuel energy production: Using energy sources such as nuclear, solar, and wind allow farming capacity to be used for food instead of bio-fuels, which some studies have shown to be a net-energy loss product.
Early warning: Have mechanisms in place for capturing information regarding shortages and market disruptions.
Supplier resilience standards: If you are a purchaser, adopt requirements of your suppliers for managing risk that incentivizes food production resilience.
In the face of dealing with all of the food commodity disruptions in the market, and increasing pressure to shave already thin margins, it’s easy to lose sight of the fact that a major disruption doesn’t just mean loss of revenue, but can also mean loss of life within the markets of the most vulnerable consumers. For example, US food aid to foreign countries comes from US commodity surplus, but aid has decreased by 64% in the last decade due to reduced surplus. This and many other examples are why it’s so extremely important for those of us working in the food procurement and production industries to build resilience into their long term strategies.
For additional insight on this topic I highly recommend the report by the UK-US Taskforce on Extreme Weather and Global Food System Resilience.
For more information on how SafeSourcing can assist your team with this process or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.
 “Drought May Cost California’s Farmers Almost $3 … – NPR.” 2015. 18 Aug. 2015 <http://www.npr.org/sections/thesalt/2015/06/03/411802252/drought-may-cost-californias-farmers-almost-3-billion-in-2015>
 “Bird Flu Cost the US $3.3 Billion and Worse Could Be Coming.” 2015. 18 Aug. 2015 <http://phenomena.nationalgeographic.com/2015/07/15/bird-flu-2/>
 “Egg prices in the US nearly double after outbreak of avian flu.” 2015. 18 Aug. 2015 <http://www.theguardian.com/us-news/2015/jul/16/egg-prices-in-the-us-nearly-double-after-outbreak-of-avian-flu>
 “North Korea fears famine as drought halves food production …” 2015. 18 Aug. 2015 <http://www.theguardian.com/world/2015/jun/19/north-korea-fears-famine-as-drought-halves-food-production-says-un>
 “The State of World Population 2011 – UNFPA.” 2011. 19 Aug. 2015 <http://foweb.unfpa.org/SWP2011/reports/EN-SWOP2011-FINAL.pdf>
 “Arable land (hectares) | Data | Table – The World Bank.” 2010. 19 Aug. 2015 <http://data.worldbank.org/indicator/AG.LND.ARBL.HA>
 “Food Production Must Double by 2050 to Meet Demand …” 2014. 18 Aug. 2015 <http://www.un.org/press/en/2009/gaef3242.doc.htm>
 “Economic Cost of Biodiesel and Corn Ethanol per Net BTU …” 19 Aug. 2015 <http://www.ag.auburn.edu/biopolicy/documents/Economic%20Cost%20of%20Biodiesel%20and%20Corn%20Ethanol%20per%20Net%20BTU%20of%20Energy%20Produced.pdf>
 “Food Aid Reform: Food For Peace By the Numbers … – usaid.” 2013. 19 Aug. 2015 <https://www.usaid.gov/foodaidreform/ffp-by-the-numbers>
 “Extreme weather and resilience of the global food system.” 2015. 18 Aug. 2015 <http://www.foodsecurity.ac.uk/assets/pdfs/extreme-weather-resilience-of-global-food-system.pdf>