An insight into what is going on in the global food supply chain – 12-October-2021
As we have all heard in the media, market prices for food crops are rising and will not be coming down in the foreseeable future. This is a serious situation which the whole global supply network and our supply chains are currently struggling with.
At Bovey Larder we pride ourselves on the relationships we have with our customers and our community – you have supported us throughout the first year of our life and we are extremely grateful. We think healthy relationships are based on honesty and we want to be clear and honest with you. We’ve been doing a bit of work to look into what is going on with food supply and we wanted to share it with you.
While the UK news is all about the effects fuel shortages and problems with the UK haulage industry, there are much larger, global factors contributing to the situation, including problems with harvests, increases in shipping costs and long shipping delays. The problems are going to manifest themselves in two ways: shortages and price increases.
As a result, market, wholesale and retail prices are already increasing and, as recent worldwide harvests come to market, they are going to continue to rise. Of course, wholesale prices change all the time and usually, where we cannot absorb a price increase, we have to pass the increase onto customers – as does every single other food retailer. But changes are infrequent and don’t usually materially affect a Bovey Larder weekly shopping bill. Unfortunately, the current situation is quite different, and we think you should know about it. We always try to be transparent with customers and provide fair value and you deserve to know that some of our prices are likely to increase and we may struggle to stock some products for you. You need to be able to make informed decisions about where you shop and what you buy.
We thought you might be interested in some of the detail of what is going on and that is below, but before we get into that, it is worth noting, we don’t raise prices on stock we already hold; only when new stock at a new price comes in.
Here are some of the details of what is going on:
Harvest problems are affecting both staple crops, like wheat, and also fruit, nuts, seeds, grains and pulses. For example, there have been significant durum wheat crop failures this year in Canada, where the crop is now forecast to be one third lower than previously expected. There is unlikely to be enough durum wheat to meet global demand. As a result, market prices have nearly doubled recently. Market prices are already shooting up and in turn this will have a significant effect on the wholesale prices of products like pasta, bulgur wheat and cous cous. Soft wheat, used for baking, has been less affected, but its market price has also increased some 20%.
Shipping, Port Delays and Haulage
In addition to harvest problems, there have been huge problems with shipping. A journey from China, USA or Asia, which would normally take three weeks, can take three months or more now. This is being caused by massive logistical delays at ports. The largest vessels might carry 24,000 containers and need to stop in multiple countries on route. Port delays are hence multiplied throughout the journey. This not only causes delays, but also dramatically increases spoiling of products. Both factors lead to relative product scarcity and hence price increases. In addition, and in some part, as a result of the longer journeys, port health authorities have been more likely to pull containers for inspection – an inspection can add three weeks to the journey and incurs additional fees.
Each of these problems affects the cost as well as the journey time of the product. The problems with UK HGV haulage don’t help, but they aren’t the biggest problem.
The food supply chain simply hasn’t seen this type of ‘perfect storm’ of problems with shipping before.
Countries and Product Specifics
There have been multiple crop failures causing serious supply problems and price increases in the last couple of months.
- Brazil Nuts. Lack of shipment out of South America as well as over 50% crop failure crop. The wholesale price has tripled in the last couple of months.
- Chilean Prunes. The harvest in April was over 50% failed. Product previously regarded as industrial grade, is now being sold to Europe and US as standard. Previously this grade of product would have been used in processed goods, like jams or sold to less lucrative markets. We can expect a reduction in quality of product with static or even rising prices.
- Chia Seeds. 80% of the crop has failed. Supply will be very limited.
- The crop demand has been very high this year and the USDA has revised its production estimate down twice recently. Market prices are consequently around 45% higher.
- Market prices have doubled this year after the USDA revised its almond production estimate down by 12.5%. This is a result of the well documented drought in California.
- Reduced production in China and consequent increased demand of Russian buckwheat has seen an 80% increase in market price.
- Buckwheat and other products commonly stocked like Sunflower Seeds and Pumpkin Seeds have seen increased per container shipping fees. This has added an additional 51% on the market price of Buckwheat and increases on other products.
There have been lots of frosts and high temperatures approaching the end of the fruit harvest causing crops to be badly damaged with two weeks to go. Consequently, yields will be much lower than forecasts, which are based on blossom levels much earlier in the year.
- Papaya, Pineapple and Mango. Market prices have increased by around 27% in the last few months. This will affect wholesale prices of dried fruit and also the cereals and other products that use them as ingredients.
As well as the problems with the durum wheat harvest described earlier, pulses have been affected too.
- Market prices of pulses have jumped massively. Shipping costs have increased and there have been harvest problems this year. We expect market prices for these products to increase between 20% and 60% depending on the product.
Dried Fruits, Nuts, Seeds. Prices of dried fruits nuts and seeds have gone up
- The market price of Apricots has increased 35%, as a result of lower output in Turkey and a strong Turkish currency.
- Walnuts, Almonds. Market prices have increased around 30%. The European harvest has been the largest crop in history, also with larger fruit on average, but prices are being pushed up by the problems with the US harvest as we describe above.
It will not have escaped your notice that supermarkets are advertising ‘price matching’ versus competitors at the moment. Have you stopped to wonder why? Like the stage magician deflecting an audience’s attention one way, when the important stuff is happening elsewhere, the supermarket chains are using a simple tactic to deflect customers’ focus away from rising food prices. We don’t think this is an honest way of treating loyal customers. What they are really saying is, we know you are going to see your food bills going up, but don’t shop around – you should stay loyal to us because prices are exactly the same everywhere else.
While writing this, it’s been very interesting to step back a bit and find out a bit more about how global supply chains work, where challenges lie and how interconnected markets are. But that’s not really our point here. We wanted to prepare you for any prices to come and share the reasons behind them, rather than hiding behind shady tactics. We hope, of course, that this perfect storm won’t continue for too long. Hopefully world markets will adjust over time, shipping issues will get ironed out and even the UK haulage problems will be fixed in time.
And so, while we are very likely to have to increase prices soon in line with our suppliers’ prices, in time, as prices fall again, we will look to reduce our prices, again, in line with the costs to us.
As many of you know, we always welcome feedback, either in person or by email or direct message, so we would love to hear your thoughts.