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Disruptions in global supply chains
The COVID-19 pandemic severely disrupted the world’s food supply. Blockages at all stages of the supply chain created huge backlogs: beginning on farms, they then snowballed into processing plants and packaging houses, on up through the transportation sector and all the way to distribution centres and the world’s supermarkets.
Russia’s illegal war of aggression against Ukraine has interrupted grain and fertilizer shipments worldwide from these two important exporters. In particular, poorer countries in Asia, the Middle East and Africa are suffering from the grain shortages. In addition, the world is experiencing fertilizer shortages that will adversely affect agricultural production for years to come.
Climate change is also having significant impacts on worldwide food production and supply, particularly for specialty crops (fruits, vegetables, tree nuts spices and ornamentals). Drought, water shortages, reduced snow pack, severe storms, and floods all impact the United States’ food supply; In Europe, intense heat waves, flash flooding, and wind storms are adversely afflicting the food supply chain, and adversely affect the food supply. Supply chain stakeholders must also deal with increasing competition in international food markets.
Read more: Existential Logistics: The new supply chain by Knut Alicke and Axel Karlsson, Partner & Senior Partner, McKinsey & Company
A broader perspective is needed
Given these challenges, in today’s world, stakeholders need a better toolkit to understand international markets, especially for specialty crops. Actors throughout the food chain need to utilise commercially available Big Data sources to develop a broader view of the global picture with respect to the many variables that affect agricultural markets for specialty crops.
In recent years, agricultural experts have identified 76 market variables that underpin the global supply chain for over 500 specialty crops worldwide. These variables include: crop volumes, local terminal markets, crop prices, historical weather patterns, currency fluctuations, prices of fuel, transportation disruptions, transport cost increases, changes in exchange rates, rural-to-urban labour shift, labour unrest, border closures, etc. Data addressing these types of market variables are commercially available for stakeholder use. Access to such data is the key to giving stakeholders a better understanding domestic and international food markets. This includes financial managers who can use such data to make better decisions about the loans and investments they make in the agriculture sector.
Data enhances perspective
To better appreciate the importance of data, consider the Salinas-Watsonville area of California, renowned for its iceberg lettuce production. Recent data show that average temperatures in that region are rising inexorably as a result of climate change. Such changes affect crop productivity: in the year 2019, for example, temperatures rose several degrees above normal and lettuce production dropped by 19%.
These data show the correlation between rising temperatures and decreased production. By accessing weather and temperature information from Big Data sources, buyers can discern climate-driven market trends like these. In this case, they can make adjustments in their buying strategies as lettuce production inevitably moves to more favorable growing areas outside of the Salinas-Watsonville area.
Anticipating crop productivity
Phenology is the study of the stages in the biological life cycle of plants. Decreasing moisture, for example, causes plants to start the budding process days later than normal. When that happens, growers can tell that crop yields will be less than normal at harvest time.
As an early warning system, monitoring of phenological stages of crop growth can alert farmers (and other stakeholders in the food chain) to oncoming adverse effects of climate change. Such changes can result in swings in production levels, causing logistical challenges (e.g., uncertainty in truck and container availability), precipitating domestic and international price fluctuations, and even affecting the ability of farmers to meet their financial obligations.
Market and geopolitical monitoring
Changes in government policies, even seemingly slight ones, can be very disruptive. Something as mundane as a change in daylight savings hours, for example, can impact production, labour inputs, and labour movements (from rural to urban). A loss of so much as an hour a day can affect planting and harvesting. Even holidays have a marked impact on markets as volumes drop considerably on those days. All of these variables need to be carefully monitored.
What can governments do?
Ministers of Agriculture can assume leadership in modernising data collection methods and data system architectures. This will enhance their own farmers’ management practices, increase farm incomes, and improve livelihoods.
Agriculture and food data in many countries are often nonexistent, disorganised, or inaccessible; where they are available, crop data are often maintained manually on paper or spreadsheets. Data infrastructures are often based on legacy operating systems and are not integrated with modern software architectures. Ministers of Agriculture can assume leadership in modernising data collection methods and data system architectures. This will enhance their own farmers’ management practices, increase farm incomes, and improve livelihoods. In addition, these actions will provide health and nutrition officials in those countries with the data needed to guide their citizens toward more beneficial lifestyle and food choices to help deal with obesity, diabetes, and other food-related health issues.