COVID ripples affect food supply chains

Feb 26, 2021 | Volatile world | 0 comments

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When COVID-19 first emerged in the city of Wuhan over 12 months ago, movement restrictions imposed by the Chinese government all but closed down major ports. China handles 30% of global cargo – around 715,000 containers per day in 2019 – the disruption to global trade was profound. But by February last year bottlenecks were being cleared as Chinese authorities successfully crushed the virus and workers returned to factories and ports.

As the virus spread around the world, lockdowns and travel restrictions followed. A year later, a critical shortage of shipping containers has increased costs and disrupted trade again. As consumers, particularly in Europe and the US, cancelled travel plans and stopped dining out in the second half of 2020, demand for goods such as smartphones and laptops increased has surged. To keep exports moving Chinese exporters are paying huge premiums for containers, making it more profitable to send empty containers back than backfill them. The cost of carrying goods from China to the US is almost 10 times higher than the return journey, according to Freightos data, and currently three in every four containers are being sent from LA to Asia empty.

As a result food is piling up “in all the wrong places”. Canada can’t ship lentils, India can’t ship a mountain of sugar pushing prices to a three-year high in January and the US soybean shippers are having trouble moving product.

“People aren’t getting their goods where they need them,” according to Steve Kranig, director of logistics at IM-EX Global Inc., a freight forwarder that handles cargoes including rice, bananas and dumplings from Asia to the US. “One of my customers ships eight to 10 containers of rice every week from Thailand to Los Angeles. But he can only ship two to three containers a week right now.”

Vietnam is the largest producer of the robusta coffee beans but has struggled to export, with shipments down 20% in November and December. Commodity shortages and higher freight rates will inevitably add to consumer prices for food and other goods, with some in the industry tipping freight rates could double in the 2021/22 shipping season.

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