Dynamics in grain logistics

10 January 20227 min reading

COVID-19 pandemic showed vulnerability within the agrifood system globally. Global trade in agricultural and food products plays an essential role in providing food security for the world. Volume and freedom of trade are key, as is diversity of global supply into those markets. 

The COVID-19 pandemic increased global food insecurity in almost every country by reducing incomes and disrupting food supply chains. The pandemic continues to create devastating effects on global hunger and poverty. 

Food security means a supply chain that is consistently able to deliver adequate quantities of food, both through preparing for disruption and having the capacity and flexibility to respond effectively to unexpected problems. A resilient supply chain is robust and resilient, possessing an ability to recover from disruption and which can re-orientate to alternate outcomes when necessary.

COVID-19 pandemic showed vulnerability within the agrifood system globally. Global trade in agricultural and food products plays an essential role in providing food security for the world. Volume and freedom of trade are key, as is diversity of global supply into those markets.

The proportion of agricultural products traded has increased since the 2000s. A growing global trade in agricultural products increases resilience to supply shocks affecting geographical areas and allows for a more efficient global food supply chain. However, reliance on the global trading system increases vulnerability to events, such as trade restrictions, which disrupt the system. The COVID-19 pandemic caused some disruption to transboundary supply chains but global trade in products is expected to recover and continue growing in the long term.

Although the COVID-19 epidemic is primarily a public health concern, the necessary measures enacted to contain the spread of the virus, especially the restrictions placed on the movement of people and goods, have a significant impact on all levels of the grain market chain.

The pandemic has inflicted unprecedented controls on travel and social distancing, with adverse economic consequences still ongoing. Public health emergency measures have disrupted both supply and demand sides of agri-food systems worldwide. 

The agriculture and food sector experienced significant supply chain disruptions due to the COVID-19 crisis and associated lockdown measures. Yet relatively limited economic impacts were observed on the sector due to the agility of producers, supply chain actors and retailers, but also to the rapid and broad response by governments. As the impact of the COVID-19 pandemic on this sector subsides, policymakers will need to pivot and shift spending to investments that can enhance sector-wide resilience.

Three main types of impacts were observed on the agriculture and food sector. First, the production of certain agricultural goods was reduced due to the unavailability of seasonal labor, restrictions in the access to intermediate agriculture inputs, and the incapacity to sell output. Second, there were impacts on consumer demand driven by unemployment and income shocks associated with the containment measures, reduced demand for high-value products, consumer shift in demand from food services, and decline in biofuel demand. Third, supply chain disruptions were observed in many countries, due in part to the contamination of employees in processing firms, the adoption of distancing and sanitary requirements, and transport and logistic issues.

The pandemic has destabilized the global container freight supply chain, and delayed shipments and rapidly rising freight rates are putting intense pressure on grain exporters and importers. Industry experts believe the problems could persist as the finely calibrated network of world trade, already weakened by months of shipping backlogs, labor shortages and geopolitical tensions, remains discombobulated.

Grain is transported by sea, road and rail, and recent challenges related to the pandemic have made clear just how reliant the food supply chain is upon the transport sector. Shipping accounts for the movement of at least 90% of goods around the world and the cost of transporting things by sea has rocketed in the past year. Higher demand for goods combined with the lingering effects of pandemic restrictions saw ocean shipping costs skyrocket for much of 2021. The Drewry world container index measuring the cost of moving a 40ft container is 170% higher than it was a year ago. The price on some particularly in-demand routes such as Shanghai to Rotterdam has increased by almost 200%; in the case of the Dutch port to New York, the cost has risen by 212%. China’s ‘zero-COVID’ policy create further shipping strains as pandemic measures continued to affect its ports, many of which are among the world’s busiest. The cost of sending a container from China to the United States reached a record high of more than $20,000.

As it is uncertain the end of the pandemic, COVID-19 continues to threaten the global food supply chain with the disruption on the economic sectors, extreme constraint in the access of food, shortage of farm labor, fear of moving from one place to another, among other constraints. Although many countries have adopted policies to reduce the impacts of the pandemic on the performance of the food supply chain, significant problems still exist. 

The current supply chain crisis may be temporary, but volatility could well become a permanent feature of global trade as climate change and other disruptions take hold. Digital transformation is part of the answer, but it’s even more important that we bring about a revolution in the way we think of international trade. 

---Cover Story Index

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