Is our food system broken?
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From vegetables to pasta to flour — it has been good to finally see fully stocked shelves in my local retailers in London. Shortages of pasta and meat, long queues to access supermarkets — for the first time in decades, the pandemic has brought to the fore the concept of food insecurity for many consumers such as me in developed countries. Ways to make our food supply chains more resilient is the topic of our main piece today.
Our Tall Tales of Trade looks at the UK’s insistence that border checks would not be necessary in Northern Ireland — until this week — while our chart of the day looks at an emerging battle between US and Chinese companies for cloud computing market share in south-east Asia.
The fragility of ‘just in time’
Is our food system broken? The coronavirus crisis has opened up discussions about food supply chains around the world and the resilience of what is in place.
Many believe the pandemic has exposed weaknesses in the current way that food is moved around the world. “The global just-in-time system is highly fragile,” said Professor Tim Benton, research director at Chatham House. “Do we need to think about hedging our bets in global supplies?”
On a macro level, most international food policy experts are relieved that the world has not seen a repeat of the global food price crisis of 2007-08 when the price of grain and other staple foods surged, leading to riots in various developing countries. However, some governments have still hoarded, with a handful of exporting countries banning the overseas sales of staples such as rice, while countries relying on imports rushed to shore up their reserves.
For many developed economies, tightly run retail supply chains, which hold little excess inventories, struggled to supply products that were in high demand — as anyone trying to buy flour or eggs at the start of the lockdowns can attest.
The pandemic also shone a light on the meat sector in the US and elsewhere, where a high number of labourers worked in large centralised plants. As workers fell ill and plants closed, the slaughtering of livestock and delivery of meat stopped, leading to rationing of products. Meat processors have been forced to reduce the number of workers in the plants as well as slow down the production lines, which will inevitably increase production costs.
Meat slaughtering is a labour-intensive industry, as are the fruit and vegetable agricultural sectors, where automation has been slow due to the various complexities of the processes. Farmers around the world have been forced to leave fruit or vegetables in their fields as workers have either been unable or refused to travel to pick the produce.
Another factor affecting food supplies has been the difficulty for producers in shifting between goods for retail and food services, where demand virtually dried up during the lockdowns.
Discussions on how to resolve these issues are now under way, says Nick Fereday, food analyst at Rabobank. “Everyone seems to have their own preferred R-word about the supply chains right now, such as the need for building in greater resilience, robustness, and/or redundancy to withstand any future shocks,” he said.
The solutions may be in surplus production capacity, for example: fewer mega-production plants in the case of meat processors, and higher inventory levels.
Some entrepreneurs and venture capitalists are optimistic that food and agri-technology can solve some of the ‘R’ problems. In many cases, the pandemic is accelerating the technological changes that have already been happening in the nascent food and agritech arena.
From farm to fork, digital transactions and data gathering can lead to a more agile and flexible supply chain, venture capital investors and consultants believe. Sales of seeds, pesticides and fungicides combined with weather data can alert players further down the supply chain as to what is happening upstream. At the consumer end, digitisation is increasing the amount of food delivered direct from the farm to end users, giving producers a clearer indication of demand.
All this could mean that the pandemic’s impact on global food trade could hasten changes already taking effect. Katy George, senior partner at McKinsey, sees a further move from global to regionalised trade. A lot of food processing was already local relative to other industries, she told a panel at the recent FT Global Boardroom online event. “We’re going to see more of that, facilitated by technology,” she added.
US and Chinese cloud companies are vying for dominance in south-east Asia, with Google, Amazon and Microsoft challenging Alibaba and Huawei with a frenzy of investment in the region. At stake is the fastest-growing cloud computing market in the world, with annual spending on cloud services forecast to hit $76bn by 2023, according to IDC, the market intelligence firm.
Tall tales of trade
Today’s tall tale is something of an own goal for the UK government. Prime Minister Boris Johnson has long been insisting, to a dubious trade audience, that leaving the EU would definitely not result in any border checks in Northern Ireland.
Yesterday, the UK conceded for the first time that, actually yes, there would be post-Brexit checks on trade between Great Britain and Northern Ireland.
The checks would be “minimal”, according to government minister Michael Gove, who said there would be “some processes” covering goods travelling from GB to NI — notably animals and agrifoods — to protect the EU single market but that no “new customs infrastructure” would be needed. But that’s unlikely to satisfy Brussels, which wants rigorous customs and regulatory checks in Northern Ireland to protect the EU single market after Brexit. The case continues.
The UK government needs to extend the EU transition period, writes the FT editorial board. There are no longer Remainers and Leavers; there is only a British economy facing a dire recession — and the government needs to give it a break.
Mexico is reopening without knowing if the pandemic is under control, as US manufacturers pile on the pressure to restart cross-border supply chains.
Samsung Electronics is forging ahead with billions of dollars of new investments in computer chip production despite uncertainties caused by the pandemic and continuing trade tensions between its key US and China markets.
The best trade stories from the Nikkei Asian Review
Panasonic is shutting down a large appliance factory in Bangkok and consolidating production in Vietnam in the latest sign that Japanese manufacturers are shifting to cheaper locations outside Thailand.
Chinese enterprises have started reworking their fundraising strategies after encountering a less-welcoming environment for public offerings in the US in the wake of the Luckin Coffee accounting scandal.