Global food giants Cargill Inc. are of the opinion that food prices will stay on the higher side in 2022 on account of disruptions of the supply chain globally. The head of Cargill sees labor crunch as one of the biggest risks facing the food industry.
More competition for workers is seen globally, whether they are truckers, warehouse operators, port staff, or meat processors. CEO David MacLennan says that plants are not running fully to capacity utilization. As a result, food supplies are constrained, leading to price rises.
As per an interview in Singapore Bloomberg New Economy Forum, MacLennan said that he thought the food and agriculture inflation was transitory, but a continued shortage of workforce in the labor market has made him change his mind. This is one input in the supply chain that is being watched carefully.
Global food prices climbed to the highest in the decade in October, threatening household grocery bills and worsening global hunger. The lack of a workforce threatens the global food ecosystem with shortages of warehouse operators, port workers, meat processors, or fruit pickers.
High freight costs, labor shortages, and stormy weather hit the food supply chain. Further, the energy crisis has caused fertilizer bills to surge for farmers worldwide.
In September, MacLennan has said that the rising food prices were temporary and dissipating over time. However, according to him, the increasing energy price and continued supply chain logjams have made the market lot tighter.
MacLennan said, “limited supplies lead to higher prices. Fortunately, China did not buy crops aggressively this year compared to last year. Also, the harvests were robust in North America, which helped reduce the pressure on the system“.
The tighter supply of edible oil results from pitting energy production with food as the search for biodiesel and greener airplanes continues. The most consumed vegetable oil in the world, palm oil, saw the price increase by a staggering 50% in the year and 60% for soybean oil. Canola, which is used to make oil, is also at a record high.
MacLennan says that the fuel versus food tug of war will become more intense than in the past 15 years. A day will come when agricultural products will be used more for energy than food, and the onus will shift on the farmers to ensure new and innovative ways to be more productive.
