The food crisis is getting worse, but most of us can't see the forest for the trees

 

For the past few years I and other commenters have been warning of massive food inflation, food shortages, and supply chain bottlenecks that will prevent that food from getting to where it's needed.  All of those things have been proven true over time.  The trouble is, most of the mainstream media have ignored the reality of the situation, and have instead hidden the truth behind a maskirovka of inflation adjustments and focusing on dollar rather than unit sales.  Global Data explains.

... while the continued (but significantly moderated) food inflation has allowed many branded companies, particularly the majors, to increase dollar sales, in many, if not most, cases they have turned in lower unit sales.

. . .

The rampant food inflation seen from 2021 to early 2023 raised the quarterly and annual sales growth rate for most major packaged foods companies over the last three years, evidenced by many groups reporting some of the highest dollar sales growth increases in recent history. However, much of the growth has been attributable to price increases rather than to brand marketing, sales promotion and the other traditional ways we use to boost sales.

That all changes in 2024. Packaged foods companies, especially the majors doing business in the US, not only should but must (to satisfy shareholders) put a renewed focus on growing unit sales.

Inflation and the resulting price increases have served as a “cheat sheet” of sorts for packaged foods companies, particularly the big guys, to grow dollar sales.

New rule: Pay as much or more attention to unit sales growth as we do to dollar sales growth in 2024.

Last week, Walmart CEO Doug McMillon said there’s a high probability the US will see deflation in 2024. If he’s right, packaged foods companies will have their biggest sales growth challenge in years. Not only will they need to have a renewed focus on unit sales but they’ll also need to focus like a laser beam on growing dollar sales, unlike what has been the case for the last couple of years.

There's more at the link.

That's a very common economic fig-leaf invoked by mainstream media financial journalists.  They say, "Well, two years ago American consumers were spending $500 million on this or that commodity, and this last Christmas shopping period they spent $600 million;  therefore, it's obvious that there isn't a shortage, and that people aren't strapped for cash."  There are two things wrong with that assumption.

• The dollar amount spent doesn't reflect the real rate of inflation, only the number of dollars involved.  The value of each of those dollars today is probably less than half what it was two or three years ago, depending on whose inflation statistics you believe.
• The dollar amount also doesn't tell us how many units, or packages, or containers of product were sold.  If, two years ago, consumers bought 100,000 units of the commodity in question, but last year bought only 70,000 units, that's effectively a massive drop in sales.  However, because nobody bothers to mention actual numbers of physically countable objects, people simply look at the dollar figures, see they haven't changed much, and assume that all's well.  It's not.

I dropped in at our local butcher yesterday, and asked him how he was doing after the Christmas season.  He looked very somber, and acknowledged that quantity for quantity, his sales have been declining for well over a year, and are currently about 25% less than they were at his peak.  In dollar terms he's holding his own, but his customers are getting that much less meat for their money, and they're hurting.  Some of his regulars have had to apologize to him because they've stopped buying at his butchery;  they love his products, but they simply can't afford to pay his prices any more.  They're reduced to buying off-cuts and canning or freezing venison, wild pig, etc.

Internationally, certain staple food groups are in a bad way as we enter 2024.  Forbes identifies several.

Olives and Olive Oil

In 2023, extensive heat and dry conditions and insufficient soil moisture in much of the Mediterranean adversely affected olive trees. Between April 2022 and May 2023, average temperatures, surpassing norms by up to 4°C were recorded in Spain, the leading global producer of olive oil. Persistently low rainfall for over a year, leading to severe drought resulted in a 50% reduction in Spanish olive oil production.

Consequently, the prices of olive oil reached unprecedented levels and stockpiles have significantly decreased compared to previous years.

The consequent increase in the cost of olive oil is impacting the prices of various products, including canned goods, such as sardines. With Spain exporting 70% of its olive oil production, domestic consumers are finding themselves in competition for this commodity in a progressively competitive global market.

Rice

Global rice supplies tightened in 2023 due to climate impacts experienced across the United States, Asia and the European Union. Throughout the year, rice prices remained elevated due to a sustained La Niña in March, followed by an El Niño anomaly in June. Additionally, India implemented restrictions on non-basmati rice in July, following concerns of a production shortfall caused by a delayed monsoon.

India, the world's largest rice exporter— accounting for 40% of global rice exports— responded to shortage concerns by imposing restrictions on shipments. Despite declining values in other grain markets, rice prices surged to their highest levels in 15 years in 2023, experiencing increases of 40%-45% in quotations at various Asian export hubs.

In October 2023, the United Nations Food and Agriculture Organization's All Rice Price Index averaged 138.9 points, a 24% increase from the previous year.

Italy, which contributes approximately half of the European Union's rice production and is the exclusive grower of crucial varieties for risotto such as Arborio and Carnaroli, recorded a decrease in rice output in 2023. Agricultural groups warned that Italian farmers, grappling with a second consecutive year of drought, are scaling back the cultivated land for rice to its lowest level in more than two decades.

Potatoes

A study published in the journal, Climate, indicates that potatoes face a significant threat from climate change, with global yields potentially declining by 18% to 32% within the next 45 years in the absence of adaptation.

European farmers are already experiencing the impact. In 2023, heavy rain led to one of the lowest potato harvests on record in the UK. According to a report from Bloomberg, farmers in Belgium and France had to park tractors due to waterlogged fields, which impeded collection. This resulted in soaring European potato prices.

Across the globe, in the highlands of Bolivia, where potatoes are the staple crop, the late arrival of seasonal rains and untimely frost— the likely the outcome of climate change— severely impacted potato harvests, lives and livelihoods.

Over recent months, Bolivia, along with much of South America, has experienced a "heat dome," resulting in unprecedented temperatures soaring to 45°C, a remarkable occurrence during winter. In August, Bolivia registered the highest winter temperature in the Southern Hemisphere.

Again, more at the link.

We may have plenty of some commodities here, but because of that, others may not be able to get them where they are.  For example, olive oil is in desperately short supply in Europe;  therefore, in a knock-on effect, we're already seeing US olive oil prices skyrocket, and availability (particularly of known and trusted brand names) is restricted.  Furthermore, global weather patterns are driving excessive price increases and restricting supply in many parts of the world.

Finally, the supply chain crunch has been with us for several years now.  I think many people have either forgotten that it's still a factor, or they've decided that we can live with it.  That's a dangerous assumption, because the two single largest bottlenecks in world trade - the Suez and Panama Canals - are in trouble right now, and there's no sign of any short-term improvement.  Something like 12% of world container traffic uses the Red Sea route to and from the Suez Canal, and it's been cut in half by the ongoing conflict with Houthi rebels in Yemen.  It can take up to 25% longer to re-route container ships around the Cape of Good Hope to Europe and America, and costs a lot more in fuel, crew salaries, etc.  All that affects the cost of the goods the ships carry.  The Panama Canal has endured drought for several years, meaning that the freshwater lakes and arteries that keep the canal filled with water have been depleted.  As a result, the canal authorities have restricted not only the number of transits, but how deep the ships may be loaded, resulting in an effective drop of up to 40% of capacity for the foreseeable future.

Remember, too, that every ship that's delayed takes capacity out of the market.  If you have ten ships to move a million tons of cargo, at a hundred thousand tons each, that's do-able, and the ships will be available for their next voyage almost at once.  However, when those ten ships take 25% longer to reach their destinations and/or are delayed at choke points like the canals, their carrying capacity is removed from the market until they can be unloaded.  That greatly increases demand for what ships are available, and may take too long for time-sensitive crops to reach safe long-term storage facilities.  The trouble is, there's not a massive oversupply of vessels to absorb that kind of pressure.  The shipping arteries can only handle so much before they run out of hulls to carry trade, including food.

That's a major reason why large parts of the world are looking at the overall food supply situation and getting in a panic about how they're going to feed their people this year and going forward.  They're right to be concerned.

Keeping it local, I'm just completing a sort-through of our emergency supplies, taking out older cans that won't keep past their due date (particularly those with acidic foods such as tomatoes, pineapple, etc.).  I'll send those to the food bank before they expire, and replace them with new cans that'll remain usable for a couple of years from now.  (Non-acidic foods such as beans, vegetables, etc. can be kept for years past their "use by" date without difficulty;  one just has to check to make sure the can is in normal condition - not bulged, not hissing when it's opened - before using them.)  I'll be doing the same with older packs of seasoning, herbs and spices, replacing older ones with fresh supplies, and I'll add a few more pounds of staples such as oatmeal, grits, cornmeal and pasta.  With the general availability of food still in a not very stable situation, I want to make sure we're up-to-date with our emergency preps.  (I'll have more to say about that later this morning.)

Peter