Food prices continue to rise as the combination of COVID-19 disruption and indirect impacts from the situation in Ukraine touches many segments of the global supply chain. From production, processing, transport, logistics, and consumer demand; food prices continue to rise as a result of a number of factors.
Such bottlenecks were the result of port shutdowns to mitigate the spread of COVID. These shutdowns led to fewer sea containers in circulation in the short term and in the long-term queues, once markets open up. The imbalance will continue and maybe worsen as ports in China navigate another wave of shutdowns in April. This will have another knock-down effect on port congestion as terminals struggle to process outbound / inbound shipments in the summer months. Port congestion has created a backlog to get products into global markets and created higher demand. Twofold, higher demand has led to price increases with ocean carriers in addition to the expected higher costs of refined fuel that power the sea and air vessels themselves.
Seaport congestion/delays had caused more products to divert to air. Unfortunately, air freight options are not as cost-effective as sea freight solutions. Thus, the per-unit pricing will keep increasing to cover operating/logistics costs. Due to a reduction in passenger traffic, there continues to be less airline capacity in the market which has put additional pressure on costs as well. The situation-specific to air is not just about the reduction of passenger traffic but also some airlines are trimming down just published spring/summer schedules as the availability of trained flight crews or ground personnel are rebounding slower. As global markets re-open, fuel prices increase which impacts the cost of air/ocean, and final mile deliveries. The Russia and Ukraine regional conflict has created additional disruptions for an assortment of reasons: fewer airlines in the market, airlines having to reroute their aircraft, and embargoes affecting oil but also additives that produce fuel. The next wild card could be the renewal of the ILWU (International Longshoreman Warehouse Union) current contract that handles Western USA seaports such as LA/Long Beach/San Pedro is due to expire on July 1st, 2022.
Transporting these items via reefer trucks has also caused prices to soar and will inevitably hit the end consumer right in the pocket. It’s a not-so-perfect storm of disruption that’s felt most keenly at the gas pump, grocery store, and kitchen table.
Be it Hawaii or Alaska or New York, exit Canada or Mexico, Watsonville to Dubai, Bakersfield to Sao Paulo, or the USA to Australasia… impacts will continue well into 2022. These are the situations where CFI is uniquely positioned to step in and work on the behalf of our clients to provide best-in-class perishable services. Our decades of experience, a worldwide network of partners, and access to warehousing, refrigeration, and transportation equipment have us uniquely positioned to be able to navigate this critical market at a time when food quality and availability are a paramount concern for producers, retailers, wholesale distributors, and families alike. If you need an advocate, additional information, or just want to know how CFI can help you level up your perishables service, contact a representative today.