Many food shortages and supply chain issues that expose the volatility of the global food system occurred this year. Following are some of the biggest topics to affect the specialty food industry.
War in Ukraine
The current conflict between Ukraine and Russia began in February of last year. Blockades, embargoes, and a general inability to move key agricultural commodities like grains, sunflower seeds, and fertilizer affected the well-being of many countries in 2022 and persisted into 2023.
The war continued to exacerbate energy and fertilizer prices, which Russia primarily supplies. This has also contributed to record food price inflation across the world. The strong U.S. dollar shielded Americans from the brunt of the price increases, said Joseph Glauber, senior research fellow at the International Food Policy Research Institute, but the lack of crops in the reserve could soon change that.
In a move that intended to stabilize the cooking oil market, Ukrainian farmers transitioned to sending out raw sunflower seeds instead of sunflower-seed oil in early March.
Ukraine exported 347,000 tons of sunflower-seed oil in January, down from the 621,000 tons in January 2022, before the war, according to data from SovEcon, an agricultural consulting firm. This drop in exports caused the prices of sunflower-seed oil and other cooking oils to surge.
The next month, allied countries and agricultural companies began supporting Ukrainian farms by lending money to farmers.
The farming industry was greatly impacted by Russia’s invasion, which destroyed equipment and land, and regulated export routes. This has led to low supplies of products like fertilizer, flour, and more that the country globally supplies. As a result, Western governments and companies have supplied aid.
The government and commercial assistance “will give a possibility for Ukraine to move in the correct direction,” said Mykola Solskyi, Ukraine’s minister of agrarian policy and food.
Russia provisionally terminated the Black Sea Grain initiative in July which allowed Ukraine to export grain to countries facing hunger and high food prices in Africa, the Middle East, and Asia.
The initiative was laid out in 2022 and renewed twice by both countries before expiring on July 17.
“The Black Sea deal is absolutely critical for the food security of a number of countries,” and its loss will further affect those facing high debt and climate fallout, said Simon Evenett, professor of international trade and economic development at Switzerland’s University of St. Gallen.
Since the start of the war, Ukraine has faced bans on Ukrainian agricultural products. As a result, the government shared that it plans to sue Poland, Hungary, and Slovakia.
Food Shortages
In May, the Food and Agriculture Organization of the United Nations shared that its price index, which tracks globally traded food commodities, increased by 0.6 points between March and April, likely driven up by high prices of rice, sugar, and meat. This is the first time the price index has risen in a year.
Rice has suffered globally because of poor weather conditions in major rice-growing regions. This caused India to ban exports of non-basmati white rice to quell the ensuing domestic inflation. The move was met with skepticism, as experts worried the food staple’s removal from international markets could trigger a global food crisis.
Tight sugar supplies worried candy companies this summer, edging up their costs and cutting into confectionery production.
In an April earnings call, Hershey and Mondelez executives shared that high sugar prices have contributed to rising costs. A smaller maker, Spangler Candy, said that it had to turn down Halloween candy orders because of sugar prices, according to a report.
Later in the year, meager sugar harvests in Cuba also affected the production of Cuban rum. An economic crisis in the country has reduced the supplies of fertilizer, fuel, and other cane-growing necessities.
In its second year, a shortage of sriracha sauce from popular brand Huy Fong lead retailers and distributors to bring suitable substitutes to market.
Reports said Huy Fong was unable to obtain enough red jalapenos to make its product, but Huy Fong did not confirm that was the case.
Recent shocks to the supply chain signal deeper implications. In September, President Joe Biden’s special envoy for food security, Dr. Cary Fowler, warned that the world could fall short of food by 2050 as a result of falling crop yields, inadequate agricultural research, and trade shocks.
Eggs' Fragile Recovery
Despite the avian flu still raging in the beginning of the year, egg prices dropped to more manageable levels. USDA data found that wholesale prices of a dozen eggs in the Midwest dropped by 58 cents to $3.29 per dozen in January. Other sources, however, shared that egg prices hit nearly $5 per dozen over the same period.
Despite the decreased prices, eggs impacted the price and purchase of many grocery categories including baked goods, according to a webinar from the International Dairy Deli Bakery Association in February.
The persistently heightened prices caused Dollar Tree to pause egg sales, indicating that it wouldn’t bring them back until the fall.
The elevated price tags on eggs were forecasted to remain throughout 2023, according to a Rabobank report, especially in areas affected by high feed costs, persistent avian flu outbreaks, and import restrictions.
Egg prices’ volatility calmed down in June as prices continued to ease. Data from the USDA put average wholesale egg prices between $0.99 and $1.39, down from the peak of roughly $5 in many locations in the U.S.
Even though wholesale egg prices were down, earlier this month Dollar General renounced its goal to transition to 100 percent cage-free eggs in its stores by 2025, citing customer needs and preferences toward a lower-priced option.
In a win for CPG brands last month, General Mills, Kraft Heinz, Kellogg, and Nestle won a lawsuit against the country's largest egg producer and two trade groups who allegedly conspired to restrict the supply and push up prices.
“We are incredibly pleased by the jury’s decision,” said Brandon Fox, a Jenner & Block LLP partner representing the food companies. “For the first time, the defendants have been held liable for their antitrust violations. We are now going to turn our attention to the damages phase.”
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