Tight labor supplies will increase the pace of automation in the food supply chain, according to a new report from CoBank’s Knowledge Exchange.
“The most significant lasting impact from COVID will be an acceleration in automation,” said report co-author Dan Kowalski, vice president of CoBank’s Knowledge Exchange division.
Kowalski said that while investment in automation and robotics was increasing before the pandemic, labor challenges over the past 18 months (and likely for the next 6 to 12 months) will only hasten the pace of automation.
“The pandemic has brought on a trifecta of labor issues for those in food and agriculture: health and in-person dependence risk during COVID, hiring challenges today, and elevated wage inflation that we believe will last into 2022,” he said in the 23-page report.
“All of these concerns incentivize businesses to increase automation, and it will affect the entire supply chain from field to grocery and restaurants.”
Historic drought conditions in the Western U.S. intensified last quarter with water allocations to some agricultural irrigators cut to zero in California, according to the report.
“Growers are adjusting by fallowing crop acreage and allocating scarce water to permanent plantings rather than field crops,” co-author Tanner Ehmke said in the report.
Prices for fruits and vegetables are rising for consumers, but not necessarily for growers, the report said.
The cost of moving produce in refrigerated trucks climbed to $3.10 per mile in May, up 41% compared with the same time a year ago, according to the report, citing DAT Freight & Analytics.
With 95% of California and Arizona, 77% of Oregon and 46% of Washington experiencing severe drought conditions, the region is now in the worst drought in four decades, according to the report.
“The extreme drought situation is expected to persist until winter rains arrive and is shrinking crop prospects,” the report said.
Prices on the Nasdaq Veles California Water Index (NQH2O) have nearly doubled since January to $850 per acre foot, the report said.
