Produce industry calls for ‘urgent government action’ to resolve supply chain stress

At least 21 produce industry organizations in Canada and the U.S. issued a joint statement calling for “urgent government action” to address significant ongoing supply chain disruptions.

The disruptions have “impacts to our food systems, economies and ultimately individuals and families across the continent and around the globe,” according to the statement.

The COVID-19 pandemic has created unprecedented public health, economic and logistical challenges for communities and supply chains worldwide — the fresh fruit and vegetable industry included.

“Almost two years since the start of the pandemic, substantial increases in costs and delays along the supply chain threaten our food security and the long-term economic viability of the North American fresh produce sector,” according to the statement. “It is important to note that these costs cannot be fully borne by the industry and will ultimately be passed to consumers. Sadly, these increases, which are already being felt by the end consumer, are likely to escalate, affecting most those who can least afford it.”

Organizations that partnered to issue this statement include: Produce Marketing Association, United Fresh Produce Association, Canadian Produce Marketing Association, California Strawberry Commission, Florida Fruit and Vegetable Association, Ontario Greenhouse Vegetable Growers, Texas International Marketing Association, Western Growers and the Quebec Produce Marketing Association, among others.

The group statement outlined several kinds of ongoing supply chain disruptions, each with many complications.

Crippling port congestion

Gridlock at major North American ports has resulted in lines of ships waiting to dock and containers stacked high waiting for unloading and pick-up. For highly perishable products, long delays at port can mean loss of product, sales and ultimately food waste. Significant delays in receiving equipment, building materials and other inputs also serve to threaten upcoming growing seasons.

1. More than 30 million tons of cargo are waiting for delivery, according to Goldman Sachs;
2. Even once a vessel berths, it can take days to discharge the containers;
3. Soaring demurrage and detention fees from port delays can’t be sustainably absorbed by the industry;
4. Long wait times for drivers picking up containers cause more congestion and delays in delivery; and
5. For Canada and parts of the U.S., much of the 2021 growing season has ended, and the busier import season begins soon.

Delays and soaring costs in container shipping

While major international shipping companies have been sending empty containers back to Asia and posting record profits, weeks-long shipping delays have caused major losses of product and sales for the North American industry, according to the statement.

“Coupled with exponentially growing container costs and a limited number of refrigerated containers, this situation creates serious challenges for the fresh produce industry and our countries’ food security,” according to the statement. “Governments must work together to provide greater oversight of international ocean carriers and ensure fair and ethical practices to support the continued flow of goods.”

1. The cost of shipping containers has tripled or more in the past year, with estimates increasing from $3,000 per container to $15,000 to $18,000, and even as high as $25,000 per container;
2. Due to the highly perishable nature of fresh produce, there are already a limited number of carrier companies that accept fresh produce shipments. One of the largest of these has recently announced it will no longer carry fresh produce due to the increase in claims being made; and
3. Despite the significant delays in product delivery, shipping companies are holding container rates for shorter periods of time. These companies have also begun cancelling bookings, only to reschedule them at a higher rate.

Cascading effects of inconsistent product delivery

When a significant delay in receiving perishable product is followed by receiving a large amount at once, a string of new issues and costs arise, including arranging distribution and sourcing additional labor required to re-grade and re-package salvageable product to recover sales and avoid waste. Barriers to exports resulting in more domestic product remaining in North America also have the potential to create new supply and demand challenges, including decreased profitability to all domestic supply chain partners.

1. “Many aspects of our supply chain are designed to penalize late or lengthy deliveries. For example, distribution centers charge fees for missed appointments or changes, carriers charge fees for detention and demurrage, and upstream distributors charge fees for partial or unfilled orders. This further inundates the supply chain with additional costs; and
2. These ongoing disruptions have brought about unprecedented issues over extended periods of time, unforeseen challenges that many contracts simply did not account for, causing more legal proceedings over contract disputes, placing further stress on the supply chain.

Continuing labor shortages across the supply chain

The significant labor shortages in the fresh produce industry have extended from the farm throughout the supply chain, and are impacting everything from planting and harvest, to packing, transportation and retail/foodservice. Governments have a key role to play in incentivizing workforce reengagement and facilitating access to both domestic and international labor.

The challenges agricultural employers are facing in attracting workers is exacerbated by procedural delays and COVID-19-related protocols.

1. In the second quarter of 2020, more than 100,000 job openings were posted in the U.S. agriculture sector calling for workers with no or limited experience, according to a report cited by the National Council of Agricultural Employers; even so, U.S. Department of Labor records show that only 313 of these openings were filled by domestic workers; and
2. The American Trucking Association has estimated that the U.S. alone has a shortage of about 80,000 truck drivers, and the driver shortage tops the American Transportation Research Institute’s list of Top Industry Issues. The scarcity of commercial truck drivers is made worse in the produce industry, as drivers may opt to take on less urgent, nonrefrigerated loads rather than the urgent, time-sensitive and highly temperature-controlled loads necessary in fresh produce.

Growing input shortages

“From fertilizer, crop protection products and greenhouse building materials, to pallets, cardboard and packaging, the fresh produce supply chain is experiencing increasing shortages and rising costs in inputs that are critical to our sector, with impacts being felt now and threatened for the future,” according to the statement.

1. In spring 2021, lumber shortages drove up wood prices by almost 350%, causing a pallet shortage for almost six months. Fresh produce can’t move without pallets, and with fresh produce’s status as a low margin item, this industry was the last to receive new pallets from suppliers when they finally became available;
2. In summer 2021, prices for paper ‘pulp,’ the raw material used to make boxes, were reported as much as 40% higher, year-over-year, causing a massive increase in the price of cartons – the primary shipping container for fresh produce;
3. Fertilizer costs have risen by more than 20% in the last year, with China’s recent announcement of restricted energy consumption in key phosphate production regions leading to anticipated shortages headed into the 2022 growing seasons; and
4. The Canadian greenhouse sector has reported delays of more than 8 months in receiving critical building materials, posing a major barrier to preparations for the next growing season.

Stockpiling of product by consumers

“While the issues outlined above pose significant concerns, it is vitally important that they are not further exacerbated by consumer panic buying or stockpiling of goods,” according to the statement. “Every effort must be made to address supply chain disruptions while also clearly communicating this to the broader public.”

In the early days of the pandemic, North American governments acted fast to invest in food systems and to collaborate to keep supply chains moving.

“The situation we now face echoes some of the challenges we saw in the spring of 2020, with the added complications of heavier border traffic, consumer purchasing habits that have been significantly increased over the course of the pandemic, and government support programs that are winding down or have ended,” according to the statement. “We cannot emphasize strongly enough the need for our governments to work together to address these issues in a multi-lateral and holistic manner.”

These detailed examples demonstrate the complexity, interconnectedness and dependencies of the produce industry’s supply chain and its challenges. Governments must work with all parts of the supply chain to avoid even more serious threats of food insecurity and food shortages, according to the statement.

While these multi-faceted problems will not be resolved quickly, further delays in course correction will likely make things even worse.
“Without multilateral engagement to find solutions, these issues will create long-lasting impacts to the detriment of all North American economies. These include: bankruptcies, legal disputes, industry consolidation, inflation, inaccessible food supplies and many more,” according to the statement. “Time is against us, and the necessity of addressing these challenges now cannot be understated.”