Shifts in demand and supply is no new trend. Fluctations are likely to happen, with changes realigning over periods of time. However, sometimes, these shifts can result in a skewed supply and demand situation, leaving companies reeling with surplus supply, pricing insecurity and instability. But what can companies, especially those dealing with perishable produce that must be transported in climate controlled conditions, do? Produce such as this cannot be stored for when the market shifts again, resulting in waste and loss of profits.
A surplus of bananas
Over the last 10 years, the banana market has started to develop a surplus of produce. Whilst markets such as Eastern Europe and the Middle East have been expanding the demand for bananas and have increased consumption overall, the current geopolitical situation in Eastern Europe has resulted in a large quanity of bananas no longer reaching a market.
Much of the excess fruit comes from Ecuador, Costa Rica and Colombia.
Action to mitigate this surplus has been sought; new markets were explored through seeing if the excess could be unloaded to markets in North America, but despite lowering prices on the produce, logistics cost still outweighed the cost of fruit from Centeral America and Mexico. According to data from Association of Banana Exporters of Ecuador (AEBE), during the first five weeks of the conflict in Eastern Europe, losses totaled around $27.52 million.
Due to the situation, banana growers in El Oro, Guayas and Los Rios in Ecuador blocked roads in April to draw attention to the depressions in banana pricing, with many not seeing a solution in sight for the excess.
Slicing the pork
Across the pond, the UK faced it’s “biggest crisis” in at least 25 years in February of this year. The national farmers union stated that 40,000 pigs had been culled and discarded due to lack of butchers.
Due to the lack of butchers in the country, with a shortage of approx. 10,000 butchers, much of the livestock was not able to be butchered and prepped as expected, and farmers were left with the choice of either continuing to feed the surplus livestock or cull it. Neither were favorable options for farmers.
The problem was partially linked to the pandemic, which had caused markets with high pork consumption like China, to dry up temporarily. This led to many butchers being laid off, with many of those opting to return to their home countries. When butchers were once again needed, bureaucracy resulted in long wait times and heavy paperwork, and butchers were not able to arrive in the UK as hoped.
In Queensland, Australia, avocado farmers are having to dump perfectly fine and ripe avocados, despite the highest food price inflation in years, to avoid losing profits. Reasonings for discarding the fruit are demand plummeting during pandemic lockdowns, floods in Queensland and New South Wales resulting in disruption in the market and overproduction in response to avocado trends.
Whilst the solution may seem to be hiking prices up, farmers say that won’t change the situation. The cost of packing and moving the fruit outweighs “reasonable” price increases, and as such, just isn’t worth it to farmers.
Supply chain planning and solutions
Whilst no one can foretell the future, there are ways to create further resilience and agility in supply chains. Working with an integrated end-to-end logistics partner that has full overview of the global market means they can guide and share knowledge on developments in other fields, and help open routes to markets that previously weren’t accessible.
Technology can ensure that produce that is transported in reefer containers is ripened to fit the market it arrives to, such as in the case of bananas being sent to new markets, where costs can be higher and profits can be found.
Often, solutions may not be where we expect them, and innovation is needed for problem solving. Having end-to-end visibility is important, allowing you to build and accommodate possible issues early on, so you can react quicker, making decision based on data versus time.
An integrated logistics partner can connect unexpected partners, bring about innovation and act as a sparring partner in ever-changing landscapes, with business growth a possibility as companies are forced to rethink and reassess their methods and habits.
What does your next step look like?