SEEING THE WOOD FROM THE TREES - JUST WHERE ARE WE IN OCTOBER 2023 ?

The UK and international agri food supply has, over the last 3 years, been subject to a series of shocks that has tested its resilience to the limit: these are the impact of Brexit (more applicable to the UK than anywhere else, of course, and a factor of our own choosing, but still, not without knock on impacts in other countries too, especially our closest EU neighbours, in the likes of Ireland, Holland and France), the impact of COVID? -?? and then the effects of the tragic war in the Ukraine.

All of these factors combined have contributed to varying degrees to the cost of living crises we are also experiencing. Again, this is not confined by any means to the UK market.

A Triple Whammy? - and more

Added to the three factors listed above, the UK and international farming and food supply chain has been subject to increasingly variable weather patterns, with extremes of both drought and floods seeming to happen more often than in the past and with more severe outcomes. This has led to food companies looking to find both technical and commercial solutions to developing more sustainable supply chains to mitigate against the impact of climate change and build more resilient supply chains per se.

These factors have also combined to produce almost unprecedented levels of food inflation. One has to have a long memory to go back to the early 1970s to have seen anything like this in the past.? This has affected all areas of the UK food market. In the last 12 months, the price of products such as cucumbers have gone up by over 50%, potatoes by 30% and bananas by 20%.? Bread has increased by 15%, baked beans by 40%, cheese by 40% and pasta by 20%.?

Consumer reaction

Consumer incomes have had little opportunity to keep pace with these increases. These? are not just being seen in the UK, but around the world.?? A similar situation is seen in other EU markets, but the UK seems to be particularly hard hit by soaring prices. It is even more so the case in regions of the world, such as Sub Saharan Africa and Asia. This has become a global issue in the last 18 months, but one to which there are no simple solutions. Those that do exist are at the moment more of a local nature, when the root causes are more macro and global.

The UK consumer reaction to this has been to shop more in discount stores, buy less food, less often and in general “trade down” and look for increased value for money and price bargains. This has impacted many consumers, but as is always the case, it has impacted on those on low and/or fixed incomes the most.

What does it all mean ?

Stepping back from the day to day activity we all get involved with, it seems clear as to what is happening:

• the combination of global, regional and local challenges in UK and international farming and food, all makes for a high degree of uncertainty in the agri food supply chain. In some cases, we could be feeling the effects of these for up to 5 - 10 years from now. These are not short term issues we are facing or dealing with. ?As a result, the “new normal” we are experiencing is probably here to stay for some time
• the ongoing volatility and cost pressures we are experiencing will inevitably create change in how the food and agribusiness sectors operate. We can no longer take our own food security and sustainability in the UK for granted. Many food producers around the world now see markets such as China, the US, the Gulf and India as highly attractive when compared to the UK. We might not always be their first market of choice
• supply chain margins are still thin. The ability to withstand further shocks as we have experienced in the last few years (Brexit, COVID, the situation in the Ukraine etc.), is open to some real question
• farmers need better/fairer prices going forward. Consumers will, ultimately, have to be prepared to pay more for food, but with the relatively poor appreciation of how food is produced and what it costs to do this by many, this is a major challenge. It also impacts on food processors and retailers too
• the changes needed to produce this situation in the supply chain are often quite idealistic, are not easy to bring about and maybe even involve unpopular/difficult decisions. They may even require an element of generational change, but in the mid to long term, both market regulation and consumer behaviours need to alter
• the whole discussion on sustainability has become more sophisticated over the last 5 years. There is still a need for better data on this and time is still required to see the impact of investments made in this “space”.? The whole subject of the use of better and more data by farmers and food companies will become increasingly important over the next few years
• the UK and international supply chain is still very commercial in its nature, but is increasingly being required to consider issues around sustainability. We have already probably reached something of a tipping point on this with the supply chain shocks we have seen in the last few years
• change in the supply chain cannot be achieved by taking a “silo” based approach. It needs the full supply chain to work together on this, in order to build a more resilient future. It may well be led just as much by strong industry players, as by government policy and objectives. To achieve this, represents a massive challenge still and will need to see input suppliers, farmers and food companies working closely with a range of other industry based stakeholder groups
• the UK agri food sector needs to able to “plan for better” in its supply chains. While there is no one single approach to achieve this, it is clear that it will need to be prepared to make some tough decisions on this going forward, as sustainability is such a strong cross cutting theme across multiple business areas, not just farming

?Big & complex issues - seeing the wood from the trees

This is all quite an agenda for farmers and food companies and the rest of the supply chain to consider. It needs people/organisations to set out clear priorities and develop a genuine future plan covering maybe as far forward as 5 - 10 years.

To do this, it seems clear we need to develop a better management and technical skills, taking into the new requirements of understanding the role of technology in all its forms and how we farm, ?produce food and in what style going forward. Technical farming skills are one thing, but fully understanding the huge issue of sustainability, market and supply chain trends as well as customer and consumer behaviour - ?and how this impacts on the finances of a farming/food business is another thing altogether.?

?These are complex and interrelated issues.? Trying to find the right way forward, wherever you are in the supply chain? -? be it input supplier, farmer, food company or operating near or at the point of sale can be hard to do.

They impact on the full supply chain and so a supply chain solution is required. There is no point solving problems in one part of the supply chain if others are left unaddressed. ?

This is where a business such as Promar, with its well developed understanding of UK and international supply chains and its excellent network of clients and other contacts across the supply chain can maybe help going forward. ?

Feel free to get in touch for a discussion about how we see the world and how we might be able to help.

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John is a Divisional Director with Promar International the agri food consulting arm of Genus ABS . He has worked in over 60 countries around the world in the dairy, beef, pork, horticultural and added value food sectors.? He is a long standing member of the Council of the Institute of Agricultural Management and a Visiting Fellow at the University of Reading’s School of Agriculture & Food.