The crises currently being faced worldwide have been well documented in the national and international press. It’s been impossible to miss the profound challenges faced by households and businesses alike while they navigate:
A cost-of-living crisis with rising inflation.
Hikes in food prices due to a supply shortage.
Economic recovery from the Covid-19 global pandemic.
New trade rules on imports and exports since Brexit.
The devastating Russia-Ukraine war that is affecting shipment routes and supply.
Everyone on every corner of the planet is having to adjust and re-evaluate how they live and spend their money, and this is no different for the shipping industry as companies are doing less export while they face a changing supply chain model.
The impact the current supply chain is having on food supply
In February this year, supermarkets were forced to ration certain fruits and vegetables due to a national shortage. Morrisons and Asda were among a number of stores to put limitations on produce – including tomatoes, peppers, cucumbers and lettuce – with customers allowed to buy no more than three of each at one time.
These shortages were blamed on bad weather in southern Europe and North Africa limiting supply, however there was speculation from former Sainsbury’s CEO Justin King, who blamed rising energy prices on UK greenhouses being too expensive to run.
Mr King said “These are products that we do produce, or at least have produced, all year round in the UK.” He added that in Thanet, Kent there were “the largest greenhouses in Europe, which used to be full of cucumbers, peppers, and tomatoes. Sainsbury’s used to have year-round British tomatoes. Without the support on energy, it’s not been economically viable to produce under glass this winter in the UK.”
Trade is still feeling the effects of Brexit
New trading rules on food and drink products that were introduced during Brexit have also been blamed for the recent food shortages.
The chair of the campaign group Save British Food, Liz Webster, argued that “The reason we have food shortages in Britain – and they don’t have food shortages in Spain or anywhere else in the EU – is because of Brexit.”
She explained, that since leaving the single market, Brexit has ‘messed-up’ UK trade and made it very difficult. She said that Brexit has “Impacted the labour supply because it ended the freedom of movement. It also removed the cap and food subsidies.”
This departure from the single market and the subsequent loss of freedoms to trade means the customs border between the UK and the EU has been reintroduced. This has resulted in much more red tape on imports and exports, meaning trade has seen a significant reduction.
In 2018 the European Union was the UK’s top partner for trade in goods, comprising 54% of imports and 49% of exports (according to the ONS). Eurostat figures put imports to the EU from the UK as falling from €169bn (£144bn) in 2020 to €146bn in 2021 – a drop of 13.6%.
The Russian invasion of Ukraine
The war in Ukraine, and the subsequent sanctions on Russia because of it, have had an unprecedented effect on the supply chain, accounting for shortages in the food sector.
Shortage of produce. Ukraine and Russia are two of the world’s leading suppliers of agri-food commodities, including oils and grains – together they supply over 30% of the world’s trade in wheat – leading to a direct drop in food supply and raw ingredients.
Rising costs of fuel. The sanctions put on Russian trade since their invasion of Ukraine, and the resulting effects on the supply and demand of gas, have forced up energy prices leaving food producers with soaring bills to run their factories and production lines.
Fertiliser shortages. Russia is a leading supplier of fertiliser. This has created shortfalls in agricultural food production globally.
Unsafe and reconfigured trade routes. Safety concerns on the ground and in the air around Russia and Ukraine mean that routes are having to be rerouted and diverted, while for shipping there are fewer Black Sea trade routes available.
Shortages in CO2 are having a knock-on effect for food and drink production
As the ongoing war is driving up gas and oil prices, making it harder for factories to operate with the enormous increase in costs, factories producing CO2 are being hit hard. The largest UK supplier of CO2 threatened to close production last year, stating the spiralling energy costs were making its CO2 production ‘uneconomical’.
The food and drink industry heavily relies on CO2 for production and distribution. As energy prices go up and CO2 production goes down, the sector is feeling the pinch because this product is an essential part of their production line.
Food-grade CO2 is used to:
Carbonate water, soft drinks, and alcoholic drinks
Dispense drinks and beers in pubs
Promote the growth of plants – such as cucumbers – in greenhouses
Humanely slaughter pigs and chickens
Package meats, baby foods, fresh foods, and baked products (CO2 extends shelf life by preventing bacteria)
Keep food fresh in transport (CO2 is used in the form of dry ice and snow)
What does the future hold?
With international transport still recovering from the increase in freight rates that were seen during the Covid-19 pandemic and with the increase in fuel costs and inflation rates, it seems that costs are set to remain high.
In the recent Spring Budget, there were hints that international traders may have a reason to be positive when plans were revealed to reduce their paperwork. In plans set out by the Chancellor, international traders will also be given longer to submit customs forms under streamlined rules.
We await further information on the technicalities but hope it will be a step in the right direction support businesses looking to expand overseas.
How we can help
Wallis Shipping is an expert in freight within the food and drink sector. We have a wealth of knowledge on international trade rules and regulations and offer a tailor-made service to help you navigate the challenges being faced in the current global marketplace. Our hand-held logistics service will guide you from A to B with continuous support.
To find out how Wallis Shipping can help you diversify your exports and imports and support you with your international trade, contact firstname.lastname@example.org