Distribution hurdles a bigger challenge, says EIU-Cargill Report

The Economic Intelligence Unit (EIU) has come out with a white paper which underlines distribution challenges in farm to fork value chain contributing to global hunger and impacting pockets especially in Asia. The report was commissioned by global commodities giant Cargill. Following are the major takeaways of the report:

On a global scale, 1 billion people around the world suffer from hunger. Global food statistics tell us there is enough food produced in a year to feed each person 2,700 calories and 75 grams of protein a day. However, as per the latest EIU report, right now, food isn’t efficiently reaching those who need it.

Asia currently accounts for 19% of the total global food and agriculture exports, and 31% of the total food and agriculture imports. It’s also a major producer of key agriculture crops: the region produces 90% of the world’s rice, while Malaysia and Indonesia produce 85% of the world’s palm oil. China is the world’s largest importer of soybean (importing 60% of the world’s soybean for feed, driven by a surge in meat consumption), and India is the world’s largest consumer and importer of pulses.

This is where the importance of the food supply chain comes in – ensuring where food needs to go plays a key factor towards ensuring food security for a booming population. Within the food supply chain, there are six megatrends that affect its viability including urbanisation, ageing rural populations, resource scarcity, supply chain integration, modern retail, and food loss and food waste.

 

Supply Chain Integration – Supply chain integration already faces challenges for smallholders. Geopolitical shifts will make regional integration difficult at the cost of global integration.

  1. Being able to integrate various stages of the supply chain means an increase in ability to trace and track food quality.
  2. Smallholders can work with large firms, but will struggle to meet quality standards demanded by consumers and large agri-business firms.
  3. Modern retail (including vertical integration) means supermarkets want high quality food in large volumes. We could end up with shorter, more regional supply chains.

 

Modern Retail – Modern & online retail to become prevalent with focus on food safety /sustainability.

  1. The average Asian consumer has more money and more evolved food preferences, so supermarkets have to meet changing requirements and deliver safe, high quality food products at competitive prices.
  2. E-commerce could re-design the food chain by lengthening them physically but shortening the number of players within the chain.
  3. National Bureau of Statistics reports that Chinese online sales grew by one-third in 2015, reaching a value of RMB3.88trillion.
  4. 37% of all Asian consumers already shop online and another 53% are willing to do so.

 

Food Loss and Food Waste – Food loss will transition to food waste, but an awareness could lead to data-driven solutions.

  1. Food loss generally occurs when there is inadequate technology, weak infrastructure support, technical skills deficiency or knowledge gaps, and also poor logistical support.
  2. Investment in infrastructure and economic development is likely to lead to a slow but gradual shift from food loss to food waste.
  3. Food loss tends to happen during harvest time and post-harvest, but high-income Asian countries are more likely to show patterns of food loss (Japan, South Korea and China) during consumption stage.
  4. About 670m tonnes of food are lost or wasted every year in high-income countries, and about 630m tonnes are lost or wasted in low- and middle-income countries.
  5. Tackling food loss requires investment in infrastructure such as warehouses, improved transport links, and the extension of R&D work to farmers.
  6. Food loss and food waste are yet to be systemic issues, but an increased awareness has been building and research encouraged in the area and efforts to find technological solutions.

 

Asia will be home to 4.9bn people by 2030, including nearly half of the world’s urban population. While factors in producing food isn’t the biggest problem, it is the difficulty in distribution i.e. food getting where it’s supposed to be, that needs urgent attention.  Non-tariff measures are high, particularly in agriculture sector and trading produce has become more challenging. The unique nature of agricultural products amplifies delays. Coupled with poor infrastructure, these come together to make it difficult to transport and store food – so driving costs up and increasing chances of food loss and food waste.

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