Supply Chain Challenges Affecting Hospo
- October 19, 2021
- Food News
What hospitality venues can expect as they reopen again
Almost every industry globally is affected by supply chain challenges right now. With the COVID-19 pandemic the biggest disrupter to the production and distribution of goods around the world.
And the food industry, being one of the largest and most complex supply chains in the world, is no exception.
Here’s an overview of what’s actually going on. And what you as a Chef or Venue Owner can expect to see now and into 2022.
GLOBAL SHIPPING DELAYS
Ports around the world are backed up with ships ‘gridlocked’ waiting to unload their cargo.
Currently the Oceania vessel schedule is at an all-time low of 14% ‘on time’ performance – meaning 86% of ships in the region are delayed. Singapore has cargo backlogs of up to 4 weeks currently (as shown above).
- Expect to see some out of stocks, particularly on imported dry goods.
- Distributors are swapping to domestic brands over international ones where they can.
- Turnaround times for new products are likely to be longer than normal. Particularly for specialty, low volume items. Placing orders in advance for any new products gives more time for Distributors to get stock in for you.
FREIGHT COSTS GOING UP
Global sea freight costs remain at an all time high. The World Container Index (WCI) is reporting 292% higher freight prices than the same time last year.
Importers are having to pay a lot more for shipping. And what they can’t absorb themselves is getting passed down the supply chain.
- Prices are rising across the board, both on imported lines due to freight costs and also local products as limited supply pushes market prices up.
- Product pricing has increased compared to 3-4 months ago when you were last trading. Any price increases have been analysed by our FoodieBuy team to validate against the current market.
- It’s important to review your current menu costings and make any necessary changes before you resume trading. We’re here to help with reviewing any new menus and recipes before you reopen.
PACKAGING & RAW MATERIAL SHORTAGES
Global demand for paper and board products on top of the increased cost of transport is having an accumulative impact on the cost of raw materials.
There is a global shortage of steel/sheeting used for packaging due to COVID-19, which has pushed prices up for these materials.
- Contributing to the price increases across general packaging and packaged food items like tinned products.
- Expect to pay a bit more for takeaway food packaging. Ask us about sourcing the best packaging option at the right price.
KEY STAPLES AFFECTED
Oil and Rice are seeing significant impacts outside of these global supply challenges due to climate conditions affecting production. Here’s a deeper look at what’s ahead in these two markets.
Canada’s canola production is lower than normal, and is expected to fall further. Thanks to hotter than normal conditions, with rainfall well below long-term averages.
This has resulted in price increases globally for rapeseed oil and canola oil due to tightened supply. Global rapeseed oil values in the EU have increased approximately $120 AUD/Mt in the past month.
World ending stocks of Canola/Rape oil are forecast to fall by 0.6M MT to 2.8MT. This fall in stock levels will result in continued price pressure.
Vegetable oil is expected to continue its unprecedented volatility into 2022. Despite a strong Australian crop, vegetable oil prices continue to surge unabated as they are an international commodity. Higher demand from China has further increased, and whilst there is no risk to supply says Cookers Oil, cost will continue to be impacted.
Rice prices are increasing in line with ongoing increased demand which has been driven by COVID-19 over the past 18 months, together with logistic challenges for imported rice and reduction of stock levels for Australian Rice.
More specifically, local drought conditions over the last 2yrs has resulted in the second and third smallest Australian rice crops on record. Depleting the volume of Australian rice available.
While the 2021 Australian rice crop has been significantly larger in comparison, it is well below the historical average.
With a low generation of broken rice this season, growers are preserving a large amount of high milling wholegrain rice (normally destined for premium offshore markets) for use in the flour mill.
The use of wholegrain instead of broken rice comes at considerable additional cost and has ultimately necessitated a review of rice flour pricing for this crop year.