Jeremy's Blog 15th October 2021: Supply Chains and Adaptation
This article by Jeremy Moody first appeared in the CAAV e-Briefing of 14th October 2021
It is a complex world. Today’s disrupted supply chain issues overlay the adjustments of the post-Brexit process, in turn overlaying the long run pressures of climate change.
The global disruption of the pandemic is now rippling down the seasons like water sloshing when carrying a bowl. The waves of the pandemic were followed by strong recoveries in demand but supply chains frustrated as Chinese ports closed for Covid outbreaks. Materials prices increased. Containers and ships are in the wrong places leading to an “everything shortage”. With Chinese ports now working, the bulge in supply has now reached and congested Felixstowe. That should all work through but, without further shocks, perhaps not until early 2022. Might we then have a glut of stocks reducing prices affecting production, as the water sloshes again?
Energy prices may last longer. A reviving China was increasing gas imports and still faced power cuts. It has now told its energy industries to deliver “at all costs” with consequent price increases as gas goes east – and more coal now burnt in China, the EU and here.
Fertiliser prices had been increasing, partly with strong produce prices, and farmers held some demand back. Fertiliser plants closed with sharply increased gas prices; production, now restored, seems a by-product of CO2. Nitrogen’s price, rather than availability, may be the issue. Reactions to price will drive management choices for the New Year. Some may pay the price, more may economise, others will seek alternatives from substitutes to legumes and environmental cropping but many answers seem more medium term than immediate as we look to the 2022 harvest.
The Environment Agency has this week focused on the longer term. Climate change mitigation is only mitigation. The Agency’s report on necessary adaptation warns of the regulation and change prompted by increasing environmental and pollution risks. We start with 4 million people and £200bn of assets at risk of flooding when heaver winter rains add to risk. Increased competition for water and low summer rivers with higher temperatures bring strain and pollution risk.
Albeit with transitional support and aid for productivity, farming is moving to operate unsupported in the marketplace for what it can sell at a profit. The public money released by this is deployed to support environmental improvement with a growing focus on climate change and biodiversity. With the need for farming economics to focus on business, the interaction of that with food supply chains will be an interesting question.