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Wednesday, April 20, 2022

Advanced Analytics for Agricultural Supply Chain Shocks

 Good Piece by McKinsey, My domain, call me if you want to discuss.

How advanced analytics can address agricultural supply chain shocks

April 14, 2022 | Article  (Excerpt) 

Building automated supply chain planning systems to address global shocks could lead to significant cost savings for agricultural organizations

Between July and October 2021, torrential rains drenched northern parts of China, flooding major agricultural provinces such as Hebei, Henan, and Shandong (Exhibit 1). The floods affected millions of acres of cropland,1 causing billions of dollars in food losses and greatly increasing prices for consumers.

Agricultural disruption caused by extreme weather is not unique to China: research has found that several regions critical to global agricultural production are susceptible to the effects of climate extremes. For example, more than 40 percent of the variation in crop yields in recent decades was caused by extremes in precipitation and temperature, affecting production of Asian corn and rice, European wheat, and North American corn, wheat, and soy.2

In September 2021, parts of China experienced a more than sixfold increase in rainfall compared with the past 20 years–serving as just one example of extreme weather around the world.

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The COVID-19 pandemic has also intensified supply chain shocks. Canadian farmers, for instance, lost an estimated $2.9 billion in earnings due to labor shortages, and 47 percent of agricultural employers were unable to hire all the workers they needed.3 European farmers and agribusinesses suffered economic losses in the first wave of the pandemic due to the closure of trade channels (such as food services), labor shortages, delays in food and raw-material deliveries, and slowdowns in food production caused by virus outbreaks at processing plants.4

Food processing plants in the United States have also been hard-hit. One research group counted 100,000 cases and 466 deaths from COVID-19 among farm and food processing workers in every state between May 2020 and September 2021. The researchers identified almost 2,000 outbreaks at meat processing plants, fruit and vegetable farms, snack food facilities, and seafood trawlers.5

In addition, extreme weather and the pandemic have caused fertilizer prices to increase, adding to global inflationary pressures. Average 2021 nominal prices of diammonium phosphate and urea, for instance, were about 96 percent higher than their 2019 averages.6 In turn, increasing fertilizer prices have contributed to global food insecurity, as global food prices in 2021 jumped to their highest level in a decade.7 The ongoing conflict in Ukraine is further compounding the situation, with the Food and Agriculture Organization of the United Nations stating that the global supply gap from potential shortfalls in agricultural exports from Russia and Ukraine could raise international food and feed prices by more than 20 percent  ... '

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