July 5, 2022 | Business insights
In times of uncertainty, fact-driven, long-term planning is imperative for business owners. Understanding what experts are forecasting about the 2022 fresh produce growing season could increase profits for those in agribusiness.
Every economic sector has felt the sting of the ongoing supply chain crisis, and has been forced to adapt accordingly. However, American produce farmers have incredibly narrow windows to work with, and often can't just wait for the materials they need to eventually arrive. Furthermore, the perishable nature of their goods drives a need for empty shipping containers—which themselves have become a commodity in high-demand. Thus, the produce shortage facing American consumers also stems from the ongoing wider shipping and supply chain crisis.
In a joint statement from North America's produce industry, major producers called for urgent government action to intervene in ongoing shipping problems plaguing business. Produce agriculture was no exception to the challenges wrought by the Covid-19 pandemic. Rising shipping and energy costs have caused trickle-down effects that threaten the long-term success of the fresh produce sector.
While the Biden administration has alleviated some pressure, many experts believe these issues will persist well into 2022—possibly spilling into 2023. How can established agribusinesses within the sector plan for the coming years? What do experts have to say about the current and future produce shortage?
What Does This Mean for 2022?
Many of the talking points addressed in the joint statement stemmed from issues persistent through 2021. However, North American produce farmers worry that many of those issues will carry over into this year, further straining the industry and exacerbating the shortage.
However, delays in shipping time-sensitive products aren't their only concern. The statement also points to delays in getting equipment and building materials crucial to the 2022 growing seasons. One such issue last year was pallet shortages caused by increased lumber prices. Produce farmers rely heavily on such pallets to move their products. One producer, Pallet Enterprise predicts this year will entail, “tight supplies” and “...A situation where pallets remain in demand. Used pallet prices remain elevated unless the U.S. economy falls sharply. Labor shortages continue to drive up new and recycled pallet prices.”
While getting product off ships is one challenge, bringing it to the consumer presents another. According to the American Trucking Association, the U.S. has a shortage of 80,000 truck drivers, a problem that tops the list of industry-wide issues. This scarcity has contributed greatly to the produce shortage, as many drivers opt to take on less time-sensitive loads.
Greg Ferrara, president and CEO of the National Grocers Association, believes that “Inadequate labor availability has become the single greatest challenge to the entire food supply chain.” Produce companies have struggled to fill frontline warehouse jobs, as the supply of trained personnel isn't readily available. For 2022, many companies have turned to increased benefits and wages while focusing on bolstering facility culture, working conditions, and safety, in order to find workers.
Expert Predictions for the Global Supply Chain in 2022—Will Things Improve?
While many imagine fully-loaded 40-foot containers idling off the coast when they consider the shipping backup, they forget about the stacks of empty containers waiting to get back across the ocean. Both of these situations play a major role in the produce shortage, as well as shortages in other sectors. Many empty containers are waiting to go where they're needed, but there aren't enough vessels moving them. The reason why boils down to economics: shipping companies make more money transporting full containers west than they do bringing empty containers back east. Normalizing the flow of empty containers back to exporting countries is imperative to righting the ship.
Industry executives and analysts believe the crisis may persist through 2022, thus drawing out the correlating produce shortage.
Meanwhile, some of the largest shipping companies worldwide, like Hapag-Lloyd and CMA CGM, are increasing their supply of containers and contracting new vessels. According to United Nations trade data, China, the world-leading manufacturer of shipping containers, added 300,000 more containers to a global fleet of 180 million. All of which, will hopefully have a positive impact on the joint statement’s warning where, “long delays at port can result in loss of product, sales and ultimately food waste” and “significant delays in receiving equipment, building materials and other inputs also serve to threaten upcoming growing seasons.”
Tom Lange Co. Vice President of Sales Jeff Moore believes the driver and truck shortage will also continue to be a major challenge. "We really don't see any relief on this through at least 2022 and, likely, well into 2023," he notes.
The Great Resignation might also be to blame for the shortage of truck drivers. Many young people are less attracted to trucking as a career choice. Thus, the industry has depended more on immigrants to fill the void. However, Covid-19 created complex barriers for experienced truckers to enter the country. Those barriers also hindered the training of resident immigrants to get proper licensing. Pandemic restrictions made it difficult for driving schools to operate in the US and overseas in countries like India, where many new drivers originate.
All together, labor seems to be the biggest concern for many heading into 2022. According to Moore, "Maintaining service levels and fully staffing their operations remains the biggest challenge."
Planning Ahead for Success
In times of uncertainty, fact-driven, long-term planning is imperative for business owners. In the face of the current produce shortage, understanding what experts are forecasting about the 2022 fresh produce growing season could increase profits for those in agribusiness.
Many industry experts believe early planning is the best way to prepare for the 2022 growing season. Produce farmers should stay in close contact with their retailers and dealers to understand what chemicals and equipment are currently available, and what's in short supply.
Don’t Be Caught Short This Season—Plan Your Finances Today
The produce shortage plays a significant role in the future of American produce farmers. While the current administration is moving to alleviate some of the pressure, experts believe most businesses should continue expecting delays.
Now, more than ever, a local financial partner such as Bank of Blue Valley, a division of HTLF Bank, understands the challenges, risks, and opportunities the fresh produce agribusiness industry is facing. In this evolving market, it’s critical to recognize the value of flexibility in financing, and offer customized solutions. With their knowledge and deep industry expertise, you’ll be set up for success when the shipping and supply chain issues begin to dwindle.