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US food supply chains struggle to get back into shape

Although the food system in the US is largely a domestic affair, it’s not completely separate from events happening in the rest of the world. International trade accounts for 6% of all consumed calories in North America, compared to 20% in Europe.

For US manufacturers, elevated price levels of raw materials, and non-food inputs such as packaging, energy and fuel are the result of strong domestic demand plus developments abroad. Larger backlogs in ports have caused additional difficulties for food producers over the past two years as they affected import flows of foreign ingredients and commodities and export flows of US products.

Longer lead times also made it harder to get the equipment, parts and packaging materials needed to keep production lines running smoothly. While the US is not particularly dependent on agricultural commodities from the Black Sea region, the knock-on effect of the war on global prices did trickle down to buyers of grains and vegetable oils in the US.

A series of frictions has put US food supply chains off balance:

Port backlogs and commodity prices have come down, but issues can spark up again

Over the summer of 2022, the impact of increased backlogs in ports and higher commodity prices has been easing. Backlogs in ports on the West Coast have been significantly reduced and prices for commodities such as grains and vegetable oils have retreated.

Still, disruptions in ports could resurface as was recently shown by a week of trucker protests in the port of Oakland. And when it comes to seaborne trade there’s less flexibility in the US than in Europe, given only a few ports are able to receive and handle large carriers. On agricultural commodity markets, volatility indicators have eased since 1Q but could easily spark up again due to geopolitical or extreme weather events.

Congestion in Los Angeles-Long Beach significantly reduced as some pressure shifted to the East Coast

Inflation is running at 8.5% and the Federal Reserve is focused on raising interest rates in order to dampen economic activity and constrain price pressures. The dollar is also strengthening, adding a further headwind to US growth at a time when China’s economy is struggling and Europe’s energy crisis is leading it to a recession.


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