Food shortages put supply chain at risk

12 December 2008

12 December 2008 | Jake Kanter

The shrinking availability of raw materials will have a "profound impact" on supply chain risk in 2009, according to a study by consultancy Control Risks.

Scarcity of supply has already caused food riots and political tension in some countries, with attendant risks to the supply chain. The study warned that "a hungry mob is an angry mob" and protests could disrupt sourcing from those regions, resulting in export restrictions.

Supplies of food, minerals and energy have been tested to the limit in this year's volatile commodity markets. Efforts to control remaining resources could result in more social unrest and political instability next year.

Average food prices are three times higher "than in recent years", said the report, due to adverse weather conditions, financial speculation and the increasing cost of fuel and shipping. In addition, greater demand for alternative fuel supplies such as bio-fuel has had a "stupendous" effect on prices.

The research said buyers could invest in the regions they purchase from to secure supplies. This might involve providing infrastructure for vendors or reliable energy and water supplies, and businesses could co-operate to provide these facilities.

Adam Strangfeld, research director at Control Risks, said: "In 2009, risk will become still more significant as business is forced to negotiate an increasingly difficult and uncertain landscape."

Its 2009 Risk Map highlighted sourcing from countries such as Russia and Mexico will pose a medium level risk, while China was considered low risk. Copies of the map can be obtained from enquiries@control-risks.com.

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