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Food producers grapple with disrupted supply chains

B.C. companies employing different strategies depending on sector
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UBC food and agriculture professor James Vercammen doubts that significant short- or long-term food inflation is likely

When recent flooding disrupted transportation corridors connecting Metro Vancouver with the rest of Canada, some panicked residents bought excess food.

Shelves at some grocers started to empty following supply disruptions, but on the whole they remained stocked.

Industry observers say those mostly stocked shelves stand as evidence for how the region’s food-supply chain can withstand temporary shocks.

Short-term price hikes on products have also not materialized because large grocers are not nimble enough for such increases on short notice and are more likely to want to let shelves go bare than to be seen to be gouging, said James Vercammen, a professor at the University of British Columbia’s (UBC) faculty of land and food systems and at its Sauder School of Business.

The B.C. government’s state of emergency is another barrier to near-term price hikes because it allows the province to ban sudden steep price hikes.

Vercammen told BIV that significant longer-term inflation is unlikely, based on his research of past trends.

“Why pull the alarm bell?” he asked. “There’s no real evidence of long-term price inflation, and when I look back over the years of various disruptions, we seem to always come through it better than expected.”

Canadian food inflation in October reached 3.9% – 0.8 percentage points lower than the 4.7% overall inflation rate, which was the highest in 18 years, he noted.

Industry insiders connected with supply chains for fruits and vegetables, eggs, dairy, poultry and beef say B.C. transportation corridor disruptions will cause minor delays at most to supply.

B.C. Agriculture Minister Lana Popham estimated in late November that 57 blueberry farms were hit by floods that also destroyed 420 acres of unharvested vegetables.

Oppenheimer Group CEO John Anderson said some of the flooded blueberry bushes may survive and that it will take time to determine the extent of long-term flood damage to B.C.’s agriculture sector.

His Coquitlam-based company is one of the world’s largest produce wholesalers. It generates more than $1 billion in annual revenue and has 15 offices in North America, three in South America and one in Africa.

One recent obstacle for Anderson was how to get some products to the B.C. Interior and to the rest of Canada from the Port of Vancouver.

He got U.S. government officials to agree to allow him to send bonded trucks with Chinese mandarin oranges through that country and up to Alberta for redistribution.

“Those oranges are not allowed in the U.S.,” he said.

“There’s a quarantine against them because there is a big citrus industry down in California. So we had to seal the trucks and have a bond in place and make sure that the U.S. government was comfortable with how that was going.”

Anderson told BIV global supply-chain glitches and the high price and scarcity of shipping containers are more likely to cause food disruptions in B.C. than are temporary highway closures.

Any local vegetable production shortfall can be compensated with food grown elsewhere, he said.

Shipping produce from the U.S. to B.C. is relatively simple. Getting products from Asia, or Central and South America, could be more challenging because Anderson said freight rates have soared, shipping containers are scarce and labour shortages are rife.

Anderson recently tried to acquire 350 shipping containers but could secure only 200. Freight rates for those containers are about US$17,000 – or more than five times what they were last year, he added.

Supply managed products

Advocates for quota-based, supply-managed food chains say it is in times of flooding and impassable highways that this kind of food-production system shines.

“Nobody is in competition with anybody else,” said BC Egg director of communications Amanda Brittain.

“Everybody wants to help fellow farmers. So that is one way that supply management is great in a situation like this.”

Thousands of egg-laying hens died in the Fraser Valley flooding, prompting less production for B.C. grocers. Brittain said affected farmers’ production quotas can be transferred to other farmers, who can apply to BC Egg to produce more eggs than they were previously allowed. 

Brittain, who is also a spokeswoman for the BC Poultry Association, said it can take a while to adjust chicken quotas, because poultry is grown on an eight-week cycle, and the association’s board plans six months in advance on how to divide the quota. 

That board decides how many extra chickens flood-affected farmers can raise in future eight-week cycles. If floods cause a shortage in the market, B.C. retailers can receive chicken from other provinces, she said. 

The dairy situation is different. 

BC Dairy Association vice-chair Sarah Sache told BIV that farmers are allowed to transfer 10% of their milk-production quota to other farmers for a fee.

“The farms that are in the flooded area could right now swap out some of their quota, but I don’t think that’s really being done. They’re too busy saving animals and doing other things.”

Sache added that the BC Milk Marketing Board can also temporarily transfer milk quotas to willing farmers.

Milk production was dealt a serious blow when highways were deemed impassable and farmers could not deliver their milk to processing facilities, which are concentrated in the Lower Mainland. 

A lot of milk was destroyed, and it is up to the BC Milk Marketing Board to compensate the farmers financially, Sache said.

When essential highway traffic resumed, processors were able to pick up about 90% of available milk from farmers, although Sache said distribution could bog down again if landslides and flooding block highways.

UBC faculty of land and food systems professor Richard Barichello called the province’s food supply chain “remarkably resilient” for a range of foods.

He told BIV that if there is a milk shortage, it should be relatively easy for processing plants to pivot and divert milk intended for yogurt, cheese and ice cream to store shelves as fresh milk for drinking.

He estimated that two-thirds of B.C.’s milk production is normally turned into other dairy products.

“We could bring cheese in from Ontario or Quebec,” he said. “A lot of our cheese comes from there anyway.”

Beef shortages likely temporary

Beef production, which is not supply managed, is largely centred in Alberta, BC Cattlemen’s Association general manager Kevin Boon told BIV.

“There’s definitely been some disruptions. I don’t think that anybody can deny that,” he said. “Some of the disruptions have been panic buying and hoarding, which has multiplied the [effect.]”

Airlines, such as Air Canada and WestJet, have increased cargo capacity on passenger planes and transported beef into Metro Vancouver, Boon said. 

Most beef continues to be transported on trucks deemed an essential service and able to use Highway 3 and Highway 7. 

If that is not possible, it is not difficult to divert meat through the U.S. and back up to Vancouver, he added. 

“That takes longer, Boon said, suggesting that this could mean moderate price increases for consumers. “It could also be that some product comes up from U.S. plants.

“The supply chain will get meat to Metro Vancouver. Consumers may not get the same amount of selection or from the same sources, but it will be the same quality of product.” 

gkorstrom@biv.com

twitter.com/GlenKorstrom

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