War’s impact on food supply chains: Overview
- Euromonitor found 81% of professionals’ companies affected by conflict
- Ukraine, Iran and Sudan conflicts have disrupted supplies
- Food businesses expect higher costs, reduced ranges and delays ahead
- Middle East instability and Black Sea disruption increase volatility significantly
- Companies are stockpiling, nearshoring and improving supply chain visibility measures
Armed conflict is one of the biggest pressures on food supply chains. Wars in Ukraine, Iran and Sudan have led to a myriad of supply chain shocks, impacting exports and pushing up prices.
According to a report from Euromonitor International, 81% of professionals said that war or geopolitical conflict had affected their company in the past 12 months.
How is war really affecting the food industry?
War and food production
Geopolitical conflict has become one of the main drivers of disruption across global food supply chains, according to Emily Field, food sector lead at the organisation British Standards Institution (BSI).
According to BSI, 37% of food businesses reported being affected by geopolitical events in the last year.
“The impacts are far-reaching because modern food supply chains depend on globally interconnected networks for agricultural commodities, fertilisers, ingredients, packaging and transportation,” says Field. “Conflict can disrupt key shipping routes, restrict exports, increase energy, freight and ingredient costs, and delay access to critical agricultural inputs.”
Businesses are responding. More than a third of businesses are planning to increase prices to offset production costs in the coming months, according to BSI data, while 28% expect to reduce product ranges.
Meanwhile, 24% are already pausing new orders, with a further 30% expecting to do so within the year.
How conflicts are exerting pressure
Since Russia invaded Ukraine in 2022, the conflict has put strain on global grain, fertiliser and sunflower oil supplies, Field explains. Both belligerents are among the world’s most important exporters of maize, wheat and agricultural inputs. Disruptions to shipping routes in the Black Sea continue to affect global food markets.
More recently, the war in Iran, particularly the closure of the Strait of Hormuz, has severely restricted global energy and fertiliser supplies.
Conflict in the broader Middle East has increased volatility within food and energy markets, Field explains.
Meanwhile, individual ingredients are being affected by conflicts: acacia gum in Sudan, for example, is being held up on transport routes by armed groups, and exports of saffron in Iran are limited by instability.
Geopolitical conflicts simply add to many other pressures faced by food companies, says Field. What we are seeing now is “the cumulative effect of multiple geopolitical tensions occurring alongside climate-related disruption. Organisations are operating in a ‘new normal’ characterised by geopolitical vulnerabilities, climate disruption and uncertainty”.
How can food mitigate these risks?
However, there are ways in which food companies can respond to these risks.
BSI surveyed business leaders involved in the supply chain, finding that about 80% were already stockpiling or building inventory buffers. A similar proportion were either already nearshoring or considering doing so, aiming to reduce exposure to geopolitical instability by moving suppliers closer to home. Around three in four are planning to alter transport arrangements in order to reduce dependence on vulnerable routes.
The vast majority said that they were investing in supply chain visibility, in order to identify vulnerabilities beyond tier-one suppliers. Some, although a lower proportion, said that they planned to diversify suppliers.
“Whatever the specific action being taken, it’s clear that scenario planning, stronger governance, better data sharing and improved visibility are essential to future resilience,” says Field.
Overall, the impact of global conflict on food is vast. Companies are already aiming to protect their supply chains from such shocks, but there is always more that can be done.
