Contents of Food Logistics - MAR 2012

Printing News serves the entire Printing Industry with targeted content for the large commercial print segment.

Page 15 of 39

COVER STOR Y
them have access to capital again for their production facilities," he says. In a further illustration of how risk can unleash a ripple effect through- out a global supply chain, Moyle notes: "Of all the commodities in world trade, food becomes the most political. That's because you have farm subsidies in many countries, you have arguments over genetically modified foods, and so on. And, a lot of the revolutions that started last year were started over food shortages. Dictators stay in power when everyone's being fed, but people take to the streets when they get hungry." In an interview with PBS NewsHour last September, Rami Zurayk,
an agronomy professor at the American University of Beirut explained, "I think that the prices of food mobilized people," he said, referring to the political uprising in the Middle East and North Africa. "If you look at Tunisia, for example, you see that the Tunisian uprising
started in the rural area," where many small farmers live and are just look- ing for a means to support themselves and their families, he said. It was a young, college educated, but unemployed Tunisian named Mohamed Bouazizi who was selling fruit and vegetables in the street without a license and that set himself on fire after he was confronted by authorities, which many consider the genesis of the Arab Spring.
Trade policy and non-tariff barriers Trade policy, both in the U.S. and abroad, is another key component of the global food supply chain. The seemingly capricious imposition of non- tariff trade barriers, such as antidumping and countervailing duties, quo- tas, certain regulatory requirements, and sanitary and phytosanitary mea- sures, amount to one more area that's prone to fluctuation when it comes to imports and exports of food and beverages throughout the world. According to Kam Quarles, director for legislative affairs at McDermott
Apple exports account for approximately 27 percent of the annual volume of U.S. fresh apple production and as much as 40 percent of the total crop value.
Painting the big picture In their recent sector report, Food Industry: still solid but price volatility will bear watching, global credit-insurer Coface outlines some of the larger trends that are impacting food supply chains. Naturally, food prices are a reflection of various inputs, starting with raw materials. In June 2010, raw material prices headed higher again, after easing from their previous spike in 2007/2008. Grain, sugar, meat, diary, soybeans, and cocoa are some of the commodities that have experienced significant price hikes, particularly in emerging economies. As for 2012, it's likely that food prices in the U.S. will settle into their
more historic trajectory, which means price increases in the neighborhood of two and a half to three and a half percent, says Kenneth Moyle, senior vice president, Coface North America. However, there are some wild cards in the current mix that could upset
this forecast, he cautions. "Energy prices and natural disasters are the big- gest ones," while grain prices, too, could start to fluctuate sharply due to changes in the tax code. Specifically, tax incentives targeting ethanol in the EU, and biodiesel in the U.S., could alter global grain production—a classic example of the integrated relationship between tax codes, energy prices, and agriculture production. Indeed, Moyle cites another example of the integrated nature of food supply chains, one of which became apparent during the global recession. "A lot of the large seafood producers were financed by Icelandic banks, and when Iceland had their crisis, they had trouble borrowing. Some pro- ducers either had to stall production or cut back, although now most of
16 MARCH 2012 • FOOD LOGISTICS
Will & Emery LLP (and a member of Food Logistics' editorial advisory board), says that while the World Trade Organization (WTO) and various free trade agreements (FTAs) have addressed tariff barriers, "a lot of the future impediments (to global trade) may transition to phytosanitary bar- riers." He remarks, "We spend a great deal of time working on pest and disease issues."
And, while the U.S. "vigorously adheres to international protocols sur-
rounding sanitary and phytosanitary measures," which must be based in sound science, "there is a lot of variation from country to country," says Quarles. "One country's definition of 'sound science,' especially if they have a very active political constituency, may differ widely from the U.S." For the moment, Quarles is keeping a close watch on "a new raft of
rules" that will be released shortly by the U.S. Food and Drug Administra- tion, which promise to affect foreign suppliers seeking access to the U.S. market, as well as the U.S producers themselves. He also is hearing a lot of concern from food clients over the recent announcement by the White House to consolidate several trade agencies under one entity. "For agriculture exporters, in particular, it caused some concern simply because we've got some very good people at the USTR (U.S. Trade Repre- sentative's Office) who know agriculture inside and out. The USTR is also a very nimble agency. Along with their counterparts at the U.S. Depart- ment of Agriculture and the Foreign Agriculture Service, they work very efficiently to deal with trade related issues. Some of them are large scale issues like the implementation of a free trade agreement or the WTO's Doha Round, and some of them are smaller, like a shipper who has 10 containers of agricultural products that have gotten hung up in a port somewhere and needs help getting them released."
Transparency as a competitive weapon It's been said many times that every business threat is an opportunity. When it comes to the proliferation of rules and regulations pertaining to
www.foodlogistics.com
© Photos.com