Evolution of the produce industry: A decade of challenges and achievements
Over the past decade, the produce industry has undergone a deep evolution, shaped by weather unpredictability, economic turbulence, and shifting consumer expectations. Challenges like labor shortages, higher input costs, and price volatility have tested the industry’s resilience and adaptability. At the same time, these obstacles have paved the way for innovation, collaboration, and the need for proactive approaches like Predictable Commerce.
Weather and climate change
The influence of extreme weather events and long-term climate change has grown significantly, placing unprecedented pressure on global supply chains. Between 2013 and 2023, the frequency of climate-related disasters—including droughts, floods, storms and wildfires—increased by 20%, disrupting planting schedules and causing substantial crop losses.
The El Niño phenomenon is a stark example, causing severe impact in multiple locations worldwide due to strong raining and temperature rise, being the 2015-16 event the most damaging so far this century. In 2023, this weather event impacted several producing regions in Peru, dropping by 41% blueberry exports and a staggering 67% in mango exports, demonstrating the impact of weather disruptions on global supply chains.
Climate change is also altering rainfall patterns and intensifying water scarcity, leading to more prolonged droughts and stronger storms. These fluctuations impact yields and quality as volatile temperatures, sunlight, and carbon dioxide levels can alter the size, taste, and nutritional value of produce. This makes it increasingly difficult for growers to meet the exacting standards of consumers and retailers. Poor-quality produce not only increases waste but also reduces profitability.
The migration of pests and diseases to regions previously unaffected by them adds even more complexity. Rising temperatures have enabled pests to thrive in new areas, exposing crops to unfamiliar threats. At the same time, agriculture’s own environmental footprint must be addressed, requiring the industry to find a way to balance resilience against adverse weather conditions with sustainability.
As extreme weather disrupts planting cycles and reduces yields, the industry has also evolved towards innovative techniques and technologies gaining popularity like hydroponics, vertical farming, precision farming, and AI-driven tools, offering solutions that address climate-related unpredictability, while mitigating environmental impact.
Economic changes impacting financial stability
The past decade has been marked by significant economic turbulence with currency fluctuations, inflation, and rising operational costs. Volatility in exchange rates has introduced unpredictability to international trade. Devalued currency has increased the cost of importing fertilizers, seeds, and equipment, while inflation has driven up expenses for producers.
The surge in production costs has hit growers hard. In 2021, global political conflicts drove prices of fertilizer up nearly 80%, followed by another 30% increase in 2022. While some stabilization occurred in 2023, the lingering financial strain has left many agribusinesses that are still struggling to recover financial stability and profit margins.
COVID-19 pandemic further exacerbated economic instability, disrupting supply chain and amplifying price volatility. Between 2020 and 2022, food prices grew rapidly with ProducePay’s 2024 Industry Volatility Report revealing an annualized pricing volatility of 70% for produce at retail point, where fruits and vegetables experienced volatility rates of 59% and 105%, respectively.
This uncertainty has made it increasingly difficult for growers to maintain working capital and liquidity, particularly in regions with limited access to financing. For example, while farm banks in the U.S. extended $110 billion in loans in 2023, agricultural lending in Mexico amounted to just $7.44 billion. This disparity highlights the need for accessible financing options to help growers invest in their operations and navigate volatile market conditions.
Farm labor on decline
Labor availability has become a critical issue for the produce industry in recent years, as fewer workers are entering agricultural roles. With farms worldwide grappling with shortages, growers face delayed harvests, unharvested crops, and financial losses. ProducePay’s 2024 Industry Survey highlighted that 59% of stakeholders consider labor availability and costs worse compared to 2023.
In the U.S., the agricultural sector faces a 21% workforce shortage, according to the International Fresh Produce Association (IFPA). This labor gap persists despite wage increases, with agricultural wages growing at a compound annual growth rate (CAGR) of 4.55% from 2013 to 2023. Policies promoting temporary immigration of farm workers have helped, as immigrants comprise 69% of the U.S. farm workforce, yet these measures have not been enough to fully address the shortage.
Efforts to attract younger generations to agriculture have fallen short, as perceptions of demanding work and limited career growth deter interest. This labor crisis requires the industry to develop innovative solutions to sustain agricultural productivity and governments to boost support for the sector.
Logistics increasingly complex
Logistics remain one of the most critical and disrupted components of the produce supply chain. Over the past decade, truck driver shortages have intensified, with the industry facing a shortage of roughly 60,000 drivers by the end of 2023. This shortage worsened during the COVID-19 pandemic, when many drivers exited the workforce, leading to bottlenecks.
Transportation costs have also surged, driven by fuel price spikes. For instance, in 2022, a 60% increase in U.S. gasoline prices led to a 10% jump in retail food prices over the previous year, directly impacting end-consumer costs and reducing grower profitability.
Despite these challenges, technology has offered solutions. Innovations in cold chain logistics, advanced tracking systems, and automated warehouses have improved efficiency, reduced delays and enhanced traceability—crucial for meeting modern consumer demands for sustainability and quality. However, the high upfront costs of these advancements often come with steep upfront costs, making them less accessible for small and medium-sized growers. Balancing affordability, efficiency, and sustainability remains an ongoing challenge for the logistics sector.
Discover how technology is strengthening the produce supply chain
ProducePay: 10 years driving the produce industry
Today, the produce industry is more connected and innovative than ever, but it continues to face challenges posed by weather volatility, labor shortages, logistical complexities, and fluctuating market dynamics. Over the past decade, a paradigm shift among stakeholders now prioritized resilience, long-term planning, and sustainability. However, achieving true stability in such a volatile environment requires collaboration, transparency, and innovation.
Since its foundation in 2014, ProducePay has been at the forefront of the fresh produce industry transformation by addressing its most pressing challenges. At the heart of our mission is Predictable Commerce, a structured approach to reduce supply chain volatility through proactive and collaborative systems for growing, selling, and buying fresh produce.
Our innovative financing solutions bridge liquidity gaps at critical stages, while our Predictable Commerce Programs connect sustainable growers with the largest retailers to stabilize pricing, reduce waste, and ensure a consistent 52-week supply.
The COVID-19 pandemic underscored the importance of predictability in the produce supply chain. During this period, ProducePay empowered growers with access to working capital when traditional banks were inaccessible. And our tools, like Visibility, have allowed agribusinesses to navigate market disruptions providing real-time insights and end-to-end transparency.
Looking ahead, ProducePay remains dedicated to enhancing predictability and resilience across the supply chain. By leveraging data, technology, and strategic capital we aim to continue driving the fresh produce industry for businesses to thrive.
Sources: IMF, LiveFarmer, La Jornada, C.L. Moretti et al., World Bank, Altline, Energy, Economics, USDA-ERS, OECD.