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Blog | 6 min read
May 17, 2023
May 17, 2023

Seven challenges to creating a sustainable agricultural supply chain in 2023.

The growing global demand for food products means that it’s never been more important for growers and markets to build resilient and reliable supply chains.  

But to achieve an efficient and sustainable global supply chain, challenges such as climate change, food security, economic and geopolitical uncertainties, inflation, and logistics must be addressed. 

1. Climate change and biodiversity loss

Climate change is one of the greatest challenges for world agriculture production. Rising temperatures and the growing frequency of extreme weather events such as droughts, floods and storms directly affect the global production chain.

This year alone, storms in California have damaged crops throughout the region, with strawberry production particularly impacted by the rains.

In South America, fires in Chile damaged more than 53,000 hectares of potential agricultural production land, while floods and heavy rains in Peru impacted more than 33,000 hectares of produce.

It should also be noted that the accelerated loss of biodiversity and soil degradation threaten long-term food production capacity. It is estimated that soil loss and land degradation cause global economic losses of up to $40 billion annually.

That’s why adopting sustainable agricultural practices that resist climate change is necessary. This includes conservation agriculture, agroforestry, precision agriculture and organic production, focusing on environmental and social performance standards

These practices must be accompanied by sustainable management of natural resources, which means optimizing the use of water, soil and biodiversity to reduce environmental impact and maintain the health of ecosystems.

2. Food security at risk due to growing demand

Due to population growth and urbanization, the need for food is increasing significantly, putting global food security at risk. By 2050, the world population is expected to reach 9.7 billion people, and the demand for food is expected to increase by 50%. Therefore, according to experts, agricultural production will have to increase by 20-30% to meet demand.

On the other hand, food supplies are also threatened by poor distribution. According to the FAO, 811 million people suffered from hunger worldwide in 2021. This highlights the need to create more efficient and direct supply chains that avoid food waste and ensure greater global food security.

3. The need to adopt innovative technologies

Through the use of advanced technologies such as artificial intelligence, data analysis, real-time data collection and automation of processes, the agricultural industry is undergoing a radical transformation that can improve efficiency, sustainability, productivity and reduce costs. 

The new technologies also offer the opportunity to increase digitization, creating a more efficient supply chain.

In addition, companies that can provide innovative technological solutions will be attractive to customers and investors. According to a report by Research and Markets, the global agricultural technology market is expected to grow at a compound annual growth rate (CAGR) of 14.9% between 2021 and 2028.

4. Demand for healthier food

The demand for healthier, safer and more sustainable food has increased the production of organic, natural and artificial additive-free products. In addition, plant-based diets are growing in popularity, which can boost the fruit and vegetable industry.

These preferences push supply chains to meet demand while becoming more sustainable and environmentally friendly. This means implementing changes to how agricultural products are processed, transported and marketed.

Besides, a more efficient chain will lower waste, overexploitation of resources and pollution. 

5. Geopolitical uncertainties

The global supply chain is highly exposed to economic and geopolitical uncertainties. Conflicts, trade tensions and trade policies are just some factors that can affect global food stability and security.

Countries that depend on food imports can be severely affected by restrictive trade policies, transportation delays, and conflicts, creating domestic and foreign investment insecurity.

For example, the Russia-Ukraine conflict has reverberated throughout the global agriculture supply chain. The imposition of mutual economic sanctions between the two countries has reduced the trade of products and inputs. 

These sanctions affect countries such as Ecuador, which saw its banana export volumes to Russia and Ukraine fall significantly since February 2022. Given the importance of banana exports to the national economy,  Ecuador is struggling to find new buyers to make up for their losses in Eastern Europe. 

6. Inflación e incremento de los costos operativos

Inflation impacts the entire supply chain. Rising prices of agricultural inputs, such as fertilizers and pesticides. Higher transportation and energy bills also directly affect farmers’ production costs, leading to higher consumer prices.

For example, during the first half of 2022, the price of fertilizers increased by 30%, on top of the 80% increase recorded in 2021. These massive price hikes on essential materials raise real concerns about the sustainability of agriculture.

Transportation rates have also become much more expensive for both land and sea. In the United States, shipping prices have risen by 50% since the end of 2020.

7. Problemas logísticos que generan disrupciones

The fresh produce supply chain faces numerous logistical challenges since the industry’s very nature involves a high level of risk. Companies must be prepared to overcome numerous challenges, from transporting perishable goods to the complexity of taxes and tariffs related to international trade.

Port congestion has also affected shipping and is expected to remain a challenge for at least the rest of the year. Although some shipping lines have restored their full transport capacity, higher energy prices and geopolitical problems may continue to affect the logistics chain.

The global supply crisis has resulted in disruptions and delays, leading to a  fresh produce crisis in the United Kingdom, where several supermarket chains were forced to limit purchasing products such as tomatoes, cucumbers, lettuce and peppers.

To conclude

The agricultural industry faces several challenges that threaten the sustainability of the global supply chain. Climate change and biodiversity loss impact productivity and food security is put at risk by increasing demand, global conflicts and rising prices.

That’s why producers must adopt more sustainable agricultural practices, utilize innovative technologies, optimize the use of resources, produce healthier food and streamline the logistics chain to avoid food waste, thus achieving a more connected supply chain.

Companies such as ProducePay can provide you with the edge to meet these challenges by offering up-to-date information on new techniques, innovative technologies and sustainable practices for agricultural production.

Sources: FAO, FAO, ONU, FAO