The following video is brought to you courtesy of the Epic Economist YouTube Channel. Click the video below to watch it now.
Global supply chains are nearing a breaking point yet again as a series of natural disasters, in addition to a new wave of virus outbreaks in Asia, and cyberattacks at key South African ports, have been threatening the flow of consumer goods, raw materials, and several other exports — a situation that is alarming food retailers, economists, and shipping specialists; and making many of them believe that the world might suffer from prolonged product shortages and higher inflation for much longer than previously expected.
Catastrophic floods in Germany and China have further disrupted global supply lines that had been struggling to recover from the impact of the first wave of virus outbreaks. Now, global economic activity is at risk of slowing down significantly, and this is threatening to derail the economic rebound from the global recession that started last year, as trillions of dollars of goods were either destroyed or are still halted at ports.
According to Chinese officials, the disastrous flood is restricting the transportation of coal from mining regions at a time power plants desperately need fuel to meet peak summer demand. A similar situation is also happening in Germany, where road transportation of goods has been stalled due to the unexpected disaster. On top of all that, due to “a confluence of crises”, the number of U.S. companies scrambling to free goods trapped in Asia and U.S. ports has simply skyrocketed, according to Nick Klein, the VP of logistics company OEC Group. However, port congestion isn’t likely to be solved until 2022.
Meanwhile, most manufacturing industries are still impaired by shortages of products and parts. Automakers are among the hardest hit by the latest transportation crunch. For instance, this week, Toyota Motor Corp. announced that due to shortages of key parts the company is being forced to stop production at several plans in Thailand and Japan. Moreover, it seems that the woes faced by automakers are about to get worse, as a mysterious cyberattack has disrupted container operations at the South African port of Cape Town, and also at Durban, the busiest shipping terminal in sub-Saharan Africa. Both ports are largely responsible for the delivery of key auto parts across several countries. Local authorities are still investigating the origin of the attack, and they said it has created a major backlog at ports that could take months to be cleared.
Although consumer demand is at all-time highs, the supply chain crisis is severely affecting the economies of both the United States and China, which combined account for over 40 percent of global economic output. U.S. data released last Friday exposed that the third and fourth quarter economic outlook is rather bleak. Despite a booming second quarter, fueled by high consumer demand and vaccination efforts, for the second half of the year, experts predict a collapse of growth and rising prices for all manner of goods and raw materials.
For U.S. restaurants, the economic recovery isn’t looking like a recovery at all. All across the industry, restaurant owners have been struggling with labor shortages, supply chain issues, inflation, and the rising cost of imported goods. And U.S. consumers are likely to see even more acute price hikes at both restaurants and grocery stores. According to the U.S. Food’s Farmer’s Report, several pantry staples are hitting record-high prices. Meat prices are also nearing all-time highs, with fresh jumbo wings, jumbo tenders, and boneless thigh meat prices spiking, and frozen chicken wing inventory at the lowest levels since 2012.
The relentless rise in meat prices is being attributed to the surging cost to feed farm animals, whose diets consist of corn and soybeans, two commodities that have seen price increases of roughly 50 percent this year. As those higher costs are being passed on to consumers and inflationary pressures continue to rise, extreme weather is definitely not helping the equation. Millions of acres of crops are being slammed all across the globe due to natural disasters, threatening to bring further food inflation at a time costs are already at the highest in almost a decade and hunger is on the rise.
The agricultural industry has become extremely globalized and this leaves food supply chains in a very precarious situation. When one extreme weather event occurs in one place it is bound to trigger a ripple effect everywhere. At this point, some of the poorest nations are already facing devastating hunger crises. In many cases, the lack of food sparks social and political tensions. In a nation with at least 24 million people facing some level of food insecurity, it’s only a matter of time until we see widespread unrest ravaging America. The rapid pace of food price growth is an alarming sign of the troubles and the dark times that are coming for us.