Food crisis: how to build resilient supply chains in Asia

Dexter Huerto Jr of engineering firm Danfoss tells the Eco-Business Podcast how food supply chains have been affected by a pandemic and conflict, and how they can be fixed.

The conflict in Ukraine and supply chain disruptions have triggered a global food crisis that has been exacerbated by climate change.

According to the World Bank, the war has altered global patterns of trade, production and consumption in ways that could keep prices at historically high levels until the end of 2024.

High food prices are leaving millions hungry and pushing many more into extreme poverty, threatening to cancel out hard-won gains in development.

Meanwhile, prolonged droughts in Europe and Africa, and heavy flooding in the United States, South Korea and Malaysia have affected global food production hubs, prompting calls to produce more food locally, curb food waste and increase efforts to mitigate climate change.

Dexter Huerto Jr, Danfoss

Dexter Huerto Jr. Image: Danfoss

Joining the Eco-Business Podcast to talk about the food crisis and solutions to address it, is Dexter Huerto Jr, sales development manager, Asia Pacific, for engineering firm Danfoss. Huerto leads the company’s industrial refrigeration business for the region.

Tune in as we talk about:

  • The three ‘C’s — Covid, crisis and climate
  • Have we learned anything from the 2008 food crisis?
  • How is climate change affecting food supply chains?
  • Solutions to the food crisis
  • How well prepared is Asia for future food shocks? 

The full transcript:

This is the Eco Business Podcast. I’m Robin Hicks.

This year’s food crisis triggered by the Ukraine conflict and exacerbated by climate change has hit Asia hard.

What gaps has the crisis exposed in the region’s food supply chains and can they be filled?

Over the past five months since Russian tanks rolled over the Ukrainian border, the prices of cereals dairy, meat, sugar and oils have skyrocketed and supply chains come under serious strain.

Indonesia banned palm oil exports. Malaysia curb chicken exports. A heatwave led to India curbing wheat exports.

Harvests in Africa, Australia and Europe have been hit by droughts and floods.

Almost everywhere, shortages and rising prices have hit the pockets of the middle classes and left millions unable to afford food.

Though disastrous, the crisis has been a wake up call [for us] to find solutions to food security, with growing calls to strengthen local agriculture, reduce food waste and increase efforts to fight climate change.

Joining the Eco-Business podcast to talk about the food crisis and its possible solutions is Dexter Huerto, Jr, sales development manager Asia Pacific for engineering firm Danfoss. He leads Danfoss’ industrial refrigeration business for Asia Pacific and India.

Welcome to the podcast, Dexter.

Dexter Huerto [1.23]

Hey, Robin, it’s nice talking to you again. I think it’s been a few years since we last spoke [on a podcast titled, How  the can cold chain secure the future of food?]

Robin Hicks [1.32]

Indeed, we talked about a similar but different topic. How things have changed in those few years since we last spoke. So now we’re in the middle of a food crisis, which has hit Asia hard. The first question I wanted to ask you is: what are the sorts of challenges that you’ve noticed play out in Asian food supply chains in recent months?

Dexter Huerto [1.56]

I would like to answer that as a consumer. I visit the supermarket a few times a week. The first thing I would notice would be that things are a bit more expensive, whether it’s staple foods or even processed foods. Prices have been going up. 

Secondly, there are some things I can’t find there anymore — a classic case in Singapore would be poultry. 

And thirdly, the refrigerated and the frozen food aisles are taking more space.

These observations are tangible outcomes of current market conditions and the challenges that we are facing, whether it’s macroeconomics, politics, or climate. These are the post-pandemic realities that we’re facing.

I came across an article in which an economist was able to succinctly summarise what we’re facing now in terms of the food crisis. She defined the situation in terms of the “three Cs”.

The first is Covid. The pandemic shock put in context how important food production is, and how vulnerable we are.

The second one would be crisis. The [Ukraine] war and political turmoil has greatly affected international trade. We now have no trade restrictions with some with countries, embargoes with countries and this has a lot of impact when it comes to global food production.

And the last one would be climate. And while I think the first two points — Covid and crisis — are short or medium term, climate is something that will be more unpredictable.

Robin Hicks [4.10]

As we talk, we are in the middle of a heatwave in Singapore, which has been linked to climate change and is being felt across the region, from India all the way through to Southeast Asia. Given the ‘three Cs’ that you’ve mentioned — what do they tell us about the health and sustainability of food supply chains in the region currently, and what have we learnt anything from the 2008 food crisis?

Dexter Huerto [4.43]

These challenges are not just local challenges, right? They are being felt globally, just in different magnitudes. More developed countries are facing these challenges in a different way. Developing countries are experiencing something else, something worse, I would say.

But if you look at food production at an industrial scale, it is highly and globally interconnected, which means that if we have a shortage of raw material, for instance wheat, this doesn’t just mean we’re getting less bread, it has a ripple effect across the entire food production chain.

Wheat, corn, soybeans are all used for animal feedstock. We need it to produce pork, beef, poultry and fish. Without sufficient animal feed there will be a reduction in production. And based on supply and demand, this will cascade and eventually have an effect on food prices.

Circling back to your question about what we’ve learned from 2008, I think these challenges tell us that food security and independence are difficult to achieve in the short term. These are not issues that you can solve in a one-year, two-year or three-year time horizon.

It needs to be the focus of government policy, and it needs to be done now. And I think regional cooperation is also key.

I was reading an article about how rice was one of the main struggles during the 2008 crisis food crisis. One of the big challenges was for countries not to panic. Because if countries panic because of a food shortage, there’s tends to be an effect in terms of increasing prices and not acting rationally.

So we have learned a lot from the 2008 crisis. The changes in research and development in the overall landscape of how agriculture is grown have put us in a better position.

Robin Hicks [7.14]

What you mentioned about the interconnectedness of the food crisis is interesting. Ukraine was a huge supplier of wheat to the rest of the world, so what happened in Ukraine certainly has had far reaching consequences in Asia. Now, I want to ask you again about climate change, Dexter. How are the effects of climate change exacerbating strains on food supply in Asia?

Dexter Huerto [7.42]

There are two sides to a coin.

If you look at food production, on one side of the coin we have had unprecedented droughts and heatwaves. In countries like Thailand, there’s been a huge impact on crop yield because of longer droughts. In the Mekong Delta, rising sea levels have affected the salinity of the water, which has affected crop growth. Typhoons, which have also been linked to climate change, also put food production at risk.

On the other side of the same coin… there was an interesting study that was published by the Food and Agriculture Organization of the United Nations that points out that global food production contributes to more than a third of total greenhouse gas emissions from the land use of agriculture, rearing livestock, and refrigeration with the cold chain.

Changing dietary preferences mean that a lot of consumers want to buy, for example, fancy strawberries from Japan, so the food has to travel longer distances, and you need refrigeration and that adds to the climate footprint of food. So on that side of the coin, food production is one of the major contributors to climate change.

So while the instinctive solution to solve food security is to produce more, we have to realise that we have an inefficient food production system, and [growing more] will just add to the burden of climate change.

In Asia, we lose a lot of the food we produce at the first stage of production, at the farm level. This is known as food loss. Producing food, processing food and preserving food requires refrigeration — and if we do it efficiently, this helps reduce energy inputs, thereby reducing carbon emissions. 

Robin Hicks [10.29]

Yes, the double-edged sword of climate change that you mentioned there — that agriculture contributes massively to greenhouse gas emissions, I think it’s something like 29 per cent of greenhouse gas emissions. But also, agriculture is affected by climate change. So yields are under threat from heatwaves. Now let’s talk about solutions. So what are the sorts of solutions that governments and corporations can use to build more resilience into their food supply chains?

Dexter Huerto [11.02]

If countries really want to focus on a resilient food supply chain, it’s very important that we look at the entire perspective, from farm to fork, from the crop to the consumers. We should not just focus on one part of the food chain.

The Asia Pacific is a really agricultural region. Different countries have different agricultural potential and challenges. Singapore has a 30 by 30 ambition. For those who haven’t heard about 30 by 30, it’s [a plan] to produce 30 per cent of Singapore’s nutritional needs by 2030.

That’s eight years from now. So it’s a very strong initiative, a huge endeavor for Singapore. We have very scarce land, and not a lot of agricultural resources. But what this country has is the ability, the financial capacity to have advanced agricultural practices, that in some cases are the first of their kind in the region.

For example, there are large industrial vertical farming or recirculating aquaculture systems, with the general purpose of reducing dependence on imports. 

Thailand is also a very good example. A huge portion of their GDP is tied into agriculture. Thailand is really focusing on small-to-medium sized businesses, food Innovation, alternative proteins, and better fertilisers. And they have the right food standards and the right marketing platforms.

All these contribute to the overall competitiveness of Thailand and their resiliency in terms of food supply. These are two things that stand out that can be copied and should be exchanged with neighbouring countries.

Robin Hicks [13.27]

The part of the business that you work at Danfoss is in refrigeration and the cold chain, which is hugely important to keep food fresh and prevent food waste. But that itself doesn’t come without challenges, for example, the carbon footprint of refrigeration. As you mentioned, the focus at Danfoss at the moment is on ensuring there is efficiency of that cold chain, that the carbon footprint is minimised…

Dexter Huerto [13.57]

In our industry, we are starting to see some some changes in terms of customer preference. So how do we build our products? We ultimately partner with companies to make sure that they think about how to comply with specific regulations, Also, how can we be of an advantage to them? Because at the end of the day, they’re also competing with other customers, for example, in the cold chain. So our products are integral to the success of our customers within the refrigeration industry. 

Robin Hicks [14.33]

Now, looking to the future. What are the food supply chain strains that we’ve seen in Asia recently telling us about the region’s shock preparedness?

Dexter Huerto [13.57]

I wouldn’t say that the region is not prepared at all. I think there are programmes by countries, as I mentioned, which were developed before the pandemic.

I guess the question could be: was the region not prepared for a shock of this magnitude? I think that’s the main challenge that we have right now. Covid, crisis, climate are all happening at the same time.

But there’s always a silver lining in all of the challenges that we faced. One of the positive changes coming out of it is that there was massive and fast adoption of digitalisation, for example e-commerce. And I’m not talking about buying electronics online, I’m really talking about food and perishables. 

Because of this boom, a lot of the infrastructure had to follow. We have a lot more now online stores that are doing same-day deliveries for food. We now have more logistics hubs and cold rooms. We built a lot of the infrastructure that would have taken us longer. 

Now, energy costs are increasing drastically. And this is also being felt by food manufacturers. We are also seeing customers choosing energy-efficient solutions to reduce their energy consumption and their operating expenses.

So I think these are the two silver linings that we got from Covid.

I want to be an optimist. I think food security in Asia will improve. Because the infrastructure is now getting built.

I think in the past two or three years, there were huge, but difficult step stepping stones that made us learn why the cold chain is important, and why having an efficient system is important.

Also, the private sector is now really more involved in capacity building, and more involved because they’re benefiting from government initiatives, such as the ones that we have in Singapore.

Robin Hicks [19.06]

That’s really great to hear — that the shocks that we’re experiencing now will prepare us better for the shocks to come, especially as climate change gets more severe. That’s a good place to leave it. Dexter Huerto, thank you so much for joining the Eco-Business podcast.

Dexter Huerto [19.24]

Thanks, Robin. It’s always a pleasure to talk with you.

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