Podcast: Achieving a stable food supply chain

In this week’s Banking for Food podcast, Gilles Boumeester, Rabobank’s Head of Food & Agri Business Research, about the global food supply chain and what we can do to stabilize it.

Listen to the podcast now (in Dutch), or read on for the English synopsis.

Food is one of humanity’s most basic necessities. Where food security is under pressure, we are liable to see migration flows, uprisings and even war. Meanwhile, industrialization and globalization have greatly complicated the supply chain from farm to fork. What is needed to stabilize the food situation? And what can a bank do? Gilles Boumeester, Rabobank’s Head of Food & Agri Business Research, explains.

A disconnect

“Long ago, people knew exactly where their food came from: from their own forests, fields and herds. These days, most people live in cities and buy processed food in supermarkets. There is a disconnect with the origins of what we eat.

“Today’s food supply chain is long and complex. From the seeds and fertilizer that the farmer buys, to his crop, to the commodity trader, the shipper, the processor, the retailer, and then at last to the consumer. Along the way, food sometimes changes beyond recognition. In the Netherlands, for example, people buy their fish and chicken filleted and plastic-wrapped. They would be horrified at the prospect of bringing home a live animal and having to kill and dress it.

“Consumers have no idea of the work that goes into their food”

- Gilles Boumeester, Rabobank

“Is this a problem? Yes. Everyone in the supply chain must be compensated for the work they do. But the supply chain is far from transparent. Consumers have no insight into the work that goes into their food or how the profit margin is distributed across it. They have no idea whether what they pay meets everyone’s needs.

“But it can have a huge impact. If farmers cannot earn a living off their farm and quit farming, this can destabilize the food supply chain. The general public seems to think farming is a kind of calling rather than a professional activity aimed at making a decent living, an absurd idea!

Fair shares for all.

“Consumers also take for granted that they can eat whatever takes their fancy from day to day, and that the market will be able to deliver it at a decent price. One of the latest trends, for example, is almond milk, which has led to soaring demand for almonds. Farmers respond by planting more almond trees, but these take five years to produce almonds. By that time, the almond milk hype may be long gone.

“Even in a major agricultural production country like the Netherlands, mismatches between supply and demand are common. In the summer months, the supply of seasonal products often outpaces demand. The price of cabbage, for instance, drops to a level where the farmer can’t even recover the cost of harvesting his crop, and simply leaves it in the field. It would help if eating with the seasons came back in fashion as a first step in re-connecting consumers with their food.

“Food multinationals are increasingly being held to account”

- Gilles Boumeester, Rabobank

Create transparency

“But what can we do structurally to repair the imbalances? And ensure that all the actors in the chain act responsibly and receive their fair share of the profit margin? The answer is to make the global food supply chain more transparent, by monitoring it and collecting data.

“If consumers know about unsustainable and unfair practices, they are more likely to want to pay towards improvements. Even more importantly, food multinationals will want to pay. First of all because it’s good business sense. A stable supply chain guarantees a company’s supply of raw materials. But also to preserve their brand image. They have a major responsibility for supply chain stability, and they are increasingly being held to account. Not only by consumers, but also by their shareholders.

“Rabobank plays an enabling role in data-related innovation in the agricultural sector: smart farming, robotization, drones. Through our network, we put multinationals, farmers and retailers in touch with start-ups that can help them collect and leverage essential data. And then we help parties link these data streams. That provides insight into the entire food supply chain, from farm to fork. With that insight, everyone in the chain, from consumers to producers to investors, can take decisions that bring improvements.

“Rabobank can help parties link their data streams”

- Gilles Boumeester, Rabobank

Lowest incomes, hardest hit

“Stabilizing the food supply chain is particularly important for emerging markets. The people hardest hit by shortages and soaring prices are always those with low incomes. While people in developed countries spend only 10% of their income on food, in emerging markets this is 50% to 80%. When food prices spiral upwards, they can no longer afford to feed themselves.

“Food shortages are a far more urgent problem than electricity or gasoline shortages, and are much quicker to impact the political situation. Empty stomachs are often the driving force behind conflicts and migration. In 2011, for example, the surge in wheat prices triggered a wave of global unrest, from the Tortilla Crisis in Mexico to the Arab Spring.

“A more stable and sustainable food supply chain in Africa could help stem the flow of migrants. If your own country offers enough food, water, and growth opportunities, it makes little sense to embark on a high-risk journey. Now, circumstances forces people to flee, and they often have nothing to lose.

Worthwhile

“The food supply chain is the most important supply chain in the world. And Rabobank has a role to play in making it work better. Not just as a provider of finance, but by sharing our knowledge and contacts. We help our clients design modern, data-based solutions that create much-needed transparency. That, to me, is what makes my job at Rabobank worthwhile.”

Curious? Listen to the full podcast now, available via various apps for iPhone and Android, SoundCloud and Stitcher. Rabobank’s Banking for Food podcasts have been nominated for a Dutch Podcast award in the branded category. Vote now: www.podcastawards.nl