Supply Lines: Freezer burn

Supply Lines

Demand for cold-storage space in Europe has surged after bars, restaurants and sports venues closed, leaving their suppliers hunting for new customers or somewhere to store the unsold food.

Farmers, manufacturers and retailers in the bloc say it's nearly impossible to find commercial fridge and freezer space. The shortage is forcing production cuts, and may mean wasting thousands of tons of produce that suddenly has nowhere else to go.

The squeeze is yet another way that the coronavirus is wreaking havoc on the global food industry. From empty meat shelves in the U.S. and growing levels of hunger in Africa, food-supply chains are being stretched across the world. Experts are already predicting climate-controlled warehousing will be a growth industry as companies try to avoid such imbalances in the future.

In Europe, the effects are widespread:

  • Lineage Logistics, the world's largest temperature-controlled logistics provider, says more than 90% of its cold-storage facilities in the region are already full.
  • In the U.K., there's barely any room left at all, according to Shane Brennan, chief executive of the Cold Chain Federation.
  • Belgian potato processor Agristo is running out of places to stash its French fries. With its own freezers full up and hardly any space available to rent, the company was forced to cut daily output by about 20%.

The supply-chain disruptions saw the European Commission last week lower its projections for trade with the rest of the world even further, with exports of goods and services this year set to drop as much as 15%.

A recovery in demand and return to normal shipping trade flows will be key to resolving the cold-storage crunch, given the bloc's status as a net exporter of many food items, said Matteo Iagatti, a supply-chain specialist at the food and agri-research center with Rabobank.

"Shipping cancellations will continue in June and through the entire second and possibly the third quarter this year," Iagatti said. "This will be a decisive factor that leaves more food stuck in Europe, increasing the system congestion and pressuring food prices further."

-Manisha Jha and Greg Ritchie in London

Charted Territory

Typically, no more than 5% to 10% of China's U.S. soybean imports arrive between May and September, with the vast bulk shipping during the balance of the year, when Brazil's soybean exports slump, writes David Fickling, a Bloomberg Opinion columnist.

Today's Must Reads

  • Next step | The EU will try to convince Boris Johnson to forge a compromise later this month in an attempt to stop the U.K. from leaving the bloc without a trade deal. Fishing is a key sticking point, with the possibility of protest blockades.
  • Tax probes | The Trump administration is starting investigations into digital services taxes considered by several trading partners from the EU to India that could lead to tariffs being imposed on the countries' exports to the U.S.
  • Foxhole protectionism | Just days after lifting export restrictions on medical supplies, the EU is pressing for a global deal to eliminate trade barriers on pharmaceuticals and medical gear.
  • Bridging the gulf | Abu Dhabi Ports will start operating a new shipping company this month that could help the United Arab Emirates avoid disruptions to imports of food and medical supplies amid the pandemic.
  • In this together | Coordination among Asian nations on policies including trade is key to steering the global economy toward recovery from the coronavirus crisis, according to former senior government officials and academics in the region.
  • Shine again | Pandora, which makes more pieces of jewelry than any other company in the world, will stop relying on newly mined gold and silver and instead use only recycled precious metals.

On the Bloomberg Terminal

  • No more | New waves of U.S. tariffs on Chinese exports appear unlikely, but more duties would badly hurt supply chains and manufacturers already hit by the effects of the pandemic, writes Bloomberg Intelligence.
  • Stick to your own | The focus on original food sourced from its own supply chain is Wm Morrison Supermarket's way of building a distinct position in the market while also remaking its sales productivity, says Bloomberg Intelligence.
  • Use the AHOY function to track global commodities trade flows.
  • Click HERE for automated stories about supply chains.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more.



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