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The supply chain snarls that happened because of the COVID-19 pandemic have shown companies that sometimes the lowest-cost option is too risky, said Scali. Lots of companies have now mapped their supply chains, turning to multiple sources for inputs or identifying backups.
But these kinds of changes can’t mitigate every potential disruption, said Scali, and shortages and price volatility are likely to get worse.
Extreme weather doesn’t just affect the commodities themselves, it can also disrupt their transportation.
Fires in Western Canada that shut down rail lines are the most recent example, Scali said.
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“Yes, you can put stuff on trucks, but there’s never enough truck capacity in the country to make up for rail. So things will be delayed and it’ll get more expensive,” he said.
If it’s a one-time disruption, the company usually tries to absorb it, he said. But longer-term disruptions or changes usually mean prices will have to go up.
Canadians may notice the effects of extreme weather events on their food in two ways: when prices go up, and when items are suddenly no longer available.
In November 2022, lettuce prices spiked amid a shortage of iceberg and romaine, attributed to a virus in a major lettuce-growing area in California. The following spring, the valley was hit by severe rain and storms, causing flooding.
Earlier this year, spiking cocoa futures highlighted the effects of high temperatures, weather conditions and disease in West Africa, where crop yields were damaged.
Orange juice prices saw a similar spike this spring, as flooding and drought damaged harvests in Brazil, a year after Spain and Florida both suffered lower orange production amid drought and Hurricane Ian, respectively.
Strawberries are also at risk. According to the University of Waterloo, the berries are set to become more rare and costly as temperatures rise. It noted Canada is a major importer of strawberries from California.
This year, many of the food categories that saw volatility in recent years have stabilized, Michelle Wasylyshen with the Retail Council of Canada said in an email. However, current extreme heat in Western Canada and the U.S. could affect some prices in the fall and winter, she said.
Geopolitical conflicts add to the mix, she said.
“The ongoing conflict in Ukraine has made us more dependent on Canadian grain, so when that is impacted by extreme weather, it has more of an impact than before,” Wasylyshen said.
Source: cbc
