Spiking Fuel Prices and Driver Shortages Take a Huge Toll on The Produce Industry
Following a challenging two-year period of supply chain issues, intermittent shutdowns, rising freight rates and shifting consumer preferences, the produce industry now faces new struggles. The Russian invasion of Ukraine might be taking place thousands of miles away from U.S. borders, but its effects are felt all over the world.
Transportation costs are skyrocketing
One of the most alarming consequences of the global political unrest is the dramatic rise in fuel costs. Gas prices were high enough even before the Russian invasion, but they are skyrocketing now. This has a direct impact on the fresh food industry, which has to deal with increased transportation costs as well as other leftover issues from pandemic times, such as the lack of qualified truck drivers.
The rising costs of produce transportation cannot simply be absorbed. They will inevitably be reflected in higher product prices, particularly for crops that are shipped over large distances. They might also indirectly affect product quality, because when it comes to fresh produce, even the smallest disruptions can have major, lasting consequences.
Surging gas prices also affect crop production
The spike in fuel costs does not only impact transportation, but farming too. Most farming equipment, like tractors and tillers, need gas to function, so the rise of fuel costs is making it hard for farm business to stay afloat.
As crop production becomes more costly, farmers are being forced to increase their prices to cover their losses. According to an article published by Pennsylvania State University,
“Higher diesel prices will increase your cost of production slightly. A price of $3/gallon and a fuel usage of 3 gallons per acre costs you $9/acre in diesel costs. Double that to $6/gallon and you are up to $18/acre, a $9 increase. For a farmer with 500 acres of no-till corn and soybeans, that would mean an additional $4,500 in fuel costs to produce the 2022 crop”.
Low driver availability creates additional issues
Finding qualified truck drivers to meet the huge demand for long-distance produce shipping has been a growing challenge for the past couple of years. In the context of the pandemic, trucking shortages started as many drivers were struck with illness, or simply resigned due to safety concerns. Temporary replacements had a hard time getting licenses due to pandemic shutdowns.
Seeing as fewer young people are interested in following a career in trucking, the industry relies heavily on immigrants. However, due to past pandemic restrictions, the influx of trained immigrants has slowed down significantly, resulting in a lack of manpower.
With so many challenges added to the list, industry stability seems to be a moving target. The American produce market will have to adjust to the “new normal” and figure out ways to optimize its production and transportation systems to accommodate the main drawbacks – labor shortages and shipping costs.