Produce processors seek return to semblance of normalcy
Three years after the beginning of the COVID-19 pandemic, production levels are returning to something resembling normal, though supply chain and labor issues persist while demand fluctuates.
Those are the findings of a Produce Processing survey, and the reality an international organization is seeing for its 3,000 members.
“It is not back to normal,” said Ed Treacy, vice president of supply chain and sustainability for the International Fresh Produce Association. “Normal to me is pre-2019 and before. It is less unpredictable than it used to be.
“Part of it is people are getting used to the unpredictability. It was a nightmare in the beginning of 2020.”
Freight rates were down 20% during the third week of February compared to the same time in 2022, and hiring was on the upswing, Treacy said. But Asian ports are still vulnerable to periodic quarantines and shutdowns, stretching lead times for customers from weeks to months, and production costs — from labor to fertilizer — remain high, and are also being driven by inflation.
“Everything costs more,” Treacy said. “Labor is up. Transport is still up, even though it’s down 20%. What hurts them (producers) the most is fertilizer,” a result amplified by the Russian invasion of Ukraine, where much of the world’s fertilizer — including U.S. exports totaling $632.7 million in 2021 — is produced.
Respondents to the Produce Processing survey, conducted from January to February, bore out Treacy’s observations. Seventy-eight percent said their processing facilities were back to pre-COVID production, though the majority has seen costs rise.
Increased pricing for fruit or vegetable processing since the pandemic was reported by 87.5% of respondents, some of whom reported downturns in product sales and orders. Nearly 63% said they are still experiencing supply chain issues, and 56% have added new logistics or shipping methods.
“We always had to deal with weather — a frost or a drought or a flood. We’ve had to deal with markets shutting down and opening up, and that nonweather variability seems to have quelled, at least on the product — selling and growing fruits and vegetables,” Treacy said.
“What is still affecting them is every now and then, a port or an area of China will go on quarantine and lockdown, and what used to be a four-week lead time balloons to a four- or five-month lead time. … We’re still seeing some of that variability. When they cut the deal, everything looks good, and all of a sudden, they get a call and that says, ‘Yeah, your product’s in a port in Shanghai and they just shut down the port for a week because of another COVID breakout.’ Less so, but it’s still happening.”
That was clear among survey respondents to a question about logistics, 56% of whom said they had added new logistics/shipping methods since the pandemic.
On the subject of demand, 62.5% of respondents reported more demand since COVID, while an even 50% reported having more manual labor.
Of those who reported less manual labor, several said they used or had begun to use more automated labor to address shortages, while one responded, “I wish we could afford it.”
That squares with what IFPA members are experiencing, Treacy said.
“We’re seeing more automation and mechanized solutions. If you can’t find people and you can afford a machine, that may replace the need for them,” he said. “The ROI is making more and more sense now. People are really trying to squeeze every last cent out of their investments.”
Companies are also getting more creative in hiring and retention practices when it comes to their human workforces, Treacy said. They’re scouting job fairs and beefing up benefits packages to attract and keep workers.
“Farm labor always had a challenge, and it’s more of a challenge today. Other jobs were stable,” he said. “But right now, everyone’s trying to hire at every position, from warehouse and drivers all the way through white collar. … There’s huge competition for labor out there, especially hourly labor.”
Another change Treacy has seen is increased diversification. Producers are changing their purchasing patterns to adapt to longer lead times and expanding their pool of suppliers.
“What we’re finding is, when they can find it, they’re loading up, if they’ve got the financial wherewithal to do it,” he said. “They may buy two years’ worth of product in one lump sum because they just want to have it. They went through a period where they couldn’t get it, and they suffered. The yield went down, and they weren’t as efficient.”
Slightly more than 17% of survey respondents said their products are not the same as pre-COVID, and a handful said they also began offering different products, including non-produce options. A handful of survey respondents said they also began offering different products, including non-produce. “We had to,” responded one producer, while another reported adding products with longer shelf life.
“What we’re also seeing is people are relying more on or looking for things that will increase the yield,” Treacy said. “Where they were previously satisfied with initial methods and the inputs they used, they’re seeking out now more solutions of how I can get more pounds per acre. The events of the last two years have kind of sparked that. People are focused on or looking for efficiencies in every facet of their business.
“When you’re not making money or not making as much as you used to and your costs are up, you try to look for every opportunity.”
Opportunity for some survey respondents has taken the form of new investment, with 56.25% reporting purchasing new equipment or processing lines since COVID, while 67% said their facility footprint has increased.
That’s indicative of one potential long-term positive emerging from the pandemic — the nimbleness producers had to exhibit to keep going.
“Companies have really tightened up their supply chains and looked for efficiencies,” Treacy said. “In desperate times, you figure out a way to maximize your efficiency.
“I think we’re more efficient today than we were two years ago, or three years ago, just based on what we all went through. We had to be to survive, and those changes you implemented hopefully will stick with you.”