We’re not off the hook in supply crisis: sushi shortages are just a symptom of a broader problem

The threat of food shortages and rationing will persist throughout 2022 and food companies will have to spend big on warehousing, says a prominent agribusiness adviser.

David Williams, above, of Kidder Williams says supply shortages will persist until the Covid-19 isolation rules are changed. Picture: Arsineh Houspian

Sunday may be the traditional day of rest – but not for David Williams. As he slaps an oversized salmon on his kitchen bench, he recalls a lunch he had at Melbourne Japanese restaurant Kenzan last week.

The chefs had prepared a sushi and sashimi platter at the restaurant a stone’s throw from Wil­liams’ office at the Paris end of Collins Street.

As he set his eyes on the meal, something was missing. “Sorry, we have no tuna,” the waiter says.

Their supplier is not delivering from Sydney, citing Covid-19 restrictions. Kenzan is not alone. Covid-19 isolation rules have sparked chaos along the food supply chain, from grocery shortages at Coles and Woolworths to cafes and restaurants being forced to close because they can’t access ingredients or staff.

While the big supermarket chains expect these shortages to ease in coming weeks, Williams – who runs boutique corporate advisory Kidder Williams, with clients spanning the who’s who of agribusiness – expects the crisis to be longer-lasting.

“The problem with tuna is the same throughout food and agriculture. The full supply chain is stuffed and partial solutions don’t fix it. A fix can only be from a reassessment of the rules of isolation,” Williams says.

“Until we have a workforce harvesting, processing, warehousing and delivering, 2022 will be characterised by food shortages and rationing.

“If I am only harvesting half my lettuces, who will be the lucky customer: Coles, McDonalds, PFD?”

After his lunch at Kenzan, Williams flew to Brisbane for a series of meetings. His clients all share the same concern: being forced to close factories because of staff and product shortages.

“If they do that (close factories), then you’re out of stock real quick. That’s the single biggest problem people have got. And that’s a joint problem: having a workforce and isolation policy, and ‘just in time’ policy, that’s all working against you.

“Just in time is the philosophy that drives efficiency in food manufacturing that has exacerbated these problems. This is because there is little surplus stock in the factory, warehouse, stores and our own pantries.

“There is no fat in the system any more. Coles and Woolies don’t have any fat because they don’t take any more than they ­really need for their warehouses.

“And companies themselves are only producing what Coles and Woolies want. So if you have to close your factory for seven days, you are going to be out of stock,” he says.

To this end, Williams expects there will be one winner in the food crisis: the banks. With ‘‘just in time’’ in tatters, Williams says companies would have to spend big if they were to thrive in the year ahead.

“If just in time is out the door, food companies, retailers and wholesalers need to rethink warehousing and how much storage they need. To do this, food companies will have to borrow a lot more for working capital.

“Everyone will be thinking at the moment that ‘we have got to have double or triple shifts; we have got to have a buffer so that if my factory is shut for a week, I’ve got enough stock to get me through’.

“So that means increasing processing, increasing overtime, increasing working capital, because you have to pay for all of this stuff you’re putting in a warehouse.

“The banks will be the winners out of this.”

But even if a food manufacturer can ramp up supply, it runs into other problems, ranging from accessing packaging to freight shortages – such is the complexity of Australia’s supply chain.

Williams agrees with a call from food distributors to dump the pandemic rule that dictates that someone must isolate if they’ve been in contact with an infected person in a household environment for more than four hours. The ability for Australians to access food depends on such a change.

“We have to get to the stage where Covid-19 is really not much more than a bad cold; if you’re sick, stay at home, if you’re not sick – get to work, regardless, because we are all going to get it.”

While the country is facing shortages of some grocery products, the supply chain challenges across the export market are more profound.

“Fixing the domestic market won’t fix exports. Few planes and ships through our ports, along with trade tensions of all sorts, mean export will be a problem all 2022,” Williams says.

“Anyway, there are no pallets and too few ships to put them (products on).”

Shipping pallet costs have risen more than 400 per cent during the pandemic, while airfreight has all but disappeared, with food companies having to rely on slower sea shipping.

“If you take Huon salmon, that used to come into Melbourne by ship … then that would go to China by air. But now there is no air going to China from Melbourne. So they (Huon) take it from the container that comes across the water from Tassie, put it in another container on a truck, send the truck to Sydney and try to get it out of Sydney.

“So the cost of getting a container of salmon to Beijing has gone from $2500 to $10,000 in the space of a year and a lot of that is because of double handling and triple handling. That’s the problem. A lot of products can’t bear that. You can’t just add 400 or more per cent to the costs of logistics without starting to lose money.”

But there is a silver lining – to a degree.

“Without China, the good news is that we will have more lobster to eat and Grange to drink,” Williams says, “as long a someone delivers lobsters and Grange to the store.”