Sourcing inputs and producing more food for a growing population is only half the challenge to feeding the population. Agricultural production still must be processed and delivered to consumers. The third portion of the agrifood value chain encompasses these logistics requirements, the initial processing of crops, storage until needed and transportation – directly to consumers, retail points or manufacturers. Agrifood logistics requires physical infrastructure to process, store and transport basic agricultural commodities. As production responds to demand growth, logistic capabilities will need to expand in parallel. Investments will create logistic infrastructure while seeking ways to reduce food waste and use energy more efficiently.
• Up to 20% of food loss occurs during storage and transport
• Small stakeholder farms have limited access to processing or storage facilities
• Transportation costs are a significant component of the final price of food
• Agrifood provides 88% of the revenue to the cold storage industry
As food supplies increase and consumers demand more produce, dairy and meat, refrigerated storage is expected to grow more than seven percent per annum Building logistics infrastructure at scale requires long lead times and access to long term financing. When these facilities are located in emerging markets, capital providers demand higher returns to reflect higher costs and risks. One common risk for owners of logistics assets wherever they are located is the risk of underuse. The need to secure high throughput rates for agricultural logistics assets greatly influences ownership structure. Demand for foods that require cool storage and transport, like milk, meat and produce, will outstrip population growth. At the same time, the imperative to reduce food loss and waste will reinforce the need for better cool storage systems.
In addition to infrastructure, traceability and segregation of goods in transit is a growth sector at the logistics stage. As consumers expect better information about the source and handling of food, requirements for traceability and certification in supply chains will drive investment in sensors, controls and data management. Distributors are deploying increasingly sophisticated tracking technology to shorten delivery times and provide real time information on conditions particularly for sensitive goods like fruits and vegetables.
Large scale infrastructure like roads, canals and ports calls for active involvement of the public sector. Governments must set policy, facilitate projects, establish a stable investment climate and provide well targeted funding. For private agrifood companies, logistics investments can be necessary to secure the returns of a vertically integrated supply chain. Integrated agri-industrial groups have the scale to finance private projects and access to capital markets and lines of credit to finance large infrastructure projects.
