Regional versus global sourcing: An update

Climate and market changes

The COVID-19 pandemic, extreme weather events and trade wars have put the spotlight on global sourcing with its risks, uncertainty and volatility. All of this tests the strength and resolve of global supply chains.

With the pandemic going into a new phase, the pet sector finds itself confronted with the effects of global instability. The current high demand for raw materials is forcing producers to raise the prices of dog and cat food.

Matching supply and demand

Global sourcing is not simply an option. With a growing world population and the size of demand for food commodities, it is a necessity. But its limits are also becoming more apparent and relatively small supply reductions can have a major impact.

In a recent GMP+ International webcast, Michael Magdovitz, senior analyst for agri markets research at Rabobank, called the supply and demand gap for commodities as corn, wheat and soy ‘an extremely worrying situation’.

In addition to these challenges, consumers are increasingly asking for supply chain visibility and transparency, especially with regard to greenhouse gas emissions and deforestation. And because consumers also value price stability, infinite global sourcing puts the food supply chain in a challenging spot.

Lower carbon footprint

More and more governments and supply chains are exploring the options for increased regional sourcing to maximise the use of locally-produced ingredients.

China and the UK, among others, have come up with guidelines to boost this move toward localisation. For good reason: research in Europe has shown that the carbon footprint of locally-produced soy is significantly lower than from soy imported from South America.

Momentum is growing. The acreage for European soy production, for example, has doubled over the past decade and ample potential remains. Russia, Ukraine and Italy are the largest soy-producing countries in Europe. Although their yearly output is nowhere near that of Brazil, their carbon footprint is considerably lower.

Wanted: transparency

Increasing regional sourcing of food ingredients offers more than just sustainable production, bringing with it the benefits of regional value chain development and less dependence on imports and global disruptions. Local production also brings the opportunity to ‘reconnect’ consumers with producers, providing that desired transparency. And what really makes it a win- win scenario, is that it immediately relieves the pressure on valuable ecosystems in different parts of the world, most notably those in South America.

Challenges remain

Regional sourcing still cannot easily replace the capacity of global sourcing. And will consumers be willing to pay a premium for locally-produced ingredients? All things considered, regional supply chains offer countless opportunities worth exploring. And food companies that succeed in getting ahead of the curve will definitely reap the benefits down the road.