Supply Chain News
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Supply Chain Failure News

In an online discussion I threw a crazy estimate out that there was a 5% to 30% chance that the shelves will be bare for WEEKS if not MONTHS. 

A reader asked –

Just curious how you figure those odds. Thanks!

That got me thinking… why do I think the odds are so high?  Well here goes…

There are a LOT of reasons I think we are likely to see a moderate increase in empty shelves – and even a chance for a severe to possibly catastrophic breakdown in the Jan/Feb timeframe. The list below includes references.

Supply Chain News
Supply Chain News

And just so you know this isnt intended to be some alarmist rant. Be reasonable, be prepared, have a backup plan, but above all; plan for GOOD TIMES and BAD TIMES. Your FIRST preparations should support both good/bad times. Food, water, first aid, backup gear etc are something you will use in good times and bad. For related info read https://wearethebackupplan.com/am-i-prepared/

Critical industrial materials Shortages

There are increasing shortages in raw materials including: nitrogen, urea and fertilizer as examples. https://www.nytimes.com/2021/08/30/business/supply-chain-shortages.html

Nitrogen

Nitrogen availability is down as is skyrocking price for glyphosate- cause pressures on already razor thin produces. https://fortune.com/2021/11/04/energy-crisis-food-shortage-security-fertilizer-prices-yara-ceo-madagascar-cop26/ (SHORT TERM DEMAND PRESSURE LONG TERM SUPPLY PRESSURE)

Urea Shortage

China is the world’s biggest producer of urea, and supplies are running out (or China is holding up new production). https://www.abc.net.au/news/2021-12-08/adblue-shortage-a-serious-threat-to-australias-supply-chain/100683230 Urea is used in a TON of stuff from farming to diesel engines. (SUPPLY AND DEMAND PRESSURE)

Russia piling on Fertilizer

Russia is through fuel on the fire regarding fertilizer  https://finance.yahoo.com/news/russia-slap-quotas-fertilizer-exports-131808345.html This results in people buying up what we have now knowing we will have less in the future. (SUPPLY AND DEMAND PRESSURE)

Nickel Shortage

There is a shortage in raw nickel which is a key component in batteries. https://www.eenews.net/articles/nickel-shortage-spells-trouble-for-evs-report/

Shortages of other Farming Supplies

Other supplies: https://www.iceagefarmer.com/2021/11/02/farmers-panic-cant-get-supplies-to-grow-food/ (SUPPLY PRESSURE)

Fertilizer Inflation Contributing to Higher Food Prices https://www.armstrongeconomics.com/armstrongeconomics101/inflation/fertilizer-inflation-contributing-to-higher-food-prices/

Chemicals and Fertilizer prices SPIKING. $86,844 jumps to $171,345. https://youtu.be/HP9oP09wars?t=20

We are Losing Farmers

Wisconsin alone lost 500 farms 2019 to 2020 and the pressure looks worse for 2020-2021 and into 2022 (take that nationwide).

(LONG TERM SUPPLY PRESSURE)

Supply Chain Chaos

The global chaos in supply is well documented and reported. If you aren’t aware here is more info https://wearethebackupplan.com/supply-chain-disaster

In the graph above people are reporting the peak is ending – my gut is NOT by a long shot. Definitely better in some spots worse in others, but we are NOT OUT OF THE WOODS. Also the inflationary pressures will create supply side limits, that we haven’t even figured out yet.

There are a lot of simplistic responses to the supply chain issues.

There is nothing wrong where I am! People saying this are sticking their head in the sand, and being intentionally blind to the obvious problems. There are HUGE market changes occurring and some will likely shake out and others will create permeant change.

Unload faster! There’s are a fixed amount of cranes to offload, and fixed number of operators. So add more shifts! there are a finite number of qualified operators regulated to the numbers of hours they can safely work. Working 24×7 has helped but not completely.

Well reroute to other ports! It is happening but adds shipping time, shipping distance, cost and those ports are not empty either. Also, there is a global problem (it isn’t just California, although California is leading the way in screwing up shipping). And the infrastructure expects 30% to 40% to come through California shifting that to Texas and Florida isn’t easy.

There is a backlog of containers on land just send more trucks! There is a shortages of truckers. Oh and truck chassis are regulated in California so old trucks cant legally operate even if they work in ALL OTHER STATES. Oh and more regulations on operators, truckers and equipment and vehicles. The USA is between 10,000 and 80,000 truck drivers short. https://fortune.com/2021/10/28/truck-driver-shortage-supply-chain-80000/

The backlog is decreasing?

Not really. The reports are there are fewer ships waiting, but that is only because they are not being allowed into the area. They are farther out to sea (effectively a 2nd less visible waiting area).

Shipping Graph From MXSOCAL-UBS
Shipping Graph From MXSOCAL-UBS

Port of Vancouver Closed

The Port of Vancouver is damaged, and may be closed or at least crippled. The Port of Vancouver is the 2nd largest port on the West Coast. This is more than 1/12th of the entire west coast supply chain OFFLINE. Very bad. (SUPPLY PRESSURE) https://supplychaindigital.com/logistics/supply-chain-blow-storm-cuts-port-vancouver

Canada/US Border Trucking Backlog to INCREASE

An unknown number of truckers are walking away because of the new Jan 2022S US/Canada border vaccine requirement. https://www.ccjdigital.com/regulations/article/15281839/us-canada-requiring-covid-vaccine-for-crossborder-truckers This will add even more pressure on food supply.

The supply chain mess is DEFNINTELY not over – but should theoretically start to look better IF they don’t keep losing people.

(LARGE SUPPLY PRESSURE)

Want to see the realtime shipping fun? Here is a link to realtime shipping information https://www.marinetraffic.com/en/ais/home/centerx:-125.9/centery:47.6/zoom:3 as of 12/10/21 it is looks better than it was last July BUT we cant be sure because China turned off transponders.

China Turned Off Ship Transponders

To make things even more confusing, a lot of the shipping data disappeared because China turned off transponders on many ships. https://www.cnn.com/2021/11/24/business/china-shipping-data-mic-intl-hnk/index.html

Chicago Trains are Backed Up

Just like the ports the major rail hubs are backed up, for similar reasons – trucking & labor. https://legallysociable.com/2021/10/05/global-supply-chain-problems-lead-to-25-mile-train-backup-at-chicago-area-railyard/ (SUPPLY PRESSURE)

WHO “helping”

In the middle of the pandemic DURING the supply chain crisis they are pushing for local food production. Right NOW, and it is already being implemented in some countries. https://cdn.who.int/media/docs/default-source/food-safety/public-consultation/draft-who-global-strategy-for-food-safety-13may2021.pdf I personally am not against self sufficiency, but not allowing food trade during a crisis is a recipe for more problems.

Reference articles:

Russia and Ukraine

Russia has been playing with supplies of gas, fuel and hinting at invading Ukraine. They hacked Ukraine power grid around Christmas in two years. If they do something it will likely be in the same timeframe. https://www.foxnews.com/world/ukraine-russia-troops-border-blinken-concerns-invasion (Supply and Demand Pressure)

New “politics” in California

The rules regarding max hourly work, who can enter ports and what trucks are allowed on the road – are causing yet more chaos

(SUPPLY PRESSURE)

Underemployment

Record number of people leaving workforce. Add in the jab requirements and people refusing (significant and underreported – look at the impact on airlines and they haven’t hit all the deadlines yet). Across the board, people are NOT joining the workforce in critical positions.

https://www.wsj.com/articles/as-american-workers-leave-jobs-in-record-numbers-a-closer-look-at-who-is-quitting-11636894801

Not sure where this is going… but it results in (INDIRECT PRESSURE ON SUPPLY AND DEMAND)

Medical Staffing Crisis

There are organizations across the USA firing medical staff because they are unvaxxed. One estimate is that NY alone has fired in excess of 1300 medical professionals.

This isnt really “direct” supply chain but it adds to the overall risk factor, and increases odds for staffing pressures. The staffing pressures result in general inflation pressure. https://www.healthcarefinancenews.com/news/staffing-shortages-ramp-recruitment-pressure-hospitals

Inflation

The CPI says 6% or 8%.  For the working class we are seeing more like 20% because of food and fuel.  This creates problems that bleed into supply chain again.  (INDIRECT)  It makes suppliers and distributers unsure.

Erratic price spikes create risk and cause suppliers and consumers to react in ways they believe will protect them from that risk. Normally increased demand would cause a supplier to expand operations. But right now, inflation and COVID create a situation where they would rather raise their rates than take on risk in the middle of a fluctuating situation, with an increasingly unknown outcome.

Increased demand with no change in supply results in increased costs. The fear to expand is part of the reason we see inflation. https://www.theepochtimes.com/mkt_breakingnews/consumer-price-inflation-accelerates-to-fastest-rate-in-31-years_4096742.html (INDIRECT PRESSURE ON SUPPLY AND DEMAND)

US price rises hit highest level for 40 years https://www.bbc.com/news/business-59573145

Global Food Prices Spike in 2021

World Food Prices Hit 10 Year High https://www.reuters.com/markets/europe/world-food-prices-hit-10-year-peak-2021-2022-01-06/

Shows 15.7% increase in cost of meat, poultry, fish and eggs.  August 2019 through August 2021
Source WashingtonPost
https://www.washingtonpost.com/business/2021/09/15/food-inflation-faq/

Pork Prices likely to Spike due to Swine Flu

The good news African Swine flu is not a risk to humans directly. Bad news is it lethal to pigs. It has cause huge cullings of animals in China and South Korea. And is not confirmed in northern Italy. https://www.reuters.com/markets/commodities/african-swine-fever-found-wild-boar-italy-regional-government-says-2022-01-07/ (SUPPLY PRESSURE)

Computer Chips

New cars and trucks are hard to find – causing increase in used car prices also.  It is likely that it will be 2022 or later before this changes. https://www.consumerreports.org/buying-a-car/global-chip-shortage-makes-it-tough-to-buy-certain-cars-a8160576456/

Who cares about cars and chips for food?  Well the parts and chips are also for farming equipment and parts replacement which is causing issues with harvesting (most have been worked around) but that continuing is putting more pressure on farmers. (SUPPLY PRESSURE)

Random Fuel Shortages

Fuel isn’t available and you wont have supply or demand

(Supply and Demand Pressure)

Fuel price spikes

This one is OBVIOUS

https://www.bloomberg.com/news/articles/2021-10-07/energy-crisis-may-trigger-u-s-winter-blackouts-xcoal-ceo-says

(Supply and Demand Pressure)

Food Prices and Supply Issues

Palm production

Lowest in 5 years 6% drop https://www.bloomberg.com/news/articles/2021-10-25/palm-oil-at-heart-of-edible-oil-boom-to-see-supply-crunch-endure

Edible oils prices spiking

https://www.zerohedge.com/commodities/edible-oil-prices-hit-record-high-food-inflation-treat-soars

Reduced South America crop production

Numerous areas are seeing “Very dry planting conditions across Brazil and Argentina in October and November are likely to extend through the growing season” (SUPPLY PRESSURE) https://www.agriculture.com/news/crops/forecasters-see-mixed-planting-weather-for-south-americas-farmers

Meat prices spiking

As an example our local supermarket only received SINGLE load of frozen turkeys for thanksgiving. Instead of 2 to 3 semis full.  Just ONE this year. https://www.npr.org/2021/09/14/1036678722/chicken-beef-pork-meat-prices-inflation-biden

(Supply Pressure)

Crop to Table

Seeing issues with crop to table – harvesting issues due to lack of tires/parts. Packing issues due to lack of staff (direct). Supply chain and other very odd problems https://www.bbc.com/news/business-57856566 (SUPPLY PRESSURE)

Farmers Banned from Delivering Crops

Some suppliers Australia is now banning non-vaxxed from delivering crops.

From the CBH website:

“CBH is required to follow the Government’s instructions on mandating the COVID-19 vaccine and has decided to make the vaccination a condition of entry to all CBH sites and offices. As a result, anyone who visits our premises including employees, contractors, growers, transporters and visitors, are required to comply with the Government’s directions by ensuring that they have received their first vaccination by 31 December 2021 and are fully vaccinated by 31 January 2022. “

https://www.cbh.com.au/harvest/covid-19-requirements

China Doing its Part to add to the Chaos

Issuing “buy food” order for people – they expecting food issues. https://www.reuters.com/business/cop/chinese-stock-up-food-temperatures-fall-covid-19-spreads-2021-11-03/ (LARGE DEMAND PRESSURE)

China bad weather and CROP failure

(SUPPLY PRESSURE)

China Buying up to 50% of all world grains

China Buying up Farmland

China saber rattling

Doing exercises where they invade Taiwan. They might actually invade and start a regional or global war. Odds aren’t high but they are definitely not zero. To make things worse we are likely to reduce our front line fighting force because of vax mandates by 5% to 20% depending on the units (without Russia or China firing a shot). https://www.scmp.com/news/china/military/article/3155908/china-will-keep-escalating-military-intimidation-taiwan-experts

Covid Politics

More politics, nations locking down grain exports, possibly overlapping with the WHO initiative.

https://www.nature.com/articles/s43016-020-00211-7

(Supply Pressure)

Cyber attacks against food and energy

https://www.zerohedge.com/commodities/cheese-prices-crumble-after-cyberattack-hits-top-wisconsin-dairy-producer

(Supply Pressure)

Finally – it is already happening

Conclusion

There is no overwhelming single thing that I can point to why I suggested that there will be bare shelves this winter. This list hopefully explains why I say 5% to 30% chance things will cascade to empty store shelves.

My odds of risk as of 11/14/21

  • 30% for of moderate to severe impact supply issues (fuel/food) in Jan 2022
  • 10% WW3 in Jan/Feb 2022

My odds of risk as of 12/9/21 are about the same – slightly sliding out because of court cases for covid19 and WW3 because of increased China airspace violations, port expansion in Atlantic and Russia massing more troops near Ukraine.

  • 30% for of moderate to severe impact supply issues (fuel/food) in Jan to April 2022 – seems to be a slower burn that I expected
  • 10% WW3 in Jan/Feb 2022

My odds of risk as of 12/28/2021 are up because of the WHO activity by Canada and US and Chinese buying spree. Russia still has more troops at Ukraine, China has more activity near Taiwan. It feels like it is a slow motion train wreck with people trying to stop it but it SLOWLY keeps getting worse.

  • 15% WW3 in Jan/Feb 2022
  • 40% for of moderate to severe impact supply issues (fuel/food) in Feb to July 2022 – seems to be a slower burn that I expected

So if you are prepping it doesn’t mean 100%. It means we are in a dangerous time, that is increasingly complex and unstable. You still need to plan for the GOOD stuff, and the 99% chance of inflation. Plan for GOOD times and BAD times. Not just one or the other.

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