World population is projected to balloon to over 9 billion by 2050, and that will place major challenges before the global food supply chain, says an article in the summer issue of ‘MARKET – Insights from the world of Lloyd’s.’
The recent horsemeat-in-beef scandal in Europe and the fungi-contaminated animal feed that led to a recall of thousands of liters of milk in Germany are symptomatic of the problems afflicting the global food supply. Ultra-tough prices set by supermarkets are thought to be one reason that sparked the substitution of horsemeat for beef in Europe. Demand from biodiesel manufacturers caused a shortage of wheat in Germany, leading to the import of contaminated, untested wheat from Serbia in the second incident.
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The article also recalls food-related crises that occurred on a much larger scale in different parts of the globe in recent years – the food riots that broke out in over 30 nations in 2007-2008, the panic purchase of 1.5m tonnes of rice by the Philippines in 2009 and the 2010 grain export ban imposed by Russia following drought and wildfires.
Global climatic change, an unhealthy rise in speculation in food commodities, and the growing use of agro-commodities in bio-fuels are new trends that are causing serious upheavals in the food supply situation worldwide. Worse, developing countries are expected to increase consumption of meat and cereals. By 2050, demand for meat could therefore double, and for cereals could rise by as much as 75%.
Insurance industry expects to help the food industry grow
The insurance industry expects to help the food-growing, processing and distribution industries meet these challenges through innovative new insurance products. New insurance markets are expected to open up as governments put food security high on their agendas. The article cites the example of Turkey, where the government pays half the insurance premium for covering aquaculture farms.
The trend of using insurance to protect crops or agricultural produce may have already taken root – according to Swiss Re, agricultural insurance premiums have nearly tripled to $23.5B between 2005 and 2011. “With food production needing to grow by 60% to meet world demand by 2050, and with new markets opening up to insurance, the potential is huge,” says the article, emphasizing the growing potential for insurance throughout the food supply chain.
Lloyd’s recently published a report entitled “Feast or Famine: Business and Insurance Implications of Food Safety and Security” that highlights these issues.