The challenges for the food sector are many, and the opportunities are few
In the milling and baking industry there always are challenges and opportunities. Today, it seems like the challenges are many and the opportunities few. But if we dig deeper into the issues and keep an open mind, we can make the best of the situation and maybe even find unexpected value.
Each year, before the American Bakers Association (ABA) annual meeting, we solicit feedback from our board of directors to learn about their biggest concerns. Presently, our members cited their biggest concerns to be the workforce shortage, inflation, ingredient sourcing, and logistics.
Supply Chain Challenges
Workplace Policy
Something that has been talked about off and on for a while but recently was posted by the Occupational Safety and Health Administration (OSHA) is a notice of forthcoming regulation on heat illness and injury prevention. California has had its own rules in this area for some time, and millers and bakers in California have been affected, so ABA will continue to keep an eye on a potential federal regulation. It’s a rule we could see in the next few years.
An area where I don’t expect to see a regulation but possibly additional guidance is COVID-19 safety. There also is rumor that OSHA is considering increasing its penalties.
Additionally, we could see changes to paid leave requirements, pro-labor legislation, and healthcare.
Supply Chain Disruptions
A few years ago, when the pandemic began, we saw large supply chain disruptions due in large part to slowed international trade. Unfortunately, supply chain disruptions really have not improved.
Shanghai, China has been on lockdown since April 1. This has arrested the movement of 10% of the world’s shipping containers, creating huge delays for U.S. businesses. Disruptions to transportation systems were higher in the first quarter of 2022 than they were in 2021.
Domestically, we still are dealing with delays in rail and truck transportation, as well.
ABA does not see a short-term solution here. In talking with our peers in Washington that deal with logistics, we believe we are looking at two years before bottlenecks can be resolved.
Shanghai, China has been on lockdown since April 1. This has arrested the movement of 10% of the world’s shipping containers, creating huge delays for U.S. businesses
Sourcing. Food gums and starches, shortening, edible oils, lecithin, phosphates, high-fructose corn syrup, and many other food ingredients have been found to be difficult to source reliably.
Most notable of these is edible oils. Due to the Environmental Protection Agency’s (EPA) Renewable Fuels Standard (RFS), soybean oil is being used in the production of renewable diesel and biofuels. The RFS, which is set to be finalized in June under a court-order deadline, has created greater demand for soybean oil.
In March 2021, ABA was notified of a 300% increase in the price of soybean oil. This competitiveness with biodiesel has left some bakers priced out of the market and searching for alternatives. And according to some ABA members, the sourcing window for soybean oil is six to eight weeks.
ABA has discussed this problem with the U.S. Department of Agriculture (USDA), EPA, the Office of Management and Budget, and the Biden administration. Our hope is that EPA reduces the amount of soybean oil going to biofuels so that more can be used in the food sector.
Due to the Environmental Protection Agency’s (EPA) Renewable Fuels Standard (RFS), soybean oil is being used in the production of renewable diesel and biofuels.
At the beginning of the pandemic, ABA also spoke with the U.S. Food and Drug Administration. ABA conveyed the need for regulatory flexibility in regard to labeling, which helped to create an emergency guidance allowing food manufacturers the ability to make small ingredient changes of 2% or less without altering the label. This has been very helpful for bakers.
ABA met again with FDA recently as part of our broader food coalition quarterly dialogue with the administration. The coalition stressed that the labeling flexibility should remain after the pandemic’s state of emergency is lifted in July.
War in Ukraine. Russia’s invasion of Ukraine has greatly affected the global grain trade. The ABA and the National Grain and Feed Association (NGFA) approached USDA Secretary Tom Vilsack regarding global food security concerns. ABA and NGFA urged USDA to consider releasing additional acres from the Conservation Reserve Program. Although we realize this is not a short-term solution, we want to bring this issue to light as legislative discussions about the Farm Bill begin in 2023.
Secretary Vilsack was very responsive to our concerns on both grain production and grain exports to countries in need, in light of climate-, pandemic-, and war-induced stressors to the global grain market.
USDA is working with federal partners, the United Nations’ (UN) Food and Agriculture Organization, and the World Food Programme to address global food insecurity.
Sugar supply. Another supply chain challenge faced by bakers is the sugar tariff quota rate increase. ABA submitted a request to USDA addressing recent and continuing severe weather conditions leading to poor sugar yields, impacting supply and accessibility for bakers. ABA recommendations to USDA included:
• State clearly that high-tier pricing is neither normal nor desirable and that USDA will act to avert it.
• Identify additional ways the United States can access more raw sugar from Mexico.
• Increase the raw sugar trade rate quota as soon as possible after April 1, such that total additions to supply from Mexico and trade rate quota-holding countries are approximately 400,000 short tons raw value.
On April 18, USDA granted positive adjustments to the trade rate quota for imports from many countries but not Mexico.
Food prices. The UN Global Food Price Index continues to rise – it rose 12.6% from February to March 2022 and in April was 33.6% higher than one year prior. The index in April was at the highest level since its inception in 1990.
This action is consistent with the sharp increases in major food commodity prices since the beginning of the war in Ukraine.
Regulatory Impacts
Food Safety
Over the past few years, there has been less regulatory activity from FDA, due to its focus on dealing with COVID-19-related issues. Regular food safety inspections essentially had been put on hold for some time. In the past six months or so, FDA has begun to return to its inspection schedule.
As part of our work with the broader food sector, ABA has approached FDA about Appendix 1 of the preventive controls rule in the Food Safety Modernization Act, which is called the Hazard Analysis and Risk-Based Preventive Controls for Human Food: Draft Guidance for Industry.
One of the issues ABA is trying to address is that some FDA inspectors who are unfamiliar with the food sector use the guidance document, which remains in draft format, as a checklist for bakery inspections.
We continue hearing from our milling and baking members that FDA inspectors are asking about mycotoxins and why the miller is not controlling for them. ABA continues to encourage members in this situation to explain to inspectors why mycotoxins are not a risk and that there is a baking kill step in the process. We have heard that the inspectors’ responses to this have been inconsistent.
ABA is hopeful that FDA considers retracting the guidance document or provides further clarification that it is not to be used as a checklist for inspections. ABA expects feedback on this issue later in the year.
Listeria guidance. FDA’s listeria guidance for ready-to-eat foods is still pending and has been since it was proposed in 2017. We have discussed this with FDA and understand that the administration is close to finalizing it.
The current FDA policy for listeria is one of zero tolerance. It is a clear disincentive for the industry to conduct both Zone 2 and Zone 1 environmental monitoring and testing. The disincentive is hindering progress toward identifying and developing improvements to sensitive areas of production and packaging. ABA and the broader industry are hopeful that FDA will explore opportunities to engage with the industry to seek solutions.
Traceability. FDA is under a court-order deadline for finalizing its traceability rule by November 2022. When it was first proposed in December 2020, ABA felt it would create an overly complicated structure. So in 2021, ABA and the broader industry hosted five listening sessions with FDA to educate the administration about how the supply chain works and how its proposal would create an overly complicated regulatory scheme. ABA’s hope is that these efforts lead to a final rule that is more streamlined.
In March 2021, ABA was notified of a 300% increase in the price of soybean oil. This competitiveness has left some bakers priced out of the market and searching for alternatives
FASTER Act and sesame. The Food Allergy Safety, Treatment, Education, and Research (FASTER) Act was signed into law April 2021 and becomes effective January 2023. In this act, sesame is listed as the ninth major allergen; therefore, “All products introduced or delivered for introduction into interstate commerce [...] that contain sesame must have sesame listed either in the body of the ingredient statement by common name ‘sesame’ or in a separate ‘allergen contains’ statement.”
ABA has held preliminary discussions with FDA on this topic. We asked for additional clarification with respect to labeling flexibility, so that if you had a product that was already manufactured sitting in a distribution center, for example, but won’t hit shelves until after the compliance date, that would still be legal.
Our last contact with FDA on this topic was in late April, and they did not provide much clarity at that time.
The FASTER Act will create a challenge for some food manufacturers who already are facing supply chain difficulties with respect to packaging and labeling.
Tucker Scharfenberg, managing editor