The world is heading for a massive food crisis. That warning comes from Ryan Petersen, founder and CEO of freight forwarder Flexport.
Petersen gained notoriety late last year at the height of the supply-chain slowdown. While business leaders everywhere were wringing their hands over badly delayed shipments and unavailable supplies, Petersen did something that was both simple and brilliant: He hired someone with a small boat to take him and a trucking partner on a tour of the Long Beach/Los Angeles port complex so he could see for himself exactly what the problem was. He observed that the most pressing issue was too many containers and no place to put them while they awaited their return to China, and that a local rule forbidding stacks of more than two containers was making things worse than they needed to be. He explained all this in a series of tweets, suggesting that the prohibition on stacking containers more than two high should be temporarily suspended. Long Beach officials were among the millions who read the tweets. They took Petersen's advice, and he was hailed as "The CEO who saved Christmas." It cemented his reputation as one of the world's most knowledgeable experts in logistics.
These days, Petersen is warning of a much graver problem that the whole world must come together to solve, he explained during a Q&A event at the Collision conference in Toronto this week. When an attendee from Syria asked Petersen if he was doing anything in the area of food shipping, he responded, "I wish we were doing a lot more in that space than we do." Flexport manages containerized freight and air freight, he explained, which doesn't apply to most food shipping. Some food is shipped in refrigerated containers and what he called "the most important food" is shipped in bulk.
But, he added, "Probably the most important problem in the world right now for us to work on is food shipping." The reason, he said, is because of the war in Ukraine. "Russia and Ukraine are the first and fifth largest grain exporters in the world. Something like 30 percent of the world's wheat exports come from those two countries, and most of that's not going to reach the market."
No one can ship anything out of (or into) the ports in the Black Sea because the area is now a war zone, he explained. While some of that could be replaced by rail or truck shipping, he said there are not enough trains and trucks in all of Europe to carry the massive amounts of grain that were previously shipped out by sea. "And so, the simple reality is you won't be able to get enough grain out of those countries."
The result will be a food crisis in the developing world, he said. "Food crises almost always lead to revolutions and war. It's a horrifying problem." Petersen said he was trying to learn as much as he could about food shipping, and that it was a problem he planned to work hard on over the coming year--even though it wasn't a problem Flexport was currently equipped to address. "I don't think we're going to be the ones that solve this problem for humanity."
Shipping costs should come down--unless there's a longshore strike.
Aside from the looming food crisis, Petersen noted that shipping times from China to the United States had improved in recent months, and shipping prices that had risen to astronomical highs were starting to come down. He warned, however, that the contract between the International Longshore and Warehouse Union and the West Coast ports will run out July 1 and that a new contract hasn't been signed so far, raising the threat of a strike that could stop shipping in its tracks. Meanwhile, he said, many American companies are moving manufacturing to Mexico because shipping from there is less expensive and easier than shipping from China, and labor costs are now lower as well.
Asked how he got interested in logistics, Petersen explained that he and his brother had started a business purchasing motorcycles in Asia and selling them in the United States. "That's when I discovered that international shipping is messed up," he said. The shipping companies that the Petersens worked with weren't customer focused and used little or no technology, he said. He sensed that there was an opportunity not only to solve a difficult problem but also to make a difference in the world.
"Global trade lifted a billion people out of poverty around the world by opening markets to them," he said. "The global order that allows anyone to ship anything anywhere has been one of the most powerful forces for good worldwide. And yet, it's a nightmare. That's a pretty good heat map for finding a place to work, something that's very important, yet very hard. And we still think it's hard and important."