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Vulnerability to Food Shortages in Bird Flu Scenario:The Need for Food Assurance Policy and Ready-to-eat Reserves

Published: 7 Oct 2008

By Joe Lederman and Dr Reeva Lederman  
FoodLegal Lawyers and Consultants
© Lawmedia Pty Ltd, October 2008

FREE ARTICLE

Despite Australia’s primary productive wealth and productive capabilities in agriculture (over twenty per cent of Australian food and agricultural production by value is exported, with 95% of Australian food exports being in bulk form), Australians are very vulnerable to a systemic weakness in food security. There is a potential scenario of our food shops and supermarkets in major cities being emptied out too quickly to maintain our food supply security in certain events.

The systemic problem is that supply efficiencies always demand that there be minimum inventory stock levels. Furthermore, food supply production is actually geared to the continuity of existing patterns and levels of consumption. A break in buying will lead to a drying-up of production.

In this article, we explain that Australians are walking a tightrope without the food security net needed to guarantee food reserve capacity in the event of a bird flu pandemic. Recent reports point to an imminent bird flu pandemic risk

See, for example:

Bird Flu timebomb
WHO Avian Influenza Update
Bird Flu Death Toll Increases as Indonesian Woman Dies

Co-ordinated government action to prepare at all levels (Federal, State and Municipal) throughout Australia is therefore all the more urgent to reduce the likely impact. Our article explains why additional investment will be required to facilitate suitable reserve food production and distribution capabilities in order to ensure that Australians will have adequate food to meet a serious crisis scenario.

In April 2007, FoodLegal was commissioned by the Federal Department of Agriculture, Forestry and Fisheries (DAFF) to provide a literature review of historical models and relevant technologies for food distribution systems to address issues in the “Management of Food and Grocery Distribution in the event of a Human Influenza Pandemic”.

The observations we make in this article fall outside the terms of reference for that DAFF report and our article is only intended to alert food businesses, consumers and governments of the need to prepare our food supply for such a scenario.

Although we have examined inadequate food supply in the event of a human influenza pandemic, our observations could also apply more generally to any major food shortage situation. Triggers may include the following scenarios:

·         Situations involving the need for quarantining of any population group or geographic area;

·         Situations involving major transport disruptions such as might arise because of any major fuel shortages, fuel price increases, blockages of important infrastructure or breakages in any major transport routes;

·         Food supply shortages caused by other natural disasters; and

·         Other Supply chain issues generally.

Maintenance of Free Trade despite Emergency Plans

While not wanting to be classed as promoters of survivalism nor as alarmist doomsayers, there is a need for greater governmental and inter-governmental planning to consider likely food shortage scenarios and to consider the wider ramifications that can make a food shortage very likely. We also believe that there is a serious need for having domestic, national ready-to-eat food stockpiles in order to have adequate edible food reserves in any such circumstances. These stockpiles could be revolved on a recurrent basis without impacting adversely on free trade in the market place.

Reality of a Pandemic Threat

As demonstrated by the Federal Government’s funding of an additional $166.5 million over two years in vaccine reserves for a human influenza pandemic in the 2008-2009 Federal Budget on top of the funding of $133.6 million over 5 years in the 2004-2005 Federal Budget, the threat of a human influenza pandemic is a real one. Furthermore, recent reports (such as those at the abovementioned links) have confirmed that the prospect of a human-to-human pandemic of avian influenza has not receded.

Despite the preparation of a recommended short-term pantry list for emergency situations by the Federal Government supported Food Industry Working Group, Australians are still not sufficiently informed or prepared for a food shortage arising on account of a major emergency scenario such as a pandemic.

Current Lack of Ready-to-Eat Food Resources

Australian supermarkets provide up to 80% of Australian food (fresh or packaged) sold by retail but hold little or no reserves or food storage facilities. In accordance with a study undertaken by University of Melbourne research academics Sherah Kurnia and Robert Johnston,1 it has been found that inventory systems of their distribution centres are designed for merely short-term methods of inventory control such as pick-and-pack,2 flow-through,3 or cross-docking.4 Under such just-in-time systems, there is minimal buffer stock held, let alone any long term reserves or stockpiles. Stock replenishment is triggered by customer demand when electronic monitoring of stock levels signals a need for replenishment. Consequently, most inventory replenishment systems only order new stock once an item has been purchased by a consumer, so there is no reserve capacity in the supply chain and it is largely dependent on consistent consumer purchasing patterns. Unless food reserves exist, it is likely that food shortage situations could be created and exacerbated in any scenario where there is some form of disruption to the supply chain and also where consumer buying patterns change from making smaller purchases regularly to larger purchases less often. The current highly efficient system of supply chain management is likely to suffer breakdowns when there is significant volatility or disruption in consumer purchasing patterns.

Emphasis on Minimal Inventory

Food supply chain participants within the grocery industry will always emphasise the need to reduce food inventory across the grocery supply chain in order to improve profitability through greater efficiencies and supply chain strategies that require less or no inventory. However, the consequence of low inventory levels would turn into a major problem of widespread food shortages within a very short timeframe (probably less than a week) in the event of any major crisis or catastrophe such as a human influenza pandemic.

Governments need to encourage the creation of food reserves and reserve food supply capacity

As the burden of ensuring distribution of food during a pandemic crisis would weigh heavily on private industry retailers in particular, governments must consider how best to implement co-ordinated measures now to ameliorate industry’s lack of capacity to provide the essential community service of ensuring there is always an adequate supply of ready-to eat foods to avert disaster. Any interim or primitive food quota system is unlikely to work as an effective and equitable point of sale system without considerable prior organisation and, in any case, such a system will not be able to counter the prospect of people having to revisit the same food outlet regularly since people will then be living on a subsistence basis with inadequate built-up reserves of their own. Food manufacturers and major supermarkets do NOT carry stock of any significant level – apart from that which is held for immediate supply for consumption. Typically, the food manufacturers may hold a stock of raw materials that could last no more than 5 weeks to meet the productive cycle. Furthermore, many inputs are imported. Meanwhile, supermarket systems are geared to holding no inventory stock beyond that required for immediate supply. Typically, shelves within any major urban supermarket are continually re-stocked several times a day by manual shelf-stocking upon receipt of regular new deliveries.  While fruit and vegetable suppliers have cold-room inventories for extended periods, any pandemic scenario would probably require dispensing with the fresh food section of the supermarket.

We believe that the extent of the problem of future emergency supply could be planned for and be more readily identifiable if key suppliers (of essential foods and any other non-food essentials) were surveyed by governments asking such questions now to plan for the creation of national reserves:

Questions for Food Business Planning

1.            Generally: What is your capacity to increase production suddenly in a crisis situation? How long would it take to gear up to vast increases in quantities needed throughout Australia? What sort of output measured in volume over what period, is possible? Would you be able to access most of the raw materials locally? What consumer-pack packaging would be available for vast numbers in large quantities? Would you have enough packaging materials in stock?

2.            What steps might be required if production priority were needed to be given to simpler food product types in your product range?

3.            What is the "simplest long-lasting product" for mass production by your company for emergency supplies? What is your capacity to increase production of this particular product in a crisis situation? How long would it take to gear up to vast increases in quantities needed throughout Australia for that product? What sort of output measured in volume? Would you be able to access most of the raw materials locally? What large-sized consumer-pack packaging would be available for vast numbers in large quantities? Would you have enough packaging materials in stock?

4.            If there was a food crisis (e.g. a panic run on supermarkets caused by customers wanting to stock up their pantry suddenly in response to fear caused by a pandemic outbreak that might require long term social quarantining measures), what are the reserves (measured in terms of days of supply or production) for each product category (or major product groups) that would be available from your manufacturing plants and warehouses to meet the sudden extraordinary demand?

5.            What warehousing capacity does each company have to store additional inventory?

6.            Where is such warehousing located in relation to the major urban centres?

7.            If there is a serious prospect in the event of a pandemic that transport to and from Australia would be restricted (including shipping by sea and by air), what production could be affected?

Government consideration needs to be given to the stockpiling of additional supplies of essential goods, and the government also needs to consider the locations and security for stockpiled inventory (apart from the usual distribution centre networks operated by or on behalf of the major supermarket groups that only hold short-term stock required for the next delivery). Locations near major urban areas would also need to be safeguarded and maintained in a hygienically secure environment, free from the prospect of theft or contamination.

More needy ought to get higher priority

The paramount issue in the event of a severe food shortage caused by a human influenza pandemic would be to ensure that, as far as possible, those who are neediest have highest priority to access limited food supplies.  Equity will demand that for an emergency situation, a controlled system of food distribution at retail point of sale otherwise grants fair and equal access to limited food supplies to all consumers.

Public confidence required

Any severe food crisis would undoubtedly be accompanied by fear, as well as a basic human instinct to look after oneself. Governments and industry will need to enlist the cooperation of the general public for any retail point of sale system to be effective. The degree of cooperation will directly correlate to the general public’s confidence in the government’s and industry’s ability and preparedness to manage a food crisis.

Planning for the worst, irrespective of unpredictability

In 2006, researchers at the Lowy Institute modelled the potential human and economic costs of a global influenza pandemic:  these range from about 1.5 million deaths worldwide and a cost of more than $300 billion to more than 140 million deaths and economic losses well over $4 trillion.5 Others have estimated the death toll could be 300 million. Nine years ago, the world prepared for the Y2K bug.  At the time, there were apocalyptic predictions as to what potentially could happen as we began the new millennium.  So too, it may be that in spite of or because of the enormous combined efforts of governments and individuals, a human influenza pandemic of catastrophic proportions may not eventuate. However, according to the World Health Organisation and ongoing research, the prospects of a pandemic appear to be high. While it may seem impossible to predict what its characteristics will be (e.g. whether it will be widespread or localised; what percentage of the population will be infected; how severe the disease will be; what impact the health and emergency systems will have on mitigating the disease's effects), the Federal Government already has received and published (on the internet) the reports of its experts:

In June 2006, the Federal Government released a Business Continuity Guide for Australian Businesses.6 The Guide provided the following outlook based on advice from the Federal Government’s medical experts:

“The prospect of an influenza pandemic is real.  The very nature of an influenza pandemic in Australia will be unlike any other modern disaster and will create new challenges for business continuity planners.  It may:

·         Arise rapidly and spread quickly;

·         Make people very ill and many could die;

·         Generate unprecedented levels of fear and anxiety;

·         Occur in several waves, each lasting for several months;

·         Require full community mobilisation;

·         Result in health care services not being able to provide direct care in some cases; and

·         Result in very high staff absence rates for some periods during the pandemic.”7

“The most significant impact on Australian businesses would be on staffing levels.  Experts suggest that business should plan for 30-50 per cent staff absences at the peak of the pandemic.  For some businesses, these kinds of absences would be devastating – particularly in our essential service sector.”8

This Government Guide has also urged businesses to be prepared for 2 or 3 waves of infections. Further, a report from the Federal Department of Health and Ageing entitled “Australian Health Management Plan for Pandemic Influenza” published in 2006 stated:

“The length of each of these phases is uncertain, but the pandemic could come in several waves of up to 12 weeks each in duration. A pandemic is most likely to start where animals and humans live closely together and where the population is more crowded.”9

In other words, according to the analysis of the Federal government’s own medical experts, an influenza pandemic is anticipated to last 6 months (24 weeks) or potentially even 9 months (36 weeks). During that period, many more people would be socially quarantined as the best means of controlling the spread of the disease. (This was the only way in which the SARS outbreak could be contained in Asia in 2003).10 In such a social quarantining scenario, food consumers would be actively or forcibly discouraged from shopping. In our view, it would follow as a consequence that conventional supply chains and food buying patterns therefore could not function.

Any rationing still requires food availability and prior education

The Australian community needs to be given adequate time to prepare for the contingency of a food shortage that might arise and there needs to be government encouragement given to assist industry, community and emergency organisations, and consumers in preparing for such a food shortage. Government should give consideration to forms of assistance such as a transparent government-sponsored publicity campaign, similar to the “Get Ready, Get Thru” whole-of-government campaign run by the New Zealand government but encouraging acquisition and storage of extra food for much longer periods in the home than the New Zealand model. In our view, the risk of failure in organisation is increased by any period of inaction in ongoing preparedness. The idea of having an adequate food supply to allocate (by quota or by other rationing method) would be much more difficult to implement at the point when a pandemic arrives if there is a sudden shortage of food that has not been planned for well in advance. Rationing or quota systems are impossible to implement if there is insufficient food available to be distributed, irrespective of the sophistication of the distribution system.

Defects of the ‘basic food quota’ model

A primitive quota system will not cope adequately with a substantial food shortage in a pandemic situation because such a system will do little to reduce the prospect of people returning regularly to the supermarket to re-stock, once their limited quota is consumed or even more frequently if the system allows repeated purchasing without verification of personal ID either at the same store or at different stores.

A need for Government intervention

Immediate Federal government intervention is necessary and desirable for the following reasons:

(a)               A Federal Government ‘whole of government’ approach co-ordinated by a single Minister will be necessary for the successful implementation of food distribution logistics systems and infrastructure. This includes not only having hardware but also tested software and also adequate support services and personnel;

(b)               Federal Government subsidisation will be necessary to finance the extra infrastructure and inventory to counter the severe prospect of food shortages that would be exacerbated in the event of a pandemic if such infrastructure and inventories were not in existence.  This investment by government would need to occur well before the occurrence of a human influenza pandemic – even if the timing of that event cannot be predicted but for which the probability remains high;

(c)               Federal government action to be co-ordinated with State and Territory and local municipal governments and community and emergency organisations would be needed for any planned stockpiling by industry and to subsidise the stockpiling and storage of adequate supplies or to increase the productive capacity of industry to meet the increased demand. Industry by itself is unlikely to have an adequate financial incentive to plan for a future contingent event, namely a community-wide food shortage. Without this, the risk of a breakdown in the food supply chain becomes more likely. Preparatory action is also likely to be required to forestall the consequences of likely panic buying (which might occur at some point in time). In this regard, governments need to consider subsidising a build up of food reserves or to increase capacity in production in consumer sized packaging in sufficient quantities to provide adequate essential foodstuffs in the most likely affected geographic areas (especially the major cities and towns).  Modern apartments and housing do not encourage substantial food pantries or food preparation areas. Many city-dwellers simply assume that ready-to-eat food will always be readily available by purchase nearby or within a short car-distance. In some Australian urban areas, it is known that about 40% of the population already relies on acquiring at least one meal a day from a food outlet. Without adequate food reserves, this will be impossible. If a pandemic could (according to the Australian government’s own expert medical assessment) last up to 6 or 9 months with up to 30-50 per cent absenteeism of the Australian workforce, the current food supply chain systems will not work.  The financial impact and stress this may have could well be exacerbated by the current high level of excessive personal debt and inadequate savings meaning that many consumers will not be able to sustain their loss of earnings.11 If the free market operates with the normal price mechanisms, scarcity could also lead to sudden inflationary pressures that will exacerbate inequities being faced by the neediest of consumers. We can give two recent examples of how a sudden shortage to lead to rapid inflation in relation to a food item. One example is the significant hike in banana prices in Australian cities following Cyclone Larry in 2006.12 Another example is the effect of an outbreak of suspected “blue ear disease” along with existing foot-and-mouth disease in pigs in China which forced the Chinese government to tap into its own stockpiles of pork due to significant pork price increases.13 In the recent China example, the reports indicated that before the stockpile was utilised, a disease which affected 20 million pigs out of a population of 500 million (4%) led to price increases of up to 200%.14

            In the context of price control issues, we note the following:

§               Price control was introduced in the US during World War II to prevent a repeat of the spiralling food prices seen during World War I.

§               In the UK, food prices were prescribed by the Ministry of Food during World War II.

§               If price control were to be introduced, it would require subsidies to be introduced by government to ensure that further stocks can be acquired without retailers being forced to incur a loss. Price controls would be critical throughout the entire supply chain. Otherwise, the inflationary pressures would simply add to the cost of products for the retailers who might then end up in the unfortunate position of absorbing the increased costs without being permitted to pass on these costs to the consumers buying price-controlled products.

(d)               Federal government intervention would therefore be needed to introduce and implement the orders or regulations for an enforceable distribution system. This is likely to require regulations that set priorities for particular foods to be supplied by private industry and, to divert supplies from other existing contractual commitments. Prioritisation would be required to meet any domestic food shortfalls as well as meeting the needs of the neighbouring Pacific countries with which Australia shares a food supply for processed foods or which are reliant on Australia for private food supplies and/or government food aid.

(e)               Federal and State and local government intervention will be required to regulate changed opening hours or enforced closures and the likely need for logistical re-arrangement of the food supply at retail point of sale if an imminent emergency scenario becomes more likely.

(f)                 Federal government (in co-ordination with the State health and welfare agencies and community and emergency organisations) will be required to maintain ongoing confidence by the population beyond the communication strategies of private industry. Governments would be wiser to allow people to identify problems and provide a communication avenue that can address any consumer concerns that are vented by any individuals or community groups in the event of any food shortages and to address food supply system abuses. In addition, based on the precedent of World War II, there ought to be mechanisms to encourage members of the community to participate in monitoring abuses and defects in the system.

Communication Strategies

We believe that government and industry must develop a range of communication strategies for the following:

§               To advise how and where food will be available in an emergency

§               To advise to whom and when food will be available

§               To advise how to conserve food and avoid waste and how to maximise the utility of the essential foods

§               To counter ignorance on methods of food preparation for the large population that does not usually prepare its own food in urban areas – such as food from basic ingredients that are included in the list of essential foods stockpile

§               A range of other ongoing communication strategies.

§               To allow for the policing and securing of the retail-points-of-sale specifically, and protecting shop staff, and ensuring that food will not be readily stolen or looted.

The need for a temporary shut-down

We believe that it will be necessary to consider the timing for a temporary shut-down or moratorium of the operations of supermarkets in capital cities or at particular locations prior to the introduction of any new distribution systems for an emergency scenario:

§               To allow the supermarkets to switch over from conventional selling systems to alternative systems of food distribution.

§               To counter the prospect of a panic buying rush (that could threaten the viability of a continued food supply for the short term) but to allow for the following things to occur so that alternative distribution or rationing systems can operate effectively.

§               To give time for demounting existing shelving in order to facilitate a layout more suitable for efficient flow-through of foods in an emergency scenario so that food can be moved in and out efficiently with minimal handling and minimum time wasting. Any fresh food which needs to be removed from the supermarket as a result of such proposed rearrangements should not be wasted and consideration ought to be given to distributing the fresh food to community and emergency relief organisations.

§               Switching to a different shop configuration should aim at minimising queuing and social contact to protect check-out staff.

§               To allow for the policing and securing of the retail-points-of-sale specifically, and protecting shop staff, and ensuring that food will not be readily stolen or looted.

A Need to Prepare

Australians need to be prepared. Our purpose in writing this article is to provide an alert to the danger of not being prepared.

 

  1. Kurnia, S. and Johnston, R.B. (2001). Adoption of Efficient Consumer Response: The Issue of Mutuality, Supply Chain Management: An International Journal, Vol 6, No 5, pp 230-241.
  2. Lee,H and Whang,S  Higher supply chain security with lower cost: Lessons from total quality management Quality in Supply Chain Management and Logistics Edited by T.C.E. Cheng, K.-h. Lai and A.C.L. Yeung Volume 96, Issue 3, Pages 287-419 (18 June 2005).

3.       Harrison,T, Lee,H, Neale,J  The practice of supply chain management, Springer,2003

4.       Ibid.

5.       Warwick McKibbin and Alexandra Sidorenko, Global Macroeconomic Consequences of Pandemic Influenza, Lowy Institute, 2006, in The Age, Saturday, 19th May 2007

6.       Federal Department of Innovation, Industry, Science and Research, Business Continuity Guide for Australian Businesses. (Accessed 5 August 2008).

7.       Ibid, Chapter 1, page 2.

8.       Ibid, Foreword (i).

9.       Federal Department of Health and Ageing, The Australian Health Management Plan for Pandemic Influenza. Available online at: http://www.health.gov.au/internet/main/publishing.nsf/Content/ohp-pandemic-ahmppi-toc.htm (accessed 5 August 2008).

10.   See Mark Rothstein et al, “Quarantine and Isolation: Lessons Learned from SARS” (Institute for Bioethics, Health Policy and Law, University of Louisville, November 2003). Available online at: http://louisville.edu/bioethics/public-health/SARS.pdf/view (accessed 5 August 2008)

11.   See Reserve Bank of Australia statistics on ratio of debt to disposable income: http://www.rba.gov.au/Statistics/Bulletin/B21hist.xls.

12.   Price of bananas increased by 250% (Sydney Morning Herald 27/7/2006: http://www.smh.com.au/news/national/economy-slips-on-banana-skin/2006/07/26/1153816251734.html%06 (Accessed 5 August 2008)) after Cyclone Larry wiped out over 90% of banana crops in Australia (Australian Banana Growers’ Council: http://www.abgc.org.au/pages/media/cyclonelarry.asp (Accessed 5 August 2008))

13.   The Age 30/5/2007: http://www.theage.com.au/news/business/pigs-ear-shakes-shoppers-in-china/2007/05/29/1180205250019.html (Accessed 5 August 2008)

14.   Price increases from 9 Yuan per kilo to 28 Yuan per kilo have been reported. Ibid.