“From the Iran War to the World’s Dinner Table”: Implications for the Food Supply Chain to Watch Closely

The conflict in the Middle East is increasingly having a clear impact on the global food supply chain and Thailand’s food and beverage industry, both through rising costs and slowing consumption, as well as through the risk of shortages of raw materials and production inputs arising from supply disruptions.

• Food and beverage production costs have increased in line with higher energy prices, raw material costs, and production inputs linked to energy—particularly chemical fertilizer prices, which have surged sharply and face the risk of shortages—directly affecting a wide range of upstream players in the food production chain, including agriculture, livestock, and fisheries.
• At the same time, players in the food and beverage production chain also face sharply rising energy costs, as well as transportation and logistics costs, significantly affecting businesses, especially those with high energy intensity in their production processes or with export markets located relatively far away.
• In addition, the energy crisis is also affecting the supply chain of the packaging industry, particularly plastic packaging, as reflected in the surge in plastic resin prices in line with upstream raw material costs and the likelihood of shortages in the coming period. Such risks affect the manufacturing supply chain of a wide range of downstream industries, including food and beverage.
• On the demand side, although Thailand’s overall food exports to the Middle East remain limited, the slowdown in both the global and Thai economies, together with the prospect of accelerating inflation, may dampen or even contract consumption of certain discretionary food and beverage products. At the same time, consumers are likely to shift their consumption behavior toward more value-for-money products, which will affect the competitive landscape. Therefore, cost-efficient enterprises with resilient supply chains will maintain a competitive edge.

The prolonged warfare  is also heightening the vulnerability of global food security.

• Currently, a number of countries have begun announcing suspensions of agricultural and food exports in order to strengthen domestic food security and build emergency reserves for consumption amid a war situation that is likely to be more prolonged than expected, resulting in reduced supplies of some certain food products reaching the global market.
• Disruptions to shipping routes or logistics systems would further exacerbate shortages in global food supply and could lead to soaring food prices, thereby affecting consumers’ food security, particularly among vulnerable groups, as well as consumers in countries that are net food importers.

Nevertheless, Thailand may benefit and capitalize on the surging demand for some certain food categories, particularly those with a long shelf life, including semi-prepared foods, ready-to-eat meals, and low-cost basic proteins,  which are poised to see a substantial uptick in export volumes from trading partners, including those in the Middle East, as countries accelerate stockpiling to strengthen food security and build emergency reserves for consumption should the war persist longer than expected. This crisis therefore represents a significant opportunity for producers of certain food products to expand their export markets and generate additional revenue.

In light of this, businesses should expeditepreemptive shifts  to capitalize on emerging opportunities from this crisis, particularly through managing transport routes and logistics to avoid high-risk areas, as well as booking cargo space and shipping services in advance and entering into long-term contracts to lock in costs that are likely to rise. They may also consider diversifying export market risk by increasing the share of exports to destination markets that are closer to Thailand or offer greater safety. In addition, businesses may consider modifying or redesigning packaging to reduce dependence on plastic resin and shift toward domestically sourced substitute materials, such as bioplastics. This would not only help mitigate risks and costs arising from external volatility, but also driving value addition for Thai agricultural commodities and mitigating environmental impacts.