The Suez Canal Is Just the Beginning…
The Suez Canal incident this week was not the end of the world, but…
It is a sign of a bigger problem—a time bomb with the potential to wipe out critical supplies and generally incite panic in this country.
We’re talking about the many dangerous weaknesses in the world’s supply chain. A few too many hurricanes, some human error, a terrorist attack, or just plain bad luck could break enough of the links in that chain at once to seriously damage our economy and lives.
To help you better prepare for these types of events, we’re going to review some of the biggest choke points in the US (and world) supply chains that every prep-minded American needs to watch out for.
A Note Before We Begin
Lots of the issues we cover in this article are a world away, geographically.
But in a time when US shoppers buy electronics made in China, rice grown in India, and medicines manufactured far and wide, events on the other side of the planet have the power to severely impact prices and supplies everywhere.
A hiccup in the Suez Canal or a drought in some faraway Chinese province can turn our lives upside down, right here at home, in some very real ways.
With that in mind, in no particular order, here’s our list of the scariest choke points in the US (and world) supply chain.
1. THE SUEZ CANAL
As this week has shown us, one goofy turn of a cargo ship wheel can threaten international trade. It’s a crazy thing to consider, but the perfect case study for exactly the kind of vulnerability we’re talking about.
To recap, the Suez Canal is a man-made waterway, a lot like the Panama Canal, that connects the Red Sea to the Mediterranean Sea.
About 12 percent of global trade passes through the Suez, or $9 billion daily—which is why something as routine as a traffic backup caused international news. It’s hard to measure the full extent of this incident, but some experts are reporting that the backup will cost $6 billion to $10 billion a week until all delays are resolved and reduce world-wide trade growth for the entire year by .2 to .4 percentage points (yikes!).
All because of one cargo ship.
But the Suez Canal is far from the only literal, physical choke point in world trade. There are others that are every bit as vulnerable and that could have an even bigger impact on American supplies like food, clothing, life-saving medication, and lots, lots more.
2. THE STRAIT OF HORMUZ
The Strait of Hormuz is a naturally formed waterway between the Persian Gulf and the Gulf of Oman. Why is it important to us, here in the States? There’s a good chance that the gas sitting in your car this very instant traveled through the Strait of Hormuz.
In fact, a full third of the world’s liquefied natural gas and almost 25 percent of the world’s oil consumption passes through the Strait.
It’s one of the most strategically important locations in the world and for that reason incredibly vulnerable to terrorism and piracy. If the Strait ever comes up in the news, keep your eyes peeled and be ready to stock up on gasoline.
3. THE STRAIT OF MALACCA
The Strait of Malacca is a narrow waterway that passes between the Malay Peninsula and the Indonesian island of Sumatra. It’s the world’s number-one shipping lane between the Indian Ocean and the Pacific, with almost 100,000 ships passing through it every year.
Like the Strait of Hormuz, it’s a major oil gateway to the west. Even more, it’s a major lane for Chinese goods coming to America. It would be hard to quantify how many of the items we use everyday, from metals to medicines, come through that lane. Keep an eye out for threats to Malacca on the news, and if things get bad there, keep an eye toward stocking up critical hard goods imported from China which includes…well, just about everything.
Like all straits, Malacca is vulnerable to terrorism, piracy, and accidents (there are dozens of accidents in the crowded strait every year). Even more than the land-locked straits of the Middle East, it is also vulnerable to extreme weather—which has only gotten worse in the past few decades.
There’s actually an atmospheric phenomena that scientists are only recently discovering, where thunderstorms directly above the Strait of Malacca are “significantly more powerful” than storms in the open ocean.
The culprit? Ship exhaust fumes.
4. THE PANAMA CANAL
Finally, there’s the Panama Canal—a little more familiar and a little less exotic than any of the others we’ve covered so far. Because of its proximity the US and Canada, it’s in a far more stable geopolitical position than any of the other waterways we’ve listed.
However that doesn’t make it immune. According to US military officials, the Panama Canal is a “dream come true” for terrorists. Its vulnerability is so high that the US has in the past kept more than 70,000 troops there to deter attacks. That all changed back in 1999, when the US peacefully handed control of the canal back over to the nation of Panama.
In the 21st century the Panama Canal has managed to weather 9/11, hurricanes, and COVID without too much trouble. Let’s hope that streak continues.
Dangers to the World’s Food Supply
Of all the risks to the world’s supply chain, the ones that ought to keep us up at night are the vulnerabilities to our food supply. Of all the most critical commodities (besides water, which is still produced and distributed locally, by and large), food is the one we literally cannot live without.
Here are some of the biggest threats to the food supply chain.
5. TOO MANY EGGS IN ONE BASKET
As of today, four companies own a massive percentage of the world’s staple crops. This chart tells the story:
The majority of the food that ends up on our dinner table is processed by just a few companies.
It wasn’t always this way. Over the last half century or more, developments like complex agricultural equipment and lower produce prices drove small farms out of business. This created a vacuum that large corporations swooped in to fill. In the 1930s there were 6.3 million farms. Today, that number has been cut to a third.
The end result is that the majority of the food that ends up on our dinner table is processed by just a few companies. And consequently, decisions about the US food supply are made by a group of business leasers small enough to comfortably fit in a Ramada Inn conference room.
This is one the world’s biggest and least talked about supply choke points. If just one of those companies (let alone a few) were to take a major hit, it would have the potential to put the entire US food supply in jeopardy.
2020 showed us exactly how this could play out. During our wild COVID year, Tyson Foods’ Chairman warned Americans in an epic open letter in the New York Times that the “food supply chain is breaking.” Because of the troubles of just that one company, a massive percentage of US chicken, pigs, and cattle were in danger of being “depopulated.”
That same year, Smithfield Foods, the largest pork producer in the world had an outbreak at one of their processing plants, forcing a complete shutdown. That single shutdown caused the US pork supply to reduce by five percent. That’s just one plant!
6. THE GLOBAL CALORIC DEFICIT
As the world population grows, some experts worry we will reach a breaking point where we can no longer supply all the calories we need.
According to some experts, as the population of the world continues to balloon to nearly 10 billion by 2050, we are at risk of reaching a tipping point where human demand for food and calories is greater than all the combined calories the planet produces using current technologies and processes.
This imbalance is called the “caloric deficit.” That tipping point, according to Sarah Menker, Gro Intelligence Founder and CEO, should come around the year 2027. Her math for arriving at this date is based on projections of how many calories the earth’s exploding population will need based on its rate of consumption compared to its current production rate.
Baked into Menker’s calculation is that fact that, even if we could come up with a solution to feeding our skyrocketing population, the world’s growing middle class in countries like India and China is going to make it hard to implement.
As millions upon millions of citizens in these countries continue to demand higher caloric diets, the energy, land, freshwater resources, and production power to support them will reach unsustainable levels.
And the List Goes On
And we haven’t even mentioned our country’s major supply and demand issues, failing infrastructure, and the growing threat of cyberterrorism. Which of these issues is most concerning to you? Which are you working to prepare for? As always, share your thoughts in the comments below.