Livestock giants not doing enough to protect feed supply chain from climate risk

Livestock companies including Tyson Foods, JBS and Marfrig have overly concentrated animal feed supply chains, making them vulnerable to climate shocks, according to a new report by the FAIRR investor network.

Relying on animal feed crops such as soybeans, maize and wheat from only a few geographic areas means these companies could suffer intense shocks from climate events such as drought or flooding, impacting yields, food prices and investor returns, the report argues.

In it, FAIRR – a food system data network backed by investors representing US$90 trillion in assets under management – analysed the soft commodity supply chains of 40 publicly listed protein producers. It found that Asia accounts for roughly 60% of the supplier base for soybean, wheat and maize, while North America accounts for 20%.

The Asian supply chain concentration is particularly concerning given that the region is warming at double the average global rate, and experiencing more frequent and intense heatwaves and floods.

Meat companies lack supply chain transparency

The analysis also found differences in supply chain concentration depending on the company: Almarai and JBS have the least geographically diversified animal feed supply chains, while producers such as Muyuan and Wens have built a more geographically diversified supplier base, giving them more protection against climate-related disruptions.

In addition, transparency is sorely lacking: fewer than half (18/40) of the livestock giants analysed disclose supplier information on animal feed, keeping investors in the dark around supply chain vulnerabilities. 

Within the companies disclosing supplier information, more than half (10) rely on just one or two suppliers for maize, rising to over 60% for wheat and soybeans. And only three report having more than five suppliers per crop, which suggests the entire sector lacks resilience. 

Weiming Pu, Senior Analyst, Climate & Nature at FAIRR, said: "Climate shocks are rapidly turning into feed shocks. Feed crops are highly vulnerable to changing weather conditions and make up 70% of total livestock production costs. What once felt like an environmental issue is now a clear supply chain and financial risk for livestock companies. It is crucial for companies to build resilience through sourcing diversification and investment in climate solutions."

Concerns grow over food system resilience to climate change

This is not the first alarm to be raised around the food system’s lack of resilience to climate change. Earlier this year, a group of food industry professionals in the UK wrote an anonymous memo to alert investors of the commercial risks the sector faces as a result of climate change.

Maintaining anonymity for fear of consequences, they explained that degrading soil health, water scarcity, global warming and extreme weather events were already affecting yield, quality and predictability of supply – with clear commercial impacts.

FAIRR adds in the report that for each additional 1°C-rise in global temperatures, average yields are projected to decline by around 6% for wheat, 7.4% for maize, and 3.1% for soybeans.