There is a high probability that we’ll see supply chain issues in commodities in 2024. Suppliers will face shortages of core agricultural items. This assessment is based on several factors coming to a head, including high input prices, farm profitability concerns, increasing protectionism, and extreme weather events.

In 2023, shortages in agriculture commodities, such as raw sugar, natural rubber, rice, and soy had the highest impact on production. Governments have taken action, with nearly 35 export bans and controls on key agricultural products to protect domestic food security. Leading rice and sugar suppliers like India, Thailand, and Pakistan, accounting for 28 percent of the global sugar supply, implemented export limits affecting world markets.

New protectionist measures on commodity exports are likely to be proposed or expanded in 2024, causing further supply chain issues and disruptions with limited warning.

Risk 4: Geopolitical instability

According to the UN, the year 2023 saw the highest number of violent conflicts since the Second World War. And 110 million people have been forcibly displaced worldwide as a result of persecution, conflict, violence, human rights violations, or events seriously disturbing public order, says the UN Refugee Agency.

Rising geopolitical instability threatens supply chains more than ever. The experts at Everstream believe tensions and regulatory friction between China and Taiwan make it a focal point for potential supply chain challenges. We could see additional regulatory hurdles for exports in sectors such as semiconductors, agriculture, aerospace, and IT. Any escalation could cause problems in the electronics, textiles, plastic, rubber, chemicals, and base metal sectors could also be impacted by any escalation. Disruptions in the Taiwan Strait would affect approximately half of the world's container ships passing through it.

"We're going to see continued volatility", said Tobias Meyer, CEO of DHL Group in a CNBC Interview at Davos 2024.

Risk 3: Protectionism

Despite the fact that economic experts continually show that protectionism does not achieve its goals, Everstream expects escalating trade disputes to impact various commodities and products. These conflicts are leading to increased export controls and sanctions, causing supply chain problems and prompting companies to seek alternative technology suppliers to avoid disruptions.

For example, the U.S. has imposed export controls on special nuclear materials and semiconductor production equipment, while China has implemented controls on drones, gallium, germanium, and graphite. Apple is one of many companies mitigating supply chain challenges by moving manufacturing to countries like India, Singapore, Thailand, and Vietnam. We will likely see the shift toward “Plus One” strategies and supply chain diversification continue.

Risk 2: Environmental regulations

Over the past four decades, the world has seen about a 38-fold increase in environmental laws – and more are on the horizon as countries strive for net-zero emissions and resource protection. There is a very good chance that growing environmental regulations will impact business, affecting even companies with established environmental, social, and governance (ESG) policies. The focal point is in the U.S., where nearly half of the production stoppages and litigation took place in 2023 due to environmental violations.

Everstream has flagged upcoming legislation that addresses deforestation, packaging, and chemicals. Supply chain managers will likely face a host of added supply chain issues, such as administrative burdens, operational costs, price hikes, and other disruptions as they adjust production practices to comply with regulations.

Risk 1: Extreme weather

Everstream gives extreme weather a 100 percent risk score. That is how certain they are that the weather will cause major supply chain issues. The writing is on the wall: Billion-dollar weather events in the U.S. have increased from every four months in the 1980s to every three weeks today. And all signs indicate that this “era of extremes” is now the new normal.

The Panama Canal faces its worst drought since 1950, leading to prolonged draft height restrictions and daily vessel transit limits, causing delays for bulk carriers, freighters, and tankers. Winter storms, exacerbated by record-high ocean temperatures, pose additional delays and cancellations. Expect a continuation of extreme weather events in 2024.

If you are not using big data analytics to manage and mitigate supply chain risks, then you are probably not prepared for the supply chain challenges ahead. Everstream’s supply chain risk experts capture, record, and analyze events to reveal insights and make risk predictions. We rely on their expertise to build contingency plans that help our customers prepare for supply chain problems and avoid disruption – and we highly recommend that you do the same.

This story was first published on DHL Delivered and was republished with permission.