Two weeks ago the federal government released a report on Australia’s food security from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), which, unlike that agency’s usual dry as dust releases, had a distinct spin.

Calculated to reassure the nation that “panic buying” during the Covid-19 crisis was foolish – because Australia is one of the most food secure nations in the world – it was a data-backed version of Scott Morrison’s scolding of consumers in the first weeks of the pandemic. Panic buying was “ridiculous”, the prime minister had said. “Just stop it.”

While the ABARES document contains no lies, it was only part of the story. It is true that Australia produces more food than we can eat, but it is also true that we are not self-sufficient in groceries – if by that we mean the contents of the average supermarket trolley.

During the past two decades, Australia’s food and grocery supply chains have become increasingly vulnerable to crisis. This is the story behind the dissonance experienced by shoppers in recent weeks, as supermarkets and governments have united to assure us there are no shortages – yet it has been hard to find a bag of rice, a pack of mince or a bottle of pasta sauce. The reasons take in globalisation, cost-cutting, Australia’s concentrated grocery sector and modern orthodoxies in inventory management.

Food manufacturers and grocers are reluctant to talk about fragilities in Australia’s food supply chain. The Saturday Paper has spoken to supermarket managers, food manufacturers and packaging suppliers. Few were prepared to go on the record, because no one wants to be accused of causing another panic.

The government has known about these vulnerabilities at least since 2012, when the Department of Agriculture, Fisheries and Forestry commissioned a report from the Sapere Research Group on the resilience of the country’s food supply chain. The report concluded there were key and increasing vulnerabilities, and in major disasters – including bushfires, floods and pandemics – these could become critical for weeks at a time.

While Australia is a net exporter of food, the report warned that “this does not necessarily mean that Australia is self-sufficient in food supply”.

The vulnerabilities caused by global supply chains are exacerbated by the fact that supermarket warehouses and storages only hold about 30 days of stock of non-perishable items, and only about five days of fresh produce. There is no stockpiling capacity, and minimal surge capacity.

In Britain, research by the Which consumer group found few people were excessively stockpiling during the Covid-19 crisis. While the big stockpilers attracted the media attention, most shoppers were adding just a few extra items to their trolleys. Industry figures think this was also the case in Australia – and point out that some state governments were advising people to stock up in the early weeks of the crisis.

In Australia, as in Britain, the surge in demand – from checkout to warehouse to factory, port and paddock – was enough to push the system to the edge. The entire contents of grocery supply chains were transferred from warehouses to household pantries. Now, according to a letter to customers from Woolworths chief executive Brad Banducci, the figures suggest the average Australian household has two weeks’ supply of food in the pantry, instead of just a few days’ worth, as was the case before the Covid-19 crisis.

One person’s panic buying is another’s sensible preparation. The 2012 Sapere report recommended the federal government get behind the idea of a “pantry list” and encourage households to always have a couple of weeks’ worth of staples on hand, in case of crisis and emergency – including pandemics.

The problem, it seems, was not households stockpiling, but that everyone did it at once, in a panic and in the teeth of a crisis, rather than as a normal part of national preparedness.

Under the surface, there are plenty of stories of anxieties and near crises in recent weeks.

There was worry about supplies of plastic wrap – used in everything from pasta and rice bags to bulk wrapping of pallets. It is mostly manufactured in Australia, but from imported products.

Further back in the supply chain, farmers were concerned they would not have sufficient supplies of fertiliser for the next planting season, because most of it comes from China.

These mini-panics highlight the fact grocery supply chains are now both long – spanning continents – and complex.

Only those directly involved in food importation and manufacture know where the components come from – and often the knowledge is held not at the top, but in middle management. There is no national central registry or repository of knowledge. Australian Bureau of Statistics and Austrade figures give only the big picture – not the essential details, such as what is involved in getting a bottle of pasta sauce onto the supermarket shelf.

Let’s say the tomatoes have been grown in Australia. The jar, though, is almost certainly from China, India or Italy, manufactured by a multinational corporation that holds specifications for different brands on a central computer.

In recent weeks, one of our major supermarket chains wasn’t able to confirm it had managed to get a container-load of glass jars “on water” from coronavirus-disrupted northern Italy for one of its house-labelled products. Had it not shipped, we could have expected shortages of passata in about three weeks’ time. The jars are on their way.

Then there’s the jar’s metal cap, which may come from the same source, or a different company and country. If the pasta sauce contains food colouring, spices or flavouring, they too are likely imported.

Our bread is mostly made from Australian wheat – but almost all the yeast comes from overseas. Long-life milk comes from Australian cows, but the UHT packaging comes from China. A popular brand of mustard contains Australian-manufactured vinegar, but mustard seeds from Wisconsin, in the United States.

Most of the pork we eat is grown here, but the brine that turns it into bacon and ham is imported. Ice-cream is made from Australian milk, but the cocoa in chocolate ice-cream is mostly imported.

Australia usually grows more than enough rice – though not necessarily all the types we like to eat. During the past few years, thanks to drought and the reallocation of Murray–Darling Basin water to cotton, we have produced only a quarter of the rice we eat.

During the Covid-19 crisis, Vietnam and Cambodia have restricted rice exports because of concerns about their own food security. Locust plagues in northern Africa and drought in Cambodia and Myanmar have also compromised supplies. Australia’s own rice-growing industry, not wasting a good crisis, is using the situation to call for more water to be allocated to growing rice in the Murray–Darling Basin.

Fresh milk has one of the shortest and simplest of supply chains, because it is perishable. Plastic milk bottles are even blow-moulded on site in the big dairies in a seamless chain from udder to refrigerated truck. But most of the plastic pellets used to make the bottles come from overseas.

Australia exports beans and legumes but can’t put cans of them on our own supermarket shelves without access to global supply chains because the country’s last tinplate steel mill closed in 2006.

Australian Bureau of Statistics figures – which cover all packaging, not only that for groceries – show that imports of glass, paper and plastic packaging have all increased in the past three years. China dominates as a supplier in all categories.

Further back in the supply chain, most agricultural chemicals, including fertilisers, pesticides and herbicides, are imported, with up to 90 per cent coming from China and India.

Dr Geoffrey Annison, acting chief executive of the Australian Food and Grocery Council, emphasises that despite some short-term anxieties and disruptions, these supply chains have held up in the crisis. Countries are keen to maintain exports. But what if there was a war, or even greater international disruption?

He says that if all imports stopped overnight, Australians would not starve, but our diet would become “basic”.

“We would go back to vegetables. We’d go back to making pasta. The bread would be different. We’d still be able to bake bread, but not all the varieties we have now … We wouldn’t be able to make Indian curries because most of our spices come from overseas.”

And forget chocolate biscuits.

“We should never tell people we are not self-sufficient in food,” says Annison, but he adds that food security is about more than calories and nutrition. It is also about culture and lifestyle.

Added to these vulnerabilities is the way in which our grocery chains manage their warehouses.

Once, if a product wasn’t on the shelf, it made sense to ask if there was more out the back. These days, there is nothing, or very little “out the back” in most of our supermarkets. Instead, retailers rely on what is known as “just in time” supply management, or JIT to the cognoscenti.

JIT inventory control was pioneered by Toyota in the 1970s and has become global orthodoxy, including for groceries. Data flows from checkout to warehouse and supplier. Orders of raw materials are aligned with production schedules and consumer demand. Big distribution centres – the warehouses of our grocery companies – are increasingly automated, with goods flowing in and out on robotic pallets.

It is, in its way, a modern wonder – though so dependent on technology that the 2012 Sapere report warned the system could be brought to its knees by hackers or a cyber attack.

The whole system is geared to minimising the amount of working capital tied up in stock and minimising the cost of renting or buying storage space. The cost savings are one of the reasons our food is cheap. But it is not a system geared to deal with crises and unexpected surges in demand.

At the same time, the three companies that dominate the Australian retail grocery business – Coles, Woolworths and Metcash, which supplies IGAs and Foodworks – are increasingly consolidating their distribution centres. The Sapere report found Coles had gone from 33 nationwide to just 14, and Woolworths from 31 to 11. There has been more consolidation since that report.

If one or more of these centres lost power, had transport links cut or was subjected to an attack, flood or fire, the disruption to food supplies could be intense, the Sapere report warned. It would take days, or weeks, for supply to return to normal.

If there was more than one natural disaster at a time – say a flood in one state, a severe bushfire in another – food supplies to a region might be disrupted for days or weeks.

Jan Paul van Moort, who was one of the co-authors of the 2012 Sapere report, and Alexandra Lobb of ACIL Allen Consulting have recently completed a study of the agricultural industry for AgriFutures Australia.

They believe Australia is well positioned to adapt to crisis. If demand outstripped supply, exports would be diverted for domestic use. If some goods became unavailable, others could be substituted. We could gear up to produce our own yeast, our own brine, our own packaging.

Part of the response to disruption, van Moort suggests, would be government liberalising regulations. One example might be that if there was a shortage of glass jars, health regulations might be adjusted to allow supermarkets to refill jars brought by customers.

Annison is also upbeat about the ability of industry to adapt. If a large distribution centre was “taken out”, he says, another could be built quickly, and almost anywhere – on playing fields, for example.

But the adaptations would take time and would come at a cost – to export income, for example, if exports were diverted for domestic use. And the international sourcing of ingredients and packaging has happened because it is much cheaper than local manufacture. If we did it onshore, food costs would rise, and the poor would suffer the most.

The grocery industry is still trying to work out why it was toilet paper that became the emblem of supply chain challenges. “One for the psychologists,” says van Moort. It would have made more sense for there to be a run on petrol, given we know Australia holds inadequate reserves of fuel, and toilet paper is locally manufactured. Yet the service stations were relatively untroubled.

Annison says the industry needs to understand customer behaviour better, particularly when social media means panic can spread faster than a virus.

So what lessons are there for the future?

The federal government has announced a review of Australia’s manufacturing industries as part of the new emphasis on “sovereignty”. Most of the attention has been on medical supplies, but Annison sees relevance for groceries and packaging. Factories can be modernised so they are more adaptable, able to use 3D printing and other technologies so they can rapidly produce whatever is needed.

Otherwise, asserts Annison, there was no market failure, and hence no reason for government intervention. He certainly opposes tariffs or other moves to encourage local manufacturing. “We need global supply chains,” he says, both as exporters and importers.

Governments, however, might “nudge and encourage” grocery suppliers to maintain greater stockpiles.

Meanwhile, the grocery industry is patting itself on the back. Amid a sudden, unpredicted uplift in demand – fivefold in some product categories – the system was strained but mostly held up.

For his part, Annison maintains two weeks of staples in his pantry, and thinks others should do the same. It is a difficult message for governments to put forward without creating panic, but it may prove necessary in this moment when the geopolitical climate is more unstable than at any other time since World War II.

This article is supported by the Judith Neilson Institute for Journalism and Ideas.

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