Global food and agricultural trade has grown to a scale that makes supply chains more interconnected, but also more exposed to disruptions spreading across markets. As a result, sourcing and supplier selection strategies are shifting toward more resilient and flexible models built around better risk management and genuine diversification.
According to FAO's new report "The State of Agricultural Commodity Markets 2026", the value of global agri-food trade increased roughly fivefold between 2000 and 2024, reaching around $2 trillion.
For procurement leaders, however, the most relevant issue is not trade growth itself, but the risk to business continuity and financial performance. FAO's analysis shows that export volumes within individual trade relationships tend to recover within a few months after a shock, while price increases can persist for longer.
For food manufacturers, importers, and distributors, the challenge is maintaining continuity of supply while limiting the longer-term cost impact of a temporary disruption.
More suppliers do not necessarily mean greater resilience
One of FAO's conclusions is that countries able to source from a wider range of trading partners tend to be better positioned to absorb shocks. At company level, this supports dual sourcing and multi-sourcing, but with an important caveat.
Having two or three suppliers is not true diversification if they all depend on the same harvest, country of origin, port, upstream producer, or geographically concentrated raw material.
When assessing sourcing resilience, it is therefore more useful to examine the correlation between supplier risks. Two independent suppliers may still be exposed to the same weather event, export restriction, shipping route, or increase in energy costs.
This changes the way diversification should be viewed. The objective is not simply to increase the number of suppliers, but to build genuinely independent alternative sources of supply.
From backup suppliers to alternatives that are ready to use
This approach is already reflected in the procurement strategies of global companies. In Deloitte's 2025 Global Chief Procurement Officer Survey, which included more than 250 CPOs across 40 countries, 74% of respondents identified maintaining active alternative sources of supply as the most effective risk mitigation measure. Greater supply chain visibility followed at 64%, while 61% cited better information sharing and collaboration with suppliers.
For an alternative source to provide real protection, however, it must be ready to use at short notice. Simply having a second supplier on file is not enough. If that supplier has not been qualified, the product has not been tested, or capacity, lead times, and operating conditions have not been assessed, switching may take too long when a disruption occurs.
For critical raw materials and components, companies may therefore benefit from maintaining a second source that has already been approved from both a quality and regulatory perspective, with agreed specifications, known production capacity, verified lead times, and at least preliminary commercial terms. In some cases, allocating a small share of regular purchases to the second supplier can keep the relationship active and provide ongoing evidence of its reliability.
Different materials require different sourcing strategies
Applying dual sourcing, higher inventories, and backup contracts across every purchasing category would quickly increase both cost and complexity. A more effective approach is to segment sourcing strategies according to risk.
For each ingredient, raw material, packaging item, or component, companies can assess at least five factors:
- substitutability, or how quickly an alternative source can be introduced without changing the recipe, quality, labeling, or other product characteristics;
- supply concentration, considering both direct suppliers and the upstream origin of critical raw materials;
- supplier switching time, including qualification, testing, audits, and regulatory procedures;
- price and availability volatility, including exposure to weather, energy costs, exchange rates, tariffs, and trade restrictions;
- the financial impact of a supply disruption, which may far exceed the purchase value if it stops a production line or prevents finished products from reaching customers.
A commodity that is readily available in a liquid market may be managed through several qualified suppliers and a combination of contracts and spot purchases. A critical ingredient with highly specific requirements may justify an active second supplier, guaranteed access to part of its production capacity, and higher safety stock. For fresh products or items with a short shelf life, priority may instead shift toward alternative geographic origins and logistics routes.
The lowest price does not always mean the lowest sourcing cost
Greater volatility is also changing how companies assess purchasing costs. Comparing suppliers purely on unit price can hide a significant part of the financial exposure associated with the sourcing decision.
Alongside the traditional total cost of ownership, strategic decisions can benefit from a risk-adjusted view of total cost. This means considering not only the price of the raw material, but also transportation, tariffs, working capital tied up in inventory, required safety stock, lead times, qualification costs, and, above all, the potential economic impact of a disruption.
A supplier that is slightly more expensive but located in a different region, with shorter lead times or greater production flexibility, may therefore provide value that a simple price comparison fails to capture.
This approach also makes the cost of resilience easier to assess. Paying a modest premium to keep a second source operational may make economic sense when the expected cost of a production stoppage, emergency purchase, or expedited shipment is significantly higher.
Inventory strategies are becoming more selective and dynamic
The role of inventory is evolving as well. Increasing stock levels was a common immediate response to recent crises, but tying up capital across every purchasing category is not a sustainable long-term strategy.
A McKinsey survey published in late 2025 illustrates this tension. Among companies affected by new tariffs, 45% had increased inventories as a mitigation measure, 39% were adopting dual sourcing, and 33% were pursuing nearshoring or onshoring, bringing sources of supply closer to their operations. At the same time, few supply chain leaders viewed broad-based inventory increases as a sustainable long-term solution, particularly because of their impact on working capital.
The direction is therefore toward more targeted and dynamic buffers. Safety stock can vary according to the criticality of the material, replenishment times, seasonality, market signals, and supplier reliability rather than remaining fixed throughout the year.
Critical risk may lie beyond the direct supplier
One of the hardest challenges is gaining visibility into the deeper layers of the supply chain, including suppliers, sub-suppliers, origins, and critical dependencies. In the same McKinsey research, 95% of surveyed companies said they had visibility into at least first-tier supplier risks, but only 42% extended that visibility to the second tier or beyond.
This is particularly relevant to the food industry. Two packaging suppliers may purchase the same underlying material; several ingredient manufacturers may depend on the same agricultural commodity; and plants located in different countries may still rely on the same port or the same source for a critical raw material.
Supply chain mapping should therefore begin with the most important categories and focus on identifying potential hidden single points of failure, rather than attempting to map every tier of the supply chain across thousands of SKUs.
Building flexibility into supply contracts
Contract design can also strengthen resilience. For the categories most exposed to disruption, price is only one part of the negotiation. Flexible volume bands, reserved production capacity, transparent indexation formulas, options for additional quantities, and agreed procedures for managing exceptional changes can all play an important role.
Standardizing specifications can be equally valuable. When a recipe, component, or packaging format can be supplied by only one manufacturer, the business may become dependent on that source because of decisions made during product development. Bringing purchasing, quality, R&D, and supply chain teams into specification design at an early stage can make it easier to qualify alternative suppliers without compromising food safety or quality.
More data and AI, but above all better signals
Technology is becoming increasingly important in sourcing risk management, although adoption remains less advanced than the level of attention around AI might suggest. In the McKinsey survey, three-quarters of companies were planning, developing, or piloting AI applications in their supply chains, while only 19% said they had deployed them at scale. Demand forecasting, inventory optimization, and supply planning were among the leading use cases.
For procurement teams, some of the greatest value may come from connecting information that is still often analyzed separately: commodity prices, weather conditions, geographic concentration of supply, supplier performance, logistics lead times, inventory levels, exchange rates, and geopolitical signals.
The realistic goal is not to predict the next disruption with certainty, but to shorten the time between the first warning signal and an operational decision.
Integrating cost, flexibility and risk
The recent FAO report also offers an important perspective on the wider sourcing debate. Global food markets have shown a significant ability to adapt, and more interconnected trading networks can help absorb shocks. Greater instability does not therefore mean that every source of supply needs to be moved closer to production sites or that international trade should be reduced.
For manufacturers, importers, and distributors, a more effective strategy may be to build a diversified sourcing portfolio in which cost, availability, geographic origin, flexibility, and risk are assessed together. Under this model, procurement performance is no longer measured solely by the price negotiated. Its role becomes broader: ensuring that the company can continue producing, purchasing, and selling even when part of the supply chain is temporarily disrupted.
