Commodity Conversations Weekly Press Summary

The spread of the coronavirus is making us rethink the world’s food supply chain. We have, suddenly, come to realise how important supermarkets employees and cashiers are. So much so, in fact, that the US states of Minnesota and Vermont decided to classify food distribution workers as “essential” workers, putting them on par with health professionals and making them eligible for free child care. 

For the elderly, sick or disabled consumers, food delivery staff act like emergency first responders. According to this opinion piece, people working for services like Instacart, DoorDash or UberEats are shouldering the health risks involved with shopping and are often badly compensated, with poor or no health insurance. With the government yet to recognise their role, the onus might be on the companies to protect their workers. This is especially so given that food delivery firms are reaping huge financial returns from the surge in demand. The value of the meal delivery company Blue Apron is now seven times higher than it was last week, while shares jumped as much as 198% in one day. 

Further along the supply chain, containment measures like lockdowns are starting to have an impact on transport logistics. The FAO warned that the biggest issue at the moment was making sure products can be quickly transported from origin to destination. Experts say food prices will inevitably go up if quarantine measures are extended for more than two months. The outbreak is revealing that the food distribution system is “more fragile than we think it is”, a professor at Purdue University said. 

Countries that rely on imports are the most at risk, while some countries play an outsize role in producing a single crop, like Russia’s growing importance as a wheat exporter. The whole situation could escalate even further if countries start to hoard food. Kazakhstan and Serbia, for example, recently banned the export of some food products. 

Eventually, food production itself could take a hit due to the shortage of workers, especially with borders closing down. Rural populations face a higher risk because they often have pre-existing conditions, while rural hospitals are less equipped. In the UK, farmers are calling on the government to help retrain workers who lost their jobs because of the virus to help with food production. The sector faces a potential shortage of 80,000 workers and needs a “land army” to ensure the food supply remains stable, unions said. In some sectors, like Brazil’s and Australia’s sugar industry, the switch to mechanised harvesting will help maintain supply, although other operations like plant maintenance could be affected. 

Most government’s containment measures include clear exemptions for essential products like food and drinks. The problem is that there is a lot of confusion. In Brazil’s Mato Grosso, the city of Rondonopolis forced all facilities to close, including plants owned by Bunge and COFCO. The agriculture ministry said the decree did not comply with federal guidance and called on firms to sue the local government. Nestle also fell victim to the confusion over a lockdown in India. The group, which operates eight facilities in the country, said it suspended or slowed operations while it was engaged in talks with the government over an exemption to the lockdown. 

For the most part, however, agricultural groups are not reporting any major disruptions so far. In the US, ADM, Anderson and Bayer mentioned that they were able to maintain operations as usual ahead of the crucial planting season. Cargill said it had noted a slight increase in net demand although the food service sector now only represents 15% of sales, compared to 55% a week ago. A global recession could change consumption patterns and reduce the global meat demand, a Cargill director said, although supply issues could support prices. In the meantime, he said the group was “making decisions by the hour.” 

On a brighter note, corn futures were supported by news that China had bought the most amount of US corn since 2013, a sign that the country is on the road to recovery. China had been expected to increase imports only in the second half of the year. Cargill also reported that it was now operating its Chinese poultry plant at 80% capacity, compared to 30-40% during the worst of the outbreak. 

The lockdown is also forcing people to spend more time cooking at home. Some, like the Silicon Valley crowd, are struggling more than others. Check out this new recipe from San Francisco – cooking frozen tater tots in a waffle iron – called a totwaffles.

This summary was produced by ECRUU

One Reply to “Commodity Conversations Weekly Press Summary”

  1. Ok, agreed. And now look at the decision of Germany of not to allow seasonal workers into the country from Romania and Bulgaria. Poles, Czechs and Slovaks can still enter, but there quarantine measures were put in place and/or borders closed like the Czech border. Germany Needs about 300.000 seasonal filed workers. That means that the harvests of asparagus and early fruits like strawberries and probably raspberries are in real danger. The same problem applies to Spain. Due to the border with Morocco being closed 65% of the needed seasonal workforce couldn’t enter the country. Next stop: Italy. Same situation there. I dare say that Europe is going to face a real supply problem with fruits.

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