The latest quarterly results of the major agricultural groups show that the most significant impact of the coronavirus pandemic, so far, has been on the meat and biofuels industries. ADM reported a 2.2% drop in revenue, although it performed better than the market was expecting, while Bunge logged a loss and lowered its 2020 outlook. Both firms struggled with the collapse in biofuel consumption and the drop in corn or soybean demand, along with the closure of US meat plants and lower feed demand. For its part, Cargill decided to postpone its earnings release amid the uncertainty. Brazil was the only silver lining in the period, thanks to a weak Real and a recovery in demand from China.
The failure to quickly implement containment measures in US meat plants could actually be boosting margins, especially after the President signed an order to keep them open which should protect them from lawsuits. With 22 plants closed, meat prices went up while the price of livestock collapsed. An expert estimated that the margin for cattle went from USD 74 in 2014 to USD 726 now. In response, ranchers are asking the government to correct the disparity in profit, while some lawmakers are already looking to block mergers to avoid creating more food giants and monopolies.
Despite the recent White House order, Cargill is still closing meat plants across the US, such as in Wisconsin and Nebraska. The situation is more complicated in Canada as workers are legally allowed to refuse to work if they think it is still too dangerous. A union filed a lawsuit to block Cargill from reopening a plant in Alberta arguing that working conditions were still not safe enough.
The supply disruptions forced Wendy’s to stop selling beef items at over 1,000 of its stores, while Costco is now rationing the sale of beef, pork and poultry products to three items per customer. The supply disruption is forcing people to change their habits, by buying chicken from small independent farms, for example. Unlike food giants like Perdue and Tyson, small poultry operations have seen little disruptions and some reported a 300% increase in retail sales. One farmer said he expected that large firms will keep struggling and that this was just “the tip of the iceberg”.
Beyond Meat is seizing the opportunity by offering discounts and large value packs to increase its market share. The higher meat price is eroding the premium for the plant-based meat, which was previously 2-3 times more expensive than ground beef. Moreover, the difficulties faced by the meat sector is protecting alternative-meat producers as shoppers would normally focus on cheaper goods amid an economic downturn. Nielsen data suggested that US sales of plant-based meat were up 200% in the week ending April 18 when compared to the same week last year. In Asia, plant-based meat is also gaining in popularity as the coronavirus outbreak was linked to the consumption of animal-based products, the World Economic Forum suggested.
In India, Kashmiris are also struggling to find enough meat because the lockdown is slowing imports from other states. Consumers are not worried, however, as they are simply eating more locally grown vegetables, like haakh. Vegetables are not seen as a suitable substitute by everyone, however, and some regions in the US noted a spike in hunting and fishing permit requests.
Agencies are warning of severe supply disruptions in Africa because of pests. The restriction on cross border trade and global air freight is hampering efforts to combat the worst locust outbreak in decades in East Africa, according to the FAO. The coronavirus containment measures are limiting the supply of pesticides ahead of the key planting season, which could jeopardise the production of key crops.
A sudden change in lifestyle was also responsible for new consumer habits. Sales of sugar in British supermarkets were up by 46% over the four weeks up to mid-April, mainly because shoppers were reportedly doing more baking. In Sweden, a leading candy manufacturer reported a sharp drop in sales of pick & mix candy, as people are worried about touching the shovels to select their candy.
The coronavirus pandemic has created an unusual and sometimes painful sight: producers forced to destroy food crops because of the drop in restaurant demand, combined with a worrying increase in hunger as more people lose their jobs. The obvious solution is to divert some of the food to food banks. For example, Kroger said it will donate 200,000 gal of milk, as the Dairy Farmers of America estimated that 2.7-3.7 million gal/day of milk will need to be dumped. Even luxury products are going to food banks, such as these USD 60 prime 10 oz American Wagyu steaks from Snake River Farms. The meat usually goes to high-end restaurants but the farm donated 35,000 steaks, worth USD 2 million, to the San Francisco-Marin Food Bank.
This summary was produced by ECRUU
