Feeding the world: Agri-food players in crisis throughout coronavirus

08 May 2020 --- There is a growing sentiment around the world that crucial food industry stakeholders including producers, farmers and processors are bearing the brunt of safely maintaining food security, an “essential” response to the pandemic. Despite a series of government handouts, many feel “in crisis” and on the verge of collapse, arguing that aid packages fall short of mitigating the level of financial support needed to safely sustain the food supply chain during these unprecedented times. Canada’s agri-food industry is the latest sector to voice concerns, slamming the government’s recent CA$252 million aid package as inadequate.

Food safety and disruptions have been in the spotlight for many weeks now, but there is a general feeling that the global supply chain is passing an unparalleled test, albeit with some serious consequences. Consumers may be changing their eating habits and have fewer options in some cases, but food supply, in general, has been ensured. However, the effort to sustain supplies is complicated and costly.

From a broken meat supply chain in the US to a crisis in Europe’s dairy and fresh produce sectors, there is no let-up for food sectors under enormous pressure to sustain operations. 

Employee safety is a major concern across many food processing sectors that have to maintain operations while keeping large-scale workforces protected. This is pronounced within the US meat industry, which has faced turmoil in recent weeks with many workers getting sick from working side by side. 

Big players such as Smithfield Foods, Tyson Foods, and JBS USA have all closed meat factories to get a hold on coronavirus testing, mass absenteeism, and how to safely hit production levels while protecting workers with social distancing measures. Amid a series of closures last week, President Trump signed an executive order forcing meat plants to remain open in a bid to overcome a looming meat shortage. 

This kind of slower production creates ripples across the supply chain. Meat plants have been reopening this week, but production levels cannot be what they were pre-pandemic and so US retailers and butchers do not have the usual stock levels or cuts of meat. US consumers are now getting to grips with fewer meat items on shelves. Meanwhile, Minnesota Pork Producers – faced with not being able to sell its pigs –  are reporting that an estimated 10,000 pigs are being euthanized daily in the state. 

Meanwhile, stockpiles of potatoes, fruit and vegetables, and milk are building up, which is leading to a paradoxical food waste scenario. 

Lockdown and quarantine measures have annihilated the foodservice industry, which still may be some way from recovering, despite talks of some easing of restrictions in the EU and US coming soon. With so many markets suddenly and steeply declining, producers are faced with surplus products in some cases and a significant decline in revenues as a result. 

“The agri-food sector has successfully maintained an uninterrupted food supply throughout the crisis, but many businesses are reaching the limits of their resilience. The federal government’s latest announcement promising CA$252 million in assistance falls significantly short of meeting the needs expressed by the sector and by the Canadian Federation of Agriculture, which is calling for CA$2.6 billion,” says Canada’s Union of Agricultural Producers (UPA) President, Marcel Groleau. 

“The existing programs completely fail to address the exceptional issues we are facing. To claim otherwise, as our governments are doing, is to mislead farmers and citizens. Transferring the burden onto farmers, who are already under multiple pressures, is not the answer,” he adds.  

Europe sees “shock resilient” dairy
Meanwhile, in Europe’s dairy sector, Secretary-General at the European Dairy Association (EDA), Alexander Anton explains what’s been happening. “Across Europe, the dairy sector made every effort possible to keep shelves and fridges stocked in Europe and beyond. We see that the milk and dairy supply lines (milk collection, processing and distribution) have been shock resilient even in the worst COVID-19-hit regions of Europe, despite shortages in packaging material, other operational supplies and workforce,” he tells FoodIngredientsFirst. 

 He adds that the short-term increase of consumer goods sales did not compensate the muted demand from the horeca (hotels, restaurants and canteens) sector, a significant decrease of third-country export (due to lacking logistics and much lower demand), and the closing of open-air food markets (an important outlet for some southern European dairies). 

“This dramatically changed demand situation together with the seasonal peak of raw milk production in the northern hemisphere, has put high pressure on the dairy markets, which are in an unbalanced situation today. With very high milk volumes processed into powder today, notably also in the US, where the closing down of restaurants has muted almost half of the cheese markets, the market development of milk powder is more than worrying,” Anton notes. 

Commodity price decline
On top of market dynamics and prices being skewed as a result of the coronavirus, world food commodity prices have been declining for the last three months. 

Prices declined for the third month in a row during April, according to the UN Food and Agriculture Organization (FAO), as the economic and logistical impacts of the COVID-19 pandemic resulted in significant contractions in demand for many commodities. The FAO Sugar Price Index hit a 13-year low, declining 14.6 percent from March, while the FAO Vegetable Oil Price Index declined 5.2 percent in April, driven lower by falling palm, soy, and rapeseed oil values. The FAO Meat Price index declined 2.7 percent, as a partial recovery in import demand from China was insufficient to balance a slump in imports elsewhere. 

Notably, international rice prices rose by 7.2 percent from March and the FAO expects global wheat utilization in 2020/21 to be stable, with anticipated increases in food consumption outweighing reductions in feed and industrial uses.

What’s next?
Uncertainty continues to dominate, particularly as it’s not yet clear how the easing of lockdown restrictions will manifest across different countries. It’s difficult to determine the long-term impact coronavirus will have on global food markets. While many food ingredient companies, key commodity players and brands within the F&B industry are reporting in their first-quarter results, solidly navigating their way through the crisis, they also warn that a worse financial situation may start to show later in the year. 

By Gaynor Selby