Customers rush to stock up on products such as flour, pasta and noodles to last through the coronavirus crisis has increased demand for wheat, whose price rose sharply. Let’s take the example Bloomberg data for Chicago future market that shows the trend in the market:
The demand decreased in days after many baked their tasty blueberry scones, delightful apple tarts and sourdough bread. The increase in wheat prices is show below as being only +8% up.
But the Covid-19 pandemic is impacting grain prices as global markets react daily to the evolution. FAO Q&A about the pandemic shows that in comparison with the 2008 crisis – when reduced income and uncertainty made people spend less and resulted in shrinking demand – now there has been an increase in demand.
Moreover – FAO experts say – disruptions are minimal now as food supply has been adequate and markets stable. Good global cereal stocks and the outlook for wheat and other major staple crops is positive for this year. Yes, there still are still countries as France – a big producer in the wheat sector – that has shortages on shelves according to France.info but this is due more to the supply chain.
But from April and further May – FAO experts say – we can expect to see disruptions in the food supply chains. Transport restrictions and quarantine measures, are likely to impede farmers’ access to markets, curbing their productive capacities and hindering them from selling their produce. This will impact specially fresh groceries – season vegetables & fruits as the workforce in Western big exporter countries is represented by foreigners that left to their countries because of Coronavirus crisis. So if we usually saw people gathering salads and spring strawberries it could be a while to the moment when the wheels of agriculture will start working at 100%.
But not to worry as in several occasions farmers & supermarkets have said there are plenty of supplies and now I trust that many people have already stocks of food like cans, frozen food and non-perishable food.
These products went up with 32% while fresh food – salats, fruits, meat consumed right away with only half in the last 4 weeks. Kantar specialists think that there could be a rebalancing of the trend as people will have to restock fresh food.
The numbers are clear that we just had Christmas in spring as sales peaked with 10% y2y in last 12 weeks and were better than the December ones according to Kantar data. Which is significant because we know that Christmas time means for retails almost 30% of the total annual sales. Now, in the 4 week to 22 March increased with 30%.
Online shopping has seen a peek also as people were not so willing to leave their houses to do groceries, then the “lockin” happened. A term proposed by Irish economist David McWilliams – as also the Government announced measure to ensure social distancing but did not use the term lockdown as in many other European countries.
More households than ever before placed an online order in the 4 weeks to 22 March 2020. So 1 in 10 households – 25,000 more shoppers – purchasing groceries online than last Christmas, the previous peak, and 54,000 more than the same period in 2019.
The average household spent an additional €122 on groceries during the four weeks to 22 March, largely driven by shoppers making bigger trips. Last year, 15% of households made a shopping trip containing €120 or more of groceries – this year that figure almost doubled to 27%. Just a comment here, as normal when demand increases, additional shopping online meant that large retailers have a wait-in-slot for more than 1 week in the best cases.
Countries follow consumers in stockpiling food according to Financial Times. Top wheat producer Russia and the world’s 3rd largest rice exporter Vietnam imposed restrictions on overseas sales. Another issues that could impact the logistic cycle is that large importers stumbled upon logistical bottlenecks as is the case in France- another leading wheat exporter – lacking port staff and truck drivers.
Statement as of 6th April from the World Citrus Organisation show that its members have “focused on ensuring the protection of workers across the chain, keeping global citrus production and supply going, and making sure that consumers have access to citrus fruit. This is particularly important given the high nutritional value of citrus fruit, especially their high Vitamin C content. Among its many functions, Vitamin C contributes to the normal function of the immune system“. But the consumers are yet to feel the bitter taste of Coronavirus crisis when talking about grapefruit grown in Asia, US, Argentina and Africa or oranges from Brazil or China as prices could go up:
If we look further than Europen on the US market we see that increased baking drove the demand for yeast – used to make bread and other baked goods – grew 647% in the week ending March 21, compared to the same week in 2019, according to Nielsen data quoted by Business Insider.
But we should not stockpile products as there is also the possibility of creating a crisis where it is not and one household will be left with 20 kg o flour or 50 cans of beans. What is wrong in this picture? Well, supermarkets would rush to provide the needed products to the people stockpiling and then would be left with products on the shelves when situation cools down. The key word is balance.