Will Agriculture Struggle in Lockdown | The Corona Correction | Refinitiv
Welcome to the Corona Correction Series in association with Refinitiv. I'm your host, Roger Hirst. We've talked a lot about oil, copper and gold during the series. But perhaps the most important commodities right here, right now are agricultural commodities, and maintaining the supply chains for foodstuffs. I spoke to Daniel Redo, Director of Agricultural Research at Refinitiv, to ask if the shutdowns were affecting either production or supply of foodstuffs - or both. I mean the agriculture and the food and beverage sectors have been very heavily impacted. Nearly everyone in the world has experienced the food shortages firsthand at grocery stores or maybe online. Personally, I'm still speechless at seeing shelves completely empty of fruits and vegetables, meats, cheeses, pasta and canned goods. The bright side is, is that there are ample supplies of the main crops that go into making food stuffs. Crops like wheat for bread, pasta and biscuits, sugar to sweeten everything. Rice is a staple food, corn and soybeans to feed livestock. The problem has been that global trade flows and supply chains have been severely disrupted following things like port disruptions. And then of course in an unprecedented effort to combat and slow the contagion many countries have severely curtailed travel and shuttered businesses. And so everything has to be re-oriented and sorted to get things where they are needed most. This is the problem we've had for as long as I've been around in this business. The world has always produced enough food. The problem is storage, processing and transportation all at a reasonable cost. Right now, I don't foresee any major supply issues in the let's say the short term. South America is coming off very good corn and soybean crops. And the Brazilian soybeans are what like, for example, China is buying to feed their pork. Europe, Russia and Ukraine, some of the world's largest grain producers, are heading into the spring season with winter crops like wheat in decent condition. That's the good news. What concerns me is what happens during and after harvest. We need the farm laborers to help pick the crops or assist the machinery. We need trucks and staff to keep factories, ports, warehouses and slaughterhouses running at normal pace. Otherwise, the whole system breaks down. Again it doesn't matter how much food we produce, we just have to get it to the right places that need it and at the right time. And to do that we need enough healthy people to do their jobs. There are already reports rolling in around the world of major issues arising in these types of sectors. In Argentina, for example, a recent Reuter's article was reporting that only half the usual trucks carrying beans are getting to crushing facilities because municipalities are controlling the movement of grain trucks through their jurisdictions. I'm also hearing that Malaysia has started closing some palm oil plantations to prevent the virus to spread. Brazil is grappling with potential port strikes, and has already put two key grain exporting cities in total lockdown, which essentially is like banning shipping. These are the types of things that have me concerned because that is what will break down the supply chain. Daniel is fairly comfortable that the production side of the equation is looking reasonably good for now, though, he would be concerned if the current lockdowns extended into the back end of the Northern Hemisphere summer, and started to impact the harvest and transportation of this year's crops. He was, however, worried about the breakdown in the current supply chains, echoing Refinitiv consumer analyst Jharonne Martis, who was concerned about empty shelves when we interviewed her in early March. Daniel also echoed the thoughts of metals analyst Andy Home, in that these outages in supply could eventually lead to inflation of consumer prices for many essential goods. The authorities will be monitoring this sector very closely. We'll see you later with another update.