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.
