The Covid-19 pandemic is an unprecedented health situation that is also having a major impact on the world’s economy. As many countries decided to take measures to try and limit the spread of the virus, it affected food and commodity markets in multiple ways. You have probably experienced it yourself, and we are interested in hearing your opinion about it. We would like to receive testimonies from various actors in the sector. This piece is a summary of what we have read and heard on the subject so far.
Demand
In Asia and later Europe, lockdowns shifted demand coming from restaurants and hotels to more retails. In Asia, many festivals are cancelled, which is greatly affecting demand compared to the previous years, and therefore prices. During lockdowns in Europe, supermarkets became the main sourcing place for food products. When the pandemic reached developed countries, panic reactions with impulsive purchases of food created a short but intense pic in demand. The situation was rapidly under control.
As everybody had to adapt to the situation, daily consumption habits changed with an increased demand for processed and comfort food. As an example, when lockdowns started, peanut butter sales boomed. Now that measures are being relaxed, consumption is slowly shifting back to previous levels again. However, some changes occurred, for instance in terms of packaging. Bulk purchases decreased severely and shifted to small packaging. During these difficult times, healthy food is popular. Therefore, nuts, like peanuts and cashews are enjoyed for their nutritional values.
As the evolution of the pandemic in the coming months remains uncertain, evolution of demand is hard to predict. The situation is unprecedented, and nobody knows whether new waves of cases will develop and what measures will be taken to limit their effects.
Supply
Covid is also affecting the supply of commodity products. Lockdowns and social distancing measures reduced the availability of labour for production, processing and distribution. In many countries, workers are asked to remain at home as much as possible. Only “essential” activities are possible with special measures taken to limit contacts between workers. As the virus was spreading, most countries closed their borders. Limited mobility of people contributes to labour shortages, especially in agriculture. Labour intensive activities, such as the harvest of certain crops, is complicated. In developing countries, some farmers have encountered difficulties to source inputs for production, such as seeds, fertilizers or pesticides because little stocks are available on site and imports are slowed down.
When the crisis hit Asia, processing industries had to shut down. In India, most processing facilities remained closed for three months rendering impossible to fulfil the contracts that had been signed. Today, supply chains are still affected, closure of factories or reduction in workforce slows down the transformation of products. Disruptions on the distribution channels are occurring. It manifests through delays in the delivery of products because the workforce is reduced in ports, and additional procedures and checks are made. Activities such as custom clearance take more time. Nevertheless, we observe that measures are relaxing in most countries. Economic activities become easier, and the supply of nuts is possible.
Conclusion
Unusual supply and demand are affecting market prices. Markets of most edible nuts dropped during the crisis. Uncertainty about future demand creates confusion in the market. It is still unclear whether this ‘traumatic’ event will imply potential changes in consumption habits. Nevertheless, transactions are still happening, and most nut markets seem to have already reached their bottom for now.
Your contribution
What do you think is the impact of Covid-19 on supply and demand of edible nuts? Do you agree with the above? Did you experience something similar or different? Please send us your views on the subject in the comment section below or by email. We are planning to gather all your reactions in a future post on our website. Thank you in advance for your contribution!
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3 thoughts on “What do you think is the impact of Covid-19 on supply and demand of edible nuts?”
WORLD PEANUT SITUATION UNDER PANDEMIC & LOCKDOWNS, August 10, 2020
The global outbreak of the COVID-19 virus is having a major impact on international trade. As the market for processed edible nuts may slow down, processors have to adapt.
Many governments have already raised the possibility of recurring LOCKDOWNS in response to varying levels of threat around COVID-19. This challenges edible nut processors and they plan for potential future shutdowns and supply-chain disruptions.
Despite economic stimulus plans, it will take some time before economies rebound to pre-COVID-19 levels. As a result, manufacturers also have to plan for a future where demand is somewhat lower, and growth is slower. This UNCERTAINTY requires processors to find flexible solutions, in order to survive the LOCKDOWNS, and adjust to slower global demand.
Critical to this will be getting operational, managing costs, cash flow and operational efficiencies, and developing new outlets for existing and new products.
Logistics and the production of ingredients for processors have been disrupted around the world. In some cases, this has made it difficult to obtain raw materials.
Sometimes containers are not available, there is port congestion or lower frequency of boats and trucks. And sometimes factories or farms have not been able to operate due to lockdowns or outbreaks.
Because the pandemic develops at different speeds around the world and will probably flare up again, this situation is likely to remain. This has led, and may continue to lead, to production being halted due to lack of raw material.
Importers and processors around the world have reacted by focusing on their core products. This is because their clients demand them. They have also been keeping larger stocks of essential products and are looking for additional suppliers to spread risk.
This can also be an opportunity to find new clients. At the same time, you also need to make sure you keep enough stock of ingredients and diversify your supply base for ingredients where you rely on a single source.
At some stage in the coming months, we will reach a NEW STATE OF NORMAL.
In many European countries, governments are allowing restaurants, bars and workplaces to (re)open. However, this is probably not enough to cover lost sales during the LOCKDOWNS. Higher UNEMPLOYMENT levels and LOST INCOMES are now predicted to result in an ECONOMIC RECESSION that will last several months, or even years.
Demand for food tends to be to fairly stable overall during recessions. But consumers often change what they buy and where they consume these products.
Previous recessions have shown that consumers switch their spend to VALUE-FOR-MONEY PRODUCTS. For example, where they might have bought a premium product before the recession, they now might buy a more affordable product.
On the other hand, others might look for affordable luxuries to replace eating out of home. Small treats, once considered unnecessary or even expensive, now seem affordable and well-deserved. As a result, sales of premium sorbets, quality refrigerated desserts and pre-prepared meals all tend to grow during recessions. This will also affect processors, and present you with both challenges and opportunities.
During recessions, many retailers focus on keeping or winning customers by maintaining or even CUTTING PRICES. This has an impact throughout the entire supply chain. Manufacturers face significant pressure to avoid or delay prices increases for as long as possible. Importers and manufacturers actively look for LOWER PRICES from existing suppliers, or for new suppliers who can provide the same products cheaper.
It is necessary to develop a clear PRICING STRATEGY and prepare well for PRICE-DECREASE discussions with your customers. This might even offer opportunities to find new customers.
Best Regards,
Andrés H. “Hari” Georgalos
GEORGALOS PEANUT WORLD
Sarmiento 1664 – (X5960ETY) Río Segundo – Cba – Argentina
Tel / Fax: +54 (0) 3572 42 1809
E-Mail:
Skype: ahgeorgalos1
This pandemic has made people more aware about the risks involved in our way of life. The demand for healthy alternatives for Bio industry meat & poultry is good news for the edible nut industry. Also people are increasingly looking for means to boost their immune system. True or not edible nuts have this reputation. So in the long run considerable growth in rhis market is likely to happen.
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