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Farming Matters: Phil Bicknell - 'Supply chain shifts amid seismic shock of coronavirus'

The last three weeks have seen a marked shift in how and where we buy our food. It is a pattern that will remain while we are in lockdown and I suspect there will be a few habits or behaviours that persist for the longer term. 

Phil Bicknell, AHDB market intelligence director
Phil Bicknell, AHDB market intelligence director

For many, Government action to close pubs, cafes, restaurants, theatres and gyms on March 20 underlined the severity of the Covid-19 challenges we face.

 

In reality, the first half of the month had already seen reduced visits to pubs, restaurants and so on as coronavirus led many to stay at home. As the month progressed and further lockdown measures were announced, visits to foodservice outlets plummeted.

 

At the same time, we saw shoppers focus on retail and the figures really do bear that out.

 

An extra £1.4 billion was spent in shops on food and drink during the four weeks to March 22, 2020, compared to the same period last year. That is an increase of almost 22 per cent according to Kantar data.

Uplift

 

But for all the news headlines highlighting panic buying, the reality is the uplift came from lots of us shopping slightly more frequently and buying a little bit extra each time.

 

The numbers are quite staggering. The four days between the March 16-19 saw 42 million extra shopping trips and 88 per cent of households went shopping in that period.

 

For individual product categories, the sales increases are numbers that a marketeer can only dream of.

 

Sales value increases year-on-year for the four weeks to March 22, were:

  • Beef +32 per cent
  • Lamb +14 per cent
  • Pigmeat + 25.5 per cent
  • Cheese + 25 per cent
  • Butter and spreads +27 per cent
  • Milk +11 per cent

 

People might equate the higher spend and empty supermarket shelves with soaring farmgate demand. The reality however is more complicated than that and coronavirus is a big shock to food supply chains.

 

With a wide variety of foodservice outlets effectively closed for business, it clearly impacts on demand for raw materials.

 

Over the last three weeks, we have seen the closure of the majority of fish and chip shops. In beef, the overall uplift in sales figures underplay the situation.

 

Surging retail demand for mince and loss of foodservice demand for hindquarter cuts is building up a carcase balance problem.

Higher demand for mince and loss of demand for hindquarter cuts is building a carcase balance issue
Higher demand for mince and loss of demand for hindquarter cuts is building a carcase balance issue

Processors

 

Similarly, in the dairy sector, processors with a disproportionate reliance on foodservice are facing challenges.

 

The forced closure of foodservice outlets had the effect of eliminating a large market for dairy products, leaving many processors with severely reduced outlets for their product.

 

As a result, wholesale markets have weakened significantly, with supplies far outstripping demand.

 

Yes, the spike in retail demand helped to soak up some of the excess milk supplies, but we also expect retail demand will drop off a little as previous purchases are used up and fewer trips are made to supermarkets.

 

Our supply chains are clearly adapting. However, we are seeing diverging trends and the situation is fast-moving.

 

On many farms the focus is to get on with the farming. Planting spring crops continues apace. Lambing is at its peak. Cows and livestock are ready to head-out on to fresh pastures.

 

It is this farming cycle that will yield food in the weeks and months ahead. Yet yielding a profit can be a challenge at the best of times; doing so amid the current market volatility will be critical for farming businesses.

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