Milling & Baking News - October 6, 2020 - 14

Business

Rabobank foresees enduring impact
from COVID-19 on grain sector
UTRECHT, THE NETHERLANDS -
The global grain and oilseeds sector is
feeling the impact of the coronavirus
(COVID-19) pandemic as it has caused
ongoing trends such as deglobalization of supply chains and declining
biofuels demand to accelerate while
increasing concerns about food security, according to a recent study by food
and agriculture investor Rabobank.
The report - "The Grain and Oilseed Sector in a Post-COVID-19
World" - examined potential and
short- and long-term trends that will
impact every link in the grain and
oilseed supply chain, including producers, farm input suppliers, grain
merchandisers, processors and grainbased foods manufacturers.
Stephen Nicholson, grain and oilseed analyst for Rabobank and author
of the study, told reporters during a
teleconference on Sept. 22 that a group
of Rabobank analysts from around
the world identified seven areas of
major, long-term change for the sector - increased government intervention, changes in consumer behavior,
increased food security concerns, declining biofuel demand, deglobalization of supply chains, increasing investment in digital supply chains and
a decline in global feed demand.
Among the most impactful changes
occurring during the pandemic, which
began in January, has been the eating
habits of consumers. Before the outbreak of COVID-19, US consumers ate
51% of their meals outside the home,
but when the lockdowns occurred to
prevent the spread of the virus, closing restaurants and other types of
public foodservice, that number plummeted to 5%. But he noted there were
other more specific changes, such as
a dramatic surge in the demand for
flour and baked foods that left grocery
shelves empty.
"Prior to COVID, most grocery
shoppers stayed on the outer parts
of the store where meat, dairy, fresh
produce and the deli are located," Mr.
Nicholson said. "But during the pandemic they have started going to the
middle of the store and buying more
cereal, pasta and other grain and oilseed-related products. It changed the
dynamic there, and I believe every day
that goes by in the pandemic cements
these new habits in the consumers'
mind. Once we get past COVID, those
habits will become normal."
14 / October 6, 2020

Milling & Baking News

From a food security standpoint, the
pandemic has caused many countries
to alter their grain supply chain strategy from "just in time" to "just in case,"
Mr. Nicholson said.
"Countries are now thinking that
if this happens again, we don't want
to be short," he said. "In the case of
China, they are currently rebuilding
stocks but are also to the point where
they don't want to get caught again
where they have to depend on a supply chain that might be fractured during a pandemic or some other type of
catastrophe."
China has imported huge amounts

continue to hamper the biofuels and
feed industries even after it ends, according to the report.
Fuel (including biofuels) consumption was already on a slightly downward course prior to COVID-19, but
the decline has been accelerated as
more people work, eat and spend
leisure time at home, Mr. Nicholson
said. While the immediate and worst
demand reductions were felt early in
the crisis in April and May, in most
cases demand has not returned to preCOVID-19 levels.
"In the short term, you're going to
see a little decrease in biofuels and gas
consumption in the fall and winter
months," he said. "You can add to that
the cold and flu season and people
being worried about another spike in

China doesn't 'want to get caught again
where they have to depend on a supply chain
that might be fractured during a pandemic or
some other type of catastrophe.'
-Stephen Nicholson,
Rabobank

of corn and soybeans in recent months
with the intention of increasing its
grain reserves. Other countries also
are employing a similar strategy,
which Mr. Nicholson said is a good
news/bad news situation for the grain
and oilseed sector.
"It's good in the short term, but long
term we may have this huge inventory
acting as a cloud over the market," he
said. "We have to think about that going forward."
Food security, geopolitical and food
safety issues also are causing the acceleration of the deglobalization trend
that already was occurring prior to
COVID-19, Mr. Nicholson said, adding that the world is likely to see more
regional and bilateral agreements
even after the pandemic ends.
The report predicted that "countries
will turn inward to promote domestic
food production/markets and selfsufficiency and turn outward to cultivate 'favored trade partners.'" This
would hurt the competitive advantage
of major exporting countries and, to
a certain degree, multinational grain
traders, Mr. Nicholson said.
"This kind of goes back to the increased government intervention (in
grain markets) as countries want to
make sure it's a situation where they
don't have any sort of disruption in
supply," he said.
The pandemic has hurt and will

COVID-19 cases, which is almost certain to keep people home."
Working from home, less business
travel, less vacation travel and more
virtual events and meetings make for
a grim long-term picture for the biofuels industry, Mr. Nicholson said.
"We've discovered that we don't
need to go to the office," he said.
"We're not driving or flying as much,
and it's changing the whole energy
sector completely. We think that will
be an ongoing trend that will be accelerated and a concern for the biofuels
sector for many years to come going
forward."
As for the animal feed industry,
large supplies of meat, contraction in
foodservice and the resulting drop in
demand are squeezing profitability in
the world's livestock sector. Mr. Nicholson noted that the varying species'
biological cycles will create a "long
tail" of potentially contracting feed demand. This already has been reflected
in the US June 1 corn stocks, in which
total corn demand in the second quarter of this year was down nearly 20%.
The short-term pullback has been
in US poultry numbers, he said, while
contraction in the pork and beef sectors will take longer to be reflected.
He said the pandemic coupled with
the continuing culling of pig herds
worldwide due to the African swine
fever outbreak, which began in Asia
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - October 6, 2020

Table of Contents for the Digital Edition of Milling & Baking News - October 6, 2020