As we navigate value chains in a global pandemic, many ag and food commodities are experiencing supply disruption and major shifts in demand of both product and destination.
These shifts are perhaps most evident in protein markets, and Michael Young, president of Canada Beef, says that the value chain is adapting as well as it can.
The full volume loss of beef sales has shifted but not evenly across the sector. Overall, sales are up in the grocery stores, for sure, but food service has reopened on a limited basis, only. Restaurant patios are busy, but these businesses are only now beginning to open up dining rooms which has significantly limited restaurants’ ability to generate revenue.
What’s more, food costs have increased two to three per cent, Young says, and that’s in addition to the drop in sales. “It’s an industry that is trying to pull itself together, for sure,” he says.
People are eating more meals at home, but that doesn’t mean all the beef demand has shifted to grocery stores. Home meal kits have also gained in popularity, and that has required processors to adapt to sending more cuts to different secondary processors than before. It means more meat being pre-portioned and packaged differently. (more details after the player)
May export numbers are in, and as expected exports were down. Young says exports dropped about 15 per cent or 26,000 tonnes in volume, for about an 8 per cent drop in value. All major markets were down, and for various reasons. In some markets, there was demand but no product when needed, and in other markets, it was issues in the importing country that led to the decline.
While exports to China are holding well, there are major disruptions in exports there. Young explains that China is requiring that processing plants and providers guarantee COVID-19-free status. Across all commodities, not just beef, that has led to 36 plants not shipping to China. 21 of these “suspended” plants are voluntary suspensions (companies that are choosing not to ship to China), and 15 are involuntary.
Canada makes up one per cent of total beef imports to China right now, Young says, and we’re waiting to see how they will treat supply partners.
In general, beef prices have come back in-line with seasonal averages and demand is holding…for now.