View From Europe
By Colin Ley
Watching and reacting as Covid-19 unfolds There really is only one starting point for this new article – Covid-19. Global tension over the extent to which this virus may affect each and every one of our lives, personally and economically, is rising by the day with the stock market plunge during the final week of February illustrating the extreme seriousness of the situation. In some ways it seems crass to write about the commercial
implications of a virus which appears set to claim many lives over the coming weeks and months. It is, however, one of the harsh realities of today’s global structures that such events create a business challenge which can’t be ignored, no matter how devastating the personal cost of Covid-19 will be for individual families and communities. The global nature of modern trade routes with raw materials being
sourced from the other side of the world and end products being supplied to customers on an equally international scale, has created fabulous growth opportunities for businesses in recent times. We’ve all enjoyed the benefits of such developments, particularly in being able to produce compound feeds in an increasingly cost-effective manner. What Covid-19 shows, however, is that when one part of the world
catches a cold, literally, we all suffer. In turning to the best, often lowest- cost, sources of raw material supplies, there are usually business and supply casualties closer to home. Domestic industries that have found themselves unable to compete with lower-cost competitors are therefore no longer around as a supply option when the international network breaks down, for whatever reason. International businesses that have to shut their doors for a 14-day
quarantine when a member of staff tests positive for Covid-19 will become an inevitable feature of the next few months. Others, while continuing to operate normally, will see sales opportunities opening up in new regions and will react accordingly. Talking to business leaders, there’s a general confidence that the
market will sort itself out and that trade routes will stay open. We’ve always done it in the past and we’ll do it again. That seems to be the feeling. There will be casualties, however, as the stock market plunge clearly indicates.
Pig trading patterns As Covid-19 continues to expand its reach around the world, it’s interesting to look at how the international pig supply chain has been affected by the impact of the virus on an already volatile Chinese market. According to Iain Macdonald, Senior Economics Analyst with Quality Meat Scotland, Chinese wholesale pork prices eased to 43 yuan/kg
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(£4.75/kg) at the end of 2019, causing both GB and EU producer prices to stop rising on a ‘knock-on’ basis. Then, early in 2020, the run up to the lunar New Year celebrations
on January 25 lifted Chinese wholesale prices rose by around 10%, reaching 47 yuan/kg (£5.20/kg). “However,” continued Mr Macdonald, “at this time attention turned
from animal health (African Swine Fever) to human health with the confirmation of a coronavirus outbreak in China. “Measures introduced by the Chinese Government to control the
outbreak, contributed to demand from the foodservice sector plummeting while retail distribution was severely disrupted. “Additionally, global traders reported market access challenges, due to shortages of staff at the ports and in customs.” The next turn, however, highlights the resilience of suppliers and
traders to regroup and adjust, qualities which will hopefully be repeated around the world over the coming months. “Once price reporting resumed on February 10,” added Mr
Macdonald, “a further tightening of supplies was evident, with pork prices climbing to around 50 yuan/kg (£5.50/kg).” He also added that while the Chinese population may be eating
out less, they have been buying more through supermarkets and online retail. “In short, the level of supply in the world’s largest pork market
remains well below the quantity demanded by its people, keeping imports strong and pig prices across the world at record highs,” he said, referring back to the country’s African Swine Fever problems, which I wrote about many times in 2019. “These recent developments in China, however, show how quickly
an animal health or human health issue can destabilise the global red meat market,” he added.
No need for farmers In the midst of all this, it was astonishing to be greeted recently by newspaper headlines to the effect that the UK no longer needs its own farmers or farming industry. Faced with the prospect of international food supplies drying up or being diverted towards other more attractive markets, the idea of killing your domestic industry is beyond crazy. I suspect this is another piece of non-innovative thinking, based
on the idea that rubbishing a person or a sector before you enter into negotiations with them puts your ‘opponent’ on the back foot. It’s a disgrace to even approach such negotiations that way, of course, or to think of UK farmers as their opponents rather than a valuable part of the nation’s resources. The truth is that farming leaders in the UK make a lot of sense
when they talk, are supremely reasonable in their approach to achieving sustainable food production and are perfectly happy to care for the countryside in the process. Understandably, however, the same farming leaders don’t want to
see low-standard food flowing into the country and there is good evidence that the British people don’t want it either.
Comment section is sponsored by Compound Feed Engineering Ltd
www.cfegroup.com
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