Crisis sees return to basics of supply and demand
‘Come back, Brexit, all is forgiven” might well be a widespread feeling as the saturation coverage of the coronavirus crisis makes that of our exit from the EU look patchy and lightweight.
While there has been plenty of navel-gazing over what the longer term effects of the crisis will be on society and, in the farming press, of how the public view our industry, some of the hard and fast effects on the market began appearing in short order last week.
In a fairly spectacular nosedive, the lamb market was the first to hit the buffers as demand collapsed, leaving sales cancelled because there were no buyers, and a £30 to £45 per head drop in price where sales did go ahead.
Lamb was particularly exposed with its heavy reliance on exports to France, where even stricter lockdown restrictions than are in place in the UK saw not only cafes and restaurants closed but also many openair markets where much lamb is sold.
And with a large proportion of UK consumption normally taking place in pubs and restaurants rather than on the home dinner table, their closure here as well precipitated the drastic drop in demand.
So, such a double whammy for a sector of the industry, which was riding high on the back of some continental panic buying with near-record prices as recently as ten days ago, saw a collapse which was as swift as it was dramatic.
But with queues of never-before-seen dimensions at supermarkets around our country, the $64,000 question from the farming industry is: “How will this affect demand and prices for other agricultural produce in the coming weeks and months?”
Someone likened the current situation to the prechristmas rush where everyone stocks up on all the necessities to tide them over that one day of the year when most shops are shut.
But supermarkets have months to plan for this seasonal binge and have their supplies and marketing geared accordingly, whereas the current crisis has seen the supply chain in most European countries taken by surprise.
For years these outlets have been reducing costs and overheads by keeping little in the way of stock, relying instead on justin-time or build-to-order supply strategies designed to provide a near-instant supply of the precise products.
While such systems are designed to cope with a variation in demand within certain limits (although even an inaccurate weather forecast can leave shelves full of burgers and other barbeque nosh), any sudden and huge change in demand and buying patterns such as the conronavirus-prompted panic buying cannot be coped with.
And when there’s a disruption in the availability of labour due to self-isolation or illness – on top of the underlying problems caused by Brexit – an interruption in the ability to get food to the stores and onto the shelves can strike at any stage of the food chain.
So it’s not so much a case of there not being enough food to go round, it’s more a case of the logistics of getting it to where it should be and onto the shelves which is proving problematic.
On top of this, the third of all food that the nation normally consumes outside the home from restaurants and other outlets is being purchased and prepared in the home, boosting demand over and above any desire to stockpile essentials.
One response from the supermarkets has been to cut the range of products they carry in order to maximise production runs without losing processing time due to changeover. Some retailers have moved from carrying 20 styles of pasta to six, while another has reduced its bakery lines from 17 to seven.
Some are predicting this reduction in choice, along with the additional time people will have on their hands due to lockdown, could reignite a passion for cooking – and with it a greater appreciation of high-quality ingredients, which could increase demand for home-produced ingredients.
The sudden rush on flour certainly seems to indicate that baking has become a staple diversion for those with a houseful of kids to home-school.
But while the drop in disposable income could force shoppers to be more price-conscious than before, with fewer calls on the pound in their pocket from leisure activities, households suffering from a reduction in income may be able to maintain their overall spend on food.
And Scotland’s farmers are keen to rise to the challenge of supplying it.