COVID-19 Update I : Supply Volatile Due to Labor Shortages and Export Regulations

The COVID-19 pandemic has caused many countries to turn to nationwide lockdowns causing port congestion and a shortage of workers and containers at ports. In addition, an increasing number of countries have imposed export restrictions on staple products in order to ensure sufficient food supply in the domestic market.

So far, logistical issues have been the main concern in regard to trade due to the above-mentioned factors. However, labor shortages in production sites are expected to rise as the biggest issue as the virus spreads to communities.

Production & Harvest

Labor Shortages in Spain and Delays in US Production

Spain is undergoing labor shortages in its harvest season as temporary workers from countries such as Morocco are barred from entering the country. This vacancy would mean a 40% deficit in the number of workers. In order to fill in the gap, Spain has announced a decree to grant temporary work permits to migrants and workers previously not allowed to work in the country or have become unemployed due to the coronavirus.

US meat manufacturers have also had to shut down or are having to temporarily delay processing as employees are being sent home because of the virus. Smithfield, the biggest pork processing plant in the U.S., was closed on March 12. Due to increasing disruptions along the supply chain as companies pivot their production lines toward supermarkets instead of restaurants, the suspension of processing could become a huge bottleneck. Despite ample inventories of frozen meat, if the suspension continues, there could be a fresh-meat shortage in the market.

Harvest for Macadamia Nuts and Avocados Delayed in Kenya

As the demand for nuts has dropped in China, Kenyan farmers have decided to delay harvest for macadamia nuts and avocados in the hope of getting better price offers from local buyers and traders. Despite delays in Kenyan avocado production, top producing countries such as Mexico have seen optimal harvest this season, meaning there is not a shortage in overall quantity. However, a logistics jam in exports and transportation issues remains the biggest hurdle in the avocado market.

Canada Goes Ahead with Lobster Harvest Amid Low Prices

Nova Scotia, the top lobster producing region in Canada, has ultimately decided to go ahead with the May harvest after previously discussing a possible postponement, as it is deemed critical to the economy of Atlantic Canada. Nevertheless, prices at fishermen levels have decreased substantially to CAD 5 (USD 3.54) per pound, down from CAD 10 - 11 (USD 7.08-7.78) in early April. Experts are predicting a minimum of two months of severe damage to the lobster industry with uncertainties as to exactly when the market will recover.

Regulations

Turkey Bans Lemon Exports Until August

Turkey has decided to limit exporting lemons from April 7 until the end of August. Since Turkish lemons are the cheapest in the market, approximately 50-70% of the lemons in Russia and Ukraine are imported from the country. In Russia, Turkey’s biggest export market, the price of lemons had already been rising and is expected to rise even further.

In Ukraine, the third-largest market to import lemon from Turkey, the domestic prices were at UAH 40-45 (USD 1.47- 1.66) per kg at the beginning of March and were at UAH 80-90 (USD 2.95 - 3.32) per kg in early April. The price is expected to rise to over UAH 100 (USD 3.68) in Ukraine if domestic consumption continues to be at its current level.

With a shortage of lemon expected in the domestic market, Russia is planning to import from other markets such as Argentina, Egypt, Brazil, and South Africa. Ukraine is also planning to increase imports from Argentina. However, problems exist even with alternative options. Difficulties in shipping and logistics raise questions as to whether the products can be delivered in time.

Russia and Ukraine Limits Grain Exports / Romania Bans Grain Exports Altogether

Russia, the biggest exporter of wheat, has imposed an export limit of 7 million metric tons on the crops, effective from April until June. While this is approximately the amount Russia was planning to export during this period, international wheat prices have risen to USD 217 per ton for 11.5% wheat and USD 222 for 12.5% wheat in anticipation of a decrease in available supply.

Ukraine has also signed an agreement with exporters on restricting grain exports at 20.2 million tons for the 2019/2020 season and has temporarily banned the export of buckwheat until July 1 in order to maintain the domestic supply. The government also plans to abolish customs duties on importing cereals such as buckwheat and rice, also effective until July 1.

Romania has gone further as to cutting off grain exports to countries other than the European Union. Although most of the crops have been harvested and exported, similarly to Russia, international prices have risen in fear of a global shortage as major countries take measures to protect domestic supplies. According to Bloomberg, futures have risen by 12% in the Chicago Board of Trade (CBOT) from mid-March.

Vietnam Reverses the Rice Export Ban

Vietnam has lifted its export ban on rice imposed in March. As it resumes the export, Vietnam is expected to export about 800K tons of rice for April and May, down by 40% compared to the same period in 2019.

Russia Considers Posing Import Limits on Fresh Tomatoes

The Russian Fruit and Vegetables Association has requested the Ministry of Agriculture ban the import of tomatoes for the next 2 months, due to low prices in the domestic market as demand for fresh vegetables decreased. In 2019, Russia imported 52% of its tomatoes from Turkey, Azerbaijan, China, and Morocco of which the import volume reached 80K metric tons worth USD 100 million.