Thursday, October 15, 2020

Food Hoarding: The World Is Shifting From Just-in-Time To Just-in-Case

 From Bloomberg:

A ‘Just-In-Case’ World Is Rushing to Hoard Food as Prices Rally

Agricultural commodity buyers from Cairo to Islamabad have been on a shopping spree since the Covid-19 pandemic upended supply chains.

Jordan has built up record wheat reserves while Egypt, the world’s top buyer of the grain, took the unusual step of tapping international markets during its local harvest and has boosted purchases by more than 50% since April. Taiwan said it will boost strategic food stockpiles and China has been buying to feed its growing hog herd.

The early purchases underscore how nations are trying to protect themselves on concerns the coronavirus will disrupt port operations and wreak havoc on global trade. The pandemic has already upset domestic farm-to-fork supply chains that provided just enough inventory to meet demand, with empty store shelves across the world leading consumers to change their shopping habits.

“Covid-19 has forced consumers to shift from just-in-time inventory management to a more conservative approach which was labeled just-in-case,” said Bank of America Corp. analysts led by Francsico Blanch, head of global commodities. “The result is that consumers are holding more inventory as a precaution against future supply disruptions.”

A number of factors are adding to a rally in prices for corn, wheat and soybeans, including floods in China and the country’s increased purchases to meet commitments under its phase one trade deal with the U.S. But Beijing is also keen to heed the lessons of the pandemic and ensure its stockpiles are plentiful enough to withstand supply issues, people familiar with the situation said last month.

CountryAction Taken
JordanFurther adding to wheat stockpiles already at 17 months of supply
EgyptPurchases through international tenders up 51% since April
MoroccoAllowed duty-free wheat imports for rest of 2020
PakistanCurrently boosting purchases of wheat and sugar
TaiwanAnnounced plans to boost food reserves
ChinaIncreased purchases under phase one of U.S. trade deal

Some countries decided to bring their food purchases forward to ensure supplies in case the coronavirus rattles supply chains, said Abdolreza Abbassian, a senior economist at the UN’s Food and Agriculture Organization. Only a handful really sought to boost strategic reserves, such as Egypt and Pakistan, but they also had other reasons to do so including access to foreign currency, the size of domestic supplies and the need to keep domestic prices in check.

Bad harvests in Turkey and Morocco added to their need to boost imports.

“Many may buy now but could buy less into the new year because they won’t need it,” Abbassian said in a telephone interview from Rome, referring to early purchases. “I could see that happening, especially as winter wheat conditions are not that great and if you wait, prices could rise further.”...