When Covid-19 first appeared in early 2020, global protein markets were still responding to a shortage of pork caused by African swine fever (ASF). The coronavirus crisis has led to even greater instability. Brett Stewart, President of Global Agri-Trends, explained the impact of Covid-19 on global protein markets at a conference of the Canadian Beef Industry. The meeting took place in mid-August.
According to Stewart, there has been a lot of confusion around Covid-19 over the past eight months, and this confusion has created a lot of uncertainty. As winter approaches, this uncertainty persists, creating additional instability in world animal protein markets. This uncertainty has had a huge impact on price forecasting.
Stewart explained in his speech that to forecast prices, agrarian economists must first assess global supply and demand. Historically, this has been done by analyzing and evaluating the offer and then choosing a price.
“Our key assumption is that demand is relatively stable; demand does not change, – said Stewart. “So, if we find out what the deliveries will be, we can predict the price quite well.”
But price forecasting becomes a difficult task when demand fluctuates, as this year. “We are in a situation where price forecasting is absolutely impossible,” Stewart said. “Even if we knew what the supply would be, we don’t know what the demand would be.”
Demand is influenced by three main factors. The first factor is the transition from restaurants to retail. As families around the world went into isolation, analysts quickly realized that people ate differently when they were at home.
“In a restaurant, they are less responsible in terms of costs than in retail,” said Stewart, pointing to declining demand for steaks, bacon, cheese and butter.
The second factor manifested itself when workers in processing plants began to get sick. “We have found that human labor is a weak link in this chain,” Stewart said.
The third factor is uncertainty about long-term demand caused by consumer fears about the economic downturn and possible unemployment.
In general, it is clear why it is difficult for analysts to predict demand and, consequently, price. Stewart said he did not expect clarity for at least another year.