Welcome to The Weekly Harvest, where we recap this week’s hot topics in the crop market. Here is the recap for this week:
1. Coronavirus Pandemic Intensifies Food Inflation Concerns
Food prices jumped globally during the COVID-19 pandemic. According to the United Nations index, last month global food prices climbed to their highest level in more than six years. The increase is driven by a combination of things, including countries stockpiling commodities (e.g. China buying huge volumes of feedstuffs and vegetable oils), vulnerable supply chains and adverse weather events impacting crop production in multiple regions across the globe.
Food price inflation is hurting those already reeling from pandemic-related recessions, and many regions are feeling the pressure:
• Countries such as Russia and Argentina are limiting export volumes of some commodities via quotas and tariffs in an attempt to reduce upward pressures on domestic food prices.
• Protests in India have been constant for nearly three months now, amid tensions around food subsidies and agricultural reform. India’s food inflation increased to a high of 11% in October 2020 and is expected to accelerate in 2021.
• Nigeria, the largest economy in Africa, has seen food inflation jump at the fastest pace in over a decade. Further, Nigeria and many of these nations have seen foreign currency reserves depleted, reducing their ability to import food.
• Turkey has experienced a climb of 18% in food prices. The country has reduced tariff rates on a variety of crops in an attempt to stimulate import demand. Even wealthy countries like the United Arab Emirates are considering possible price caps on some foods.
2. African Swine Fever Confirmed in China
An African Swine Fever (ASF) outbreak has been confirmed in China’s Yunnan Province. The outbreak is allegedly coming from illegally transported piglets into the region. More and more ASF outbreak cases continue to be reported.
It is estimated that about a fifth of the breeding herd in northern China was impacted by ASF over the winter, with the disease now spreading from the north to southern regions. The Chinese government has been attempting to rebuild herd populations since 2018 when the first outbreak of ASF was reported and went on to destroy over 40% of China’s pig herd (and feed-grain demand). Yet, despite these new outbreaks, feed grain demand in China remains robust, and imports continue to soar.
Chinese feed grain prices are maintaining record highs. China’s corn continues to trade at close to USD $11/bu at this time. These strong feed grain prices suggest feeding hasn’t been majorly impacted by the ASF outbreaks (at least yet). The U.S. Department of Agriculture is now forecasting China will import 24 MMT of corn in 2020-21, up from its initial estimate of 7 MMT.
3. Oat Milk
Oat-based milk is hitting the big leagues. Oatly brand oat milk will be served at Starbucks across the U.S. beginning this week. After years of relatively stagnant oat demand, oat milk has opened a new market and is a fresh driver of oat demand in North America.
According to the latest data, oat milk sales in the U.S. climbed 170% over last year. Oat milk is the new leader in the dairy-alternative milk market due to its higher fat content and because it is most similar functionally and taste-wise to traditional dairy products. Oat milk is just the beginning for new demand avenues for oats, with many companies venturing into other oat-based dairy alternatives such as oat yogurt and oat-based ice creams.
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