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10 Apr, 2020 08:29

Exporters like Russia won as Covid-19 fears pushed grain market up, but now veggies may get sliced & diced

Exporters like Russia won as Covid-19 fears pushed grain market up, but now veggies may get sliced & diced

Coronavirus tanked global markets, but for grain producers like Russia, the pain was eased by a surge in prices. More bad news is on the horizon, however, as virus-induced labor shortages threaten the fruit and vegetable supply.

The Covid-19 pandemic caused a worldwide economic slowdown, sending the prices of oil and many other commodities into free fall. Grain prices went sharply against this trend, surging in the second half of March and prompting observations in Russia that carbohydrates were becoming more valuable than hydrocarbons.

This provided an unexpected economic boon for Russia, the world’s number one exporter of wheat, followed by the US, Canada, and Australia.

Peak is behind us

Russian wheat producers had the upper hand over that short period of growth, thanks to the devaluation of the ruble, which kept their offerings extra competitive. But the global grain markets have rebounded in the first week of April and now seem to have stabilized. Prices are unlikely to rise further in the coming weeks and months, industry analysts tell RT.

Also on rt.com Rice & wheat prices surge amid fears Covid-19 lockdown may threaten global food security

“The peak is behind [us],” said Oleg Sukhanov, head of the grain desk at the Institute for Agricultural Market Studies. Next month, he pointed out, “the Muslim world is observing the holy month of Ramadan. Our main wheat buyers in the Middle East and in Asia are Muslim nations. Trade on their part will be anemic in May,” as Ramadan entails strict fasting during daylight hours.

Sukhanov added that he expects a downward trend in prices over the next few months, which is usual for this time of year. The only possible cause for volatility is if the weather affects harvests in one of the major producing nations.

Fears unfounded

The March spike in prices was indeed partially triggered by the pandemic, said Andrey Sizov, the head of the agriculture consultancy SovEkon. Demand was up as people in virus-affected nations hoarded products like pasta in preparation for lengthy quarantines.

Pushing prices further up were fears that the Russian government would introduce restrictive export quotas. After that failed to materialize, the pressure eased. The quota of 7 million tons between April and June, which was announced last week, is well above the volume Russia sold to foreign buyers over the same period last year.

Corn and soybean markets were somewhat affected by concerns that Covid-19 lockdowns may affect major ports, Sizov said, but so far there has been no indication of this.

Watch out for strawberries and tomatoes

Overall, the pandemic has not had a major effect on grain markets, Sizov noted, adding that it appears likely that it will affect labor-intensive operations such as harvesting berries, tomatoes, and some other vegetables.

“You don’t need many hands to produce grains, considering you can use a combine harvester,” Sizov told RT. “A few people may deal with a big field. But a few people cannot pick a field full of berries.”

Also on rt.com Covid-19 crisis could trigger global food shortage, UN warns

Seasonal workers usually involved in the planting and harvesting are now mostly under lockdown and unable to travel to farms – which may be in other parts of their countries or even in other countries. Moreover, the actual work normally involves them being closer together than the prescribed “social distancing” rules allow.

“With the labor shortage caused by the quarantine, some of the produce will be left unharvested while the part that will get harvested will cost more. The global supply will shrink and the global prices will rise,” Sizov predicted. “I don’t think there will be physical shortages, but there will be a significant price hike this year.”

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