skip to Main Content

Life after lockdown – a supply view

How did we get here?

On December 31, 2019, the WHO China office heard the first reports of a previously unknown virus causing pneumonia cases in Wuhan, a city in Eastern China with a population of over 11 million.

What started as an epidemic mainly limited to China has now become a truly global pandemic. There have now been 1.5m confirmed cases and the global deaths are hurtling upwards towards 100k. The disease has been detected in more than 200 countries and territories, with Italy, the US and Spain experiencing the most widespread outbreaks outside of China. In the UK, there have been 55,242 confirmed cases and 6,159 deaths as of April 7.

The Chinese government responded to the initial outbreak by placing Wuhan and nearby cities under a de-facto quarantine encompassing roughly 50 million people in Hubei province. This quarantine is now slowly being lifted, as authorities watch to see whether cases will rise again. The US is now the new epicentre of the Covid-19 outbreak, becoming the first country to surpass China’s total confirmed cases. As of April 8, the country has 399,929 confirmed infections and 12,911 deaths. In Italy, where the death toll surpassed that of China on March 19, the government took the unprecedented step of extending a lockdown to the entire country, shutting cinemas, theatres, gyms, discos and pubs and banning funerals and weddings. In the UK, the government has shut schools, pubs, restaurants, bars cafés and all non-essential shops.

On March 23, the government put the UK under lockdown saying that police will now have the power to fine people who gather in groups of more than two or who are outside for non-essential reasons. People with the main Coronavirus symptoms – a fever or dry cough – are required to stay at home for seven days while households in which at least one person is displaying symptoms should quarantine themselves for 14 days. Four days later the prime minister and health secretary Matt Hancock both tested positive for the virus – Johnson is currently in intensive care while Hancock has returned after self-isolation.

How are we doing on food supply?

Remarkably well in the circumstances. For the first few weeks supermarkets saw an increase in volumes of around 25% to 35%. This was because of a combination of “panic buying” (particularly of hygiene products, ambient foods and paper products), and higher volumes due to customers switching out of the dining /QSR market, linked in part to a massive increase in home working. As a result, certain key lines were difficult to find, and supermarkets introduced limits on the volume that could be purchased.

By contrast the foodservice and hospitality sectors saw volumes fall dramatically during later February and early March, which caused chaos in supply chains, and high levels of waste.

Many foodservice suppliers have diversified into forms of direct to consumer delivery as a result.

What’s happening to food prices?

The cost of food is determined by a wide range of variables including climate/weather, exchange rates, import tariffs/trade costs, levels of demand and supply, and commodity market trading. In the foodservice sector prices for the few customers that are buying have been relatively stable.

What will life be like after lockdown?

At this stage this is difficult to predict. The nature and the speed of the lifting of restrictions will have a major impact on the ability of our food supply system to cope. In addition, there will certainly be some casualties within the supply world that might affect the balance of supply and demand. Like their clients, many suppliers will have incurred heavy losses as a result of the Coronavirus, and balance sheets may well be very weak, which will impact credit terms and pricing.

If there are issues with food price it is likely to be generated by one of five situations:

  1. Production challenges – where production is impacted through a shortage of labour in an infected area
  2. Transport restrictions – where the movement of goods is restricted by authorities seeking to ring-fence areas to avoid spread of infection
  3. Trade imbalance – where UK production becomes surplus because of consumption falls elsewhere in the world
  4. Commodity markets – where markets are affected by trader sentiment regarding future sales
  5. Abnormal Demand – in the retail sector causing product shortage in the whole food supply chain

Of the above #1 will likely be the most impactful, with challenges already being experienced in fruit and vegetable picking as a result of labour shortages generated by the virus and Brexit.

Our latest news
Back To Top