As the COVID-19 pandemic sweeps across the world, every step along the agriculture industry supply chain is stepping up to keep employees and consumers safe while still providing vital equipment, services, commodities, feed and food.
The novel coronavirus that initiated in China near the end of 2019 has now spread to 199 countries with the number of new cases increasing hourly. As of March 31, more than 770,000 people had tested positive for the virus and more than 37,000 had died, while more than 160,000 had recovered, according to Worldometer.
In the United States, the agriculture industry was labeled as critical, allowing businesses to continue to operate as usual despite current and potential restrictions enacted to stop the spread of the virus. Major agribusinesses based in the United States with global operations said they have increased hygiene procedures and are taking steps to ensure their facilities continue to operate.
Flour millers globally saw a rapid increase in demand as quarantine and shelter-in-place orders worldwide panicked consumers who started stockpiling flour and other grain-based foods. Millers around the world said they are operating overtime to produce enough flour but are worried how border closings and quarantine measures could impact the supply of raw materials.
Major agribusinesses vowed to keep facilities operating while enacting stricter hygiene and sanitary measures. Equipment and service providers, even those in some of the hardest hit areas of the world, were maintaining operations as best they could with reduced staff.
Across the board, the agriculture industry is concerned about logistic issues, whether it’s moving raw materials across closed borders or having enough healthy employees to keep facilities operational and products moving.
Markets have responded to the pandemic with drastic swings, most notably in the US S&P and crude oil prices. The ethanol industry is feeling the pinch as fuel usage plummets, causing some production facilities to temporarily stop production.
“So much depends on how long these extreme restrictions need to be in place,” said Scott Irwin, a University of Illinois farmdoc economist.
Logistics
While the impacts from the virus are wide ranging, one of the key concerns globally for the agriculture industry is logistics.
“What if an entire slaughter plant gets infected and has to shut down? In addition, is the transportation bottlenecks,” Irwin said. “We’re already seeing reports of a slowdown at ports in Argentina and Brazil because of workers there not wanting to work due to infection fears.”
Two major towns in Mato Grosso state in Brazil were ordered to stop shipping grains in order to stop the spread of the virus. Grain traders, including Cargill, Louis Dreyfus and COFCO were working on an agreement for a 10-day grace period to comply with the order.
A widespread concern for many flour mills across the European Union is that workers and grain cross borders to get there. In addition, migrant workers play a major role in agriculture and other parts of the food supply chain. There are fears of trucks being delayed for long periods at borders and EU ministers have discussed the option of having express lanes for food and ingredient delivery vehicles at borders.
In a joint statement issued March 17, the bodies representing the EU’s grain, oilseeds and feed value chains called on the European Commission to take urgent steps to avoid disruption.
“The priority of the whole food and feed supply chain is obviously to strictly comply with EU and national instructions to prevent further dissemination of the virus among its employees, suppliers and customers,” the grain and oilseeds trade body COCERAL, the vegetable oil and protein meal association FEDIOL and the European Compound Feed Manufacturers' Federation (FEFAC) said. “We are taking all the actions required to avoid disruptions in the food and feed supply chain, so as to be able to continue supplying farmers, the food industry and feed processors with the agricultural raw materials and ingredients they need.
“The more these restrictions persist, the more the risk of shortage for food companies is likely to materialize at any level of the food, feed and livestock chain, thus challenging the European population access to regular supplies of food.”
The National Association of British and Irish Millers (nabim), stressed in a March 20 statement the need to address logistical challenges. The supply chain there operates on close to a just-in-time basis with about three to five days of grain supply stored at mills, one to three days’ worth of flour at mills and one to two days’ flour requirement at bakeries. Additionally, there are daily deliveries of bread to supermarkets and other retail outlets.
“We need a steady supply of wheat to mills and flour to bakeries in order to make this work, so the continuing availability of key staff, including millers, engineers and drivers, flexibility on the hours they can work and delivery times, and the continued availability of fuel and electricity are the most immediate priorities,” nabim said.
With the closure of the EU’s outside borders, the European agriculture groups want to make sure that it does not apply to vessels bringing in food and feed raw materials.
“We have been watching disruptions in the food and feed supply chain increasing in the last few days and are very concerned about future developments as the COVID-19 virus continues to spread,” said Philippe Mitko, president of COCERAL. “The EU needs to protect the health of all operators in the chain so that they continue to ensure the uninterrupted supply of food and feed.”
In the United States, there’s been a shift of goods from restaurants and institutions to grocery stores. Making such significant changes in the way food is delivered is bound to lead to some shortages and hiccups, said Gary Schnitkey, professor with the University of Illinois’ Agricultural and Consumer Economics department.
“Making that big of a switch is going to be some work for those in transportation and food industries,” he said. “They are working overtime. Our first concern is around workers and transportation, and keeping those systems running. It seems likely that we’ll get COVID-19 infected workers in some sort of processing plant. How we deal with that is going to be a concern.”
Agricultural groups in the United States asked the Federal Motor Carrier Safety Administration to grant relief from federal drive time rules for all truck drivers hauling agricultural goods. As trucking capacity and driver availability tightens because of COVID-19, surge nor normal trucking capacity may be adequate to provide just-in-time deliveries to animal feeding operations, food processing and manufacturing plants, distribution facilities, export facilities and retail outlets, the groups said.
The groups also requested that the FMCSA add flexibility to the process for obtaining new restricted agricultural commercial driver’s licenses, assist in keeping truck washouts open that are necessary for the sanitary transportation of many food products, and provide leadership in harmonizing the temporary increases in truck weight limits that have been announced by several states.
Flour milling
Europe’s flour millers are working flat out to supply the flour needed to the fill retail store shelves with bread, pasta and other grain-based products.
Laurent Reverdy, secretary general of the European Flour Millers association, told World Grain on March 17 that “so far, I have not been informed of mills closing due to staff disruption or anything else. I understand that they are all busy, as a result of consumers building stocks in case they have to stay at home: bread and retail flour sales have increased.”
Germany’s flour millers’ association VGMS (Verband der Getreide-, Mühlen- und Stärkewirtschaft) moved on March 17 to reassure customers, insisting there was no need to hoard food. All the companies in the grain, milling and starch sectors were working more than usual to meet strong demand, it said. There were sufficient supplies of raw materials available, even with the effect of stockpiling. However, the association warned against hoarding too much, too soon, which could mean some consumers facing empty supermarket shelves.
Nabim has been making its case to the government of the critical nature of the industry so that it can continue to operate at or close to capacity despite staff absence related to illness or quarantine.
“It is critical that all nations acknowledge the necessity of allowing food production to continue and the importance of trade in both grain and ancillary materials such as packaging in the manufacture of food,” nabim said.
European farm ministers were told during a meeting held by video conferencing on March 25 by the farmers group Copa-Cogeca that the increase in demand for wheat products such as bread, flour and pasta is affecting demand from mills for raw materials.
There are reports of problems supplying factories and mills in France, with processors trying to get supplies as quickly as possible. With labor shortages, Copa-Cogeca said in a paper put before the meeting by its Secretary General Pekka Pesonen that “the logistics are insufficient to ensure an optimal flow of goods.”
“In Poland, at least nine buyers are not accepting cereals from farmers,” the paper said.
In China, Wudeli Group, the world’s largest milling company with 45,000 tonnes of daily wheat grinding capacity, imposed strict procedures early on. All 5,000 employees at the company’s 15 milling subsidiaries in six provinces of northern China were confined to their company apartments. As a result, none were infected with the virus, the company said.
Restrictions on truck transport and other anti-virus measures resulted in a decline in daily flour shipments in February for the company. While away for the two-week Spring Festival period, some employees were locked down in their hometowns when the virus outbreak exploded and unable to return to their milling plants, further disrupting production.
There was a sharp fall in demand for flour in 25-kg bags as restaurants were shuttered throughout the country.
However, a Wudeli spokesperson said that in the second half of March shipments had mostly recovered to pre-virus levels and overall capacity utilization had reached 75%.
Sales of flour in 5-kg and 10-kg packages rose by a factor of three but packaging capacity still could not meet skyrocketing retail sector demand. Families confined in their homes made noodles, dumplings, steamed rolls and other traditional wheat-based foods, normally an activity limited to holidays and special occasions in modern households with both spouses working outside.
Confirming this trend, yeast was completely sold out at most stores in some areas for a short period, though flour and other food products remained consistently available.
The outbreak of COVID-19 in China coincided with the annual Lunar New Year holiday when many factories in the country, including flour mills, had shut down for as long as two weeks to allow employees to return to their native places to be with family.
Wudeli resumed shipments of flour on Jan. 28 from all plants and restarted milling operations at some plants, including its newest one in Handan on Feb. 4.
Prima Ceylon Ltd., the largest producer and supplier of wheat flour in Sri Lanka, said it has enough supply on hand to ensure no shortage during the COVID-19 pandemic. The company has sufficient stock to meet three months of national domestic consumption and has the ability to ship flour through its road, rail and sea distribution network.
“This will ensure the continuous supply of flour for the country to consumers, as well as for bakeries and other flour-based industries,” Prima Ceylon said. “Therefore, no shortage of wheat flour is envisaged during this period in the country.”
Ardent Mills, the largest flour miller in the United States with 35 community flour mills and mixing facilities throughout the United States, Canada and Puerto Rico, said it is continuing to plan for the unexpected and refine its safety protocols.
“Our flour milling facilities, bakery and mix plants are operating strong and we are equipped to handle what may come next,” Ardent Mills said. “We are working with our suppliers and partners, and at this time, we do not anticipate any disturbance to grain origination or ingredient availability related to COVID-19.”
“Our flour milling facilities, bakery and mix plants are operating strong and we are equipped to handle what may come next,” Ardent Mills said. “We are working with our suppliers and partners, and at this time, we do not anticipate any disturbance to grain origination or ingredient availability related to COVID-19.”
The company said it is working around the clock with farmers, suppliers and customers and has implemented contingency plans to ensure the safety of its people and products. This includes additional cleaning and sanitation procedures, eliminating all domestic and international travel, heightened visitor protocols, social distancing practices and shift flexibility.
US family flour manufacturing plants were running around the clock to keep supply chains moving rapidly in response to unprecedented demand that has cleaned out grocery shelves of all brands, types and sizes of the product.
Millers said the week of March 16 that they had received several truckloads more in orders than a typical March ordering cycle. Some said never before had they seen current demand levels for the product generated by stockpiling, panic buying and, in some cases, hoarding in response to the global disruption of normal life.
“Not even during the fall bake season” has it been so severe, a Midwest miller said. “People are just buying in panic or fear now. I’ve never seen the shelves empty, even in the fourth quarter, because then the grocers know what’s coming up and can prepare. But if the grocer can’t get anything from the supplier, obviously they can’t put anything out on the shelf from night to night.”
Data shared from some of his customers indicated a 180% increase in sales from the week of March 2 to the week of March 9, “but I know they’re all up sharply,” he said.
Customers in the second week of March, as COVID-19 case numbers were building in the United States, showed a preference for larger 10- and 25-pound bags of flour in areas where those were sold. As stocks became depleted, buyers snapped up whatever sizes were available.
But flour manufacturers appeared to be doing all they can to keep their link in the supply chain connected. Some felt fortunate to have fully replenished warehouse stocks from the fall baking season in preparation for an Easter baking bump when pandemic-inspired pantry filling and panic buying began.
“We’re prepping like it’s a holiday season, so we have more inventory on the floor, we’ve kind of beefed up our packaging as we saw the trend start to go this way,” said a southern Plains miller. “We’ve just made sure we can be a strong resource for these distributors and groceries, so we are well-prepared on our end and we really want to be here for our customers and ultimately for the communities we’re in.”
Grain handling
Major agribusinesses across the globe said they were continuing to provide essential services, including delivery of food, feed and ingredients, while ensuring the safety of their employees and consumers. They expressed confidence in the dependability of the global food system.
“During this unprecedented time, we are working around the clock with farmers and our customers — the world’s food retailers and service providers — to continue feeding the world safely, responsibly and sustainably,” said Cargill, which is based in Wayzata, Minnesota, US.
The company said disruptions in the food supply chain have been minimal and it is taking additional precautions to support staff at production facilities. This includes temperature testing, cleaning and sanitizing procedures, prohibiting visitors in facilities, prohibiting international travel, limiting domestic travel, adopting social distancing practices and offering shift flexibility to keep major production facilities open.
“We are working differently, but the values that have enabled Cargill to meet previous global challenges remain unchanged,” the company said.
Archer Daniels Midland Co., based in Chicago, Illinois, US, said it has business continuity plans in place for various scenarios and is prepared to respond if it sees potential impacts in its business operations. In addition, it has enhanced hygiene and cleaning protocols, implemented a minimal staff model at critical global offices and facilities, prohibiting all non-critical travel and non-business-critical visitation to its facilities, actively screening visitors, including delivery drivers, and implementing procedures to address potential exposure.
“We are closely monitoring the situation and are communicating regularly with our employees and customers through various channels as the situation continues to evolve,” the company said.
CHS, based in Inver Grove Heights, Minnesota, US, said it is adjusting workflows as needed to continue to provide agronomy, energy, global grain marketing, processing and food ingredients.
“As the busy spring season unfolds, we will continue to adjust as circumstances change — we all will,” said Jay Debertin, CEO of CHS. “While there are many unknowns, I am confident in our team and the cooperative spirit that connects us all.”
Solutions to deal with the pandemic are not one size fits all, said Curt Vossen, president and CEO of Richardson International. The Winnipeg, Manitoba, Canada-based company is continuing to operate its head office, agribusiness locations, plants and terminals to the best of its ability while considering the health of its employees, customers, suppliers and communities.
“We have implemented measures to minimize the risk and spread of the coronavirus at all of our locations,” Vossen said. “As news comes in, we are monitoring information from public health authorities and governments and are taking the steps needed to reduce risk.”
Commodity markets
Compared to other commodity markets, grain has seen the least impact with prices down about 15% for corn and soybeans from the beginning of the year, Irwin said. In comparison, the S&P is down 30% from an all-time high in January and the US crude oil market is down 65%, Irwin said.
Still, the drop in corn and soybean prices is a significant hit for producers’ bottom line. For instance, a drop in corn prices of about 50 is a loss of $40 to $50 per acre in expected revenue.
“We were already looking at a poor income outlook going into 2020,” Irwin said. “This means we have significant red ink in expectations.”
In the short term, the agriculture markets are most impacted in ethanol. With plummeting gas prices amid a usage drop, the question is how many bushels of corn won’t be going into ethanol production? Depending on how long shelter-in-place and quarantine measures last, Irwin said there could be a 25% to 50% drop in ethanol production.
“We’re looking at some drastic cutbacks in the short run,” he said. “If we lose 50% of ethanol for a month, that might be 200 million bushels of corn across the country.”
POET, a US ethanol producer, said on March 23 that it had suspended corn buying at seven of its 27 biofuel plants. When running at full capacity, the company purchases 5% of the nation’s corn and produces 2 billion gallons of ethanol.
The Andersons also said it was halting production at its ELEMENT ethanol facility in Colwich, Kansas, US, for an extended maintenance and repair period. It also plans to take spring maintenance shutdowns at four facilities owned by its joint venture with Marathon Petroleum Corp.
The company expects to produce ethanol and its coproducts at approximately 50% of capacity in April, with a return to more normal production when demand improves. It also anticipates bringing the ELEMENT plant back into production in the latter part of the second quarter. The Andersons said these expectations are subject to the lessening of the economic restrictions caused by the COVID-19 pandemic.
Looking ahead to planting of the US 2020 crop, COVID-19 could impact the rate of planting and what farmers decide to plant. There could be some marginal movement toward soy, Irwin said, because it has a low intensity of inputs, which would be ideal if there were issues in getting things such as fertilizers applied.
“All of the inputs are in place in the US to plant our crops,” Irwin said. “It’s a question of the logistics. Can all the inputs be delivered and applied by the input suppliers and the farmers themselves? I think we’ll get everything planted, but it may be harder to plant in the optimum window because of COVID-19 slowdowns.”
Feed milling
Feed millers across the globe were encouraging their governments to recognize the industry as essential so that they could keep producing and transporting feed.
Nick Major, president of FEFAC, said it recognized the need for strict containment policies and stressed that its priority and key mission is to protect animal health and welfare of farm animals and food supply chains for milk, meat and eggs.
“We therefore urge the EU Commission to recognize the status of feed as essential goods in the EU COVID-19 guidelines, which is crucial to uphold the functioning of the single market for feedstuffs to prevent supply chain disruptions and shortages of essential nutrients to the EU farm animal population,” he said.
COCERAL, FEDIOL and FEFAC also want to see feed included with food in the list of essential goods included in EU guidelines on border management.
“Farm animals must be fed every day in order to provide key food products consumed by the population and to ensure animal health and welfare,” they said. “Some Member States like Spain, Italy and Belgium have already included feed supplies on their list of essential goods, but we need a harmonized approach at EU level.”
They also want EU and national authorities to make sure that all food and feed can be transported across the EU unhindered, even if it isn’t perishable.
The American Feed Industry Association (AFIA) in the United States worked with the Department of Homeland Security and individual states to ensure that animal feed, pet food and ingredient manufacturers be deemed as essential in any shutdown policies. Leah Wilkinson, AFIA’s vice president of public policy and education, said so far states with shelter-in-place orders have done just that.
Companies across the animal feed industry are coming up with creative solutions to meet challenges presented by the virus. Animal feed manufacturers have implemented flexible work arrangements and have restructured work shifts to help employees maintain safe distances.
“We’re working to make sure our customers have the supplies they need, making sure bins are full, warehouses are full,” Wilkinson said.
Suppliers keep producing
Companies that supply equipment to the grain, flour milling and feed milling industries said they were maintaining production during the COVID-19 pandemic and taking extra precautions to keep employees and customers safe.
Symaga Silos, based in Villarta De San Juan, Spain, said it was following the government’s instructions to guarantee the operability and productivity of its factory and offices and safety of its team.
Office people are working remotely, while phone lines and e-mail remain operative. All employees in the production department are working to maintain full capacity and have received hygiene and contagion prevention training.
“All drivers collecting or delivering goods are instructed by sign to remain in their trucks, so that Symaga Group employees load and unload the trucks distancing them from the drivers and avoiding risks,” the company said.
Ocrim, based in Cremona, Italy, has adopted strict measures to safeguard employees while securing the support in terms of aftersales and assistance that customers may need. Italy is one of the hardest hit nations with more than 100,000 cases as of March 28 and over 10,000 deaths.
Omas, also based in Italy, extended its partial closure and said it would resume full operations as soon as the overall situation makes it possible.
“For the moment, in our company we will continue through smart working and reduced numbers, in order to ensure our presence to our customers even in this extremely difficult situation,” Omas said.
Ag Growth International (AGI), based in Winnipeg, Manitoba, Canada, said on March 25 it has suspended manufacturing at its plants in Italy, India, France and Brazil due to government mandated shutdowns and/or regional requirements.
The shutdowns are scheduled to last two to three weeks. Interruptions in North America are possible over the coming weeks, AGI said.
Engineering, design and quoting activity is continuing in each of these businesses, which will support resumption of operations.
“We are utilizing vacation time, leave, and government programs to mitigate the impact of these short suspensions,” the company said. “The impact on AGI would be more pronounced should the duration extend.”
The company said the safety of its people is the highest priority. Tim Close, president and CEO, acknowledged its team in northern Italy, which developed the policies and procedures to safely operate right up to the recent mandatory suspension. In one of the hardest hit regions, the facility did not have one positive COVID-19 case.
“They have been an inspiration to the rest of AGI as we implement many of those same procedures across our business to provide a safe environment for all of our teams,” Close said. “AGI’s products, services and technologies have been declared an essential service in multiple states and provinces; recognition of the critical nature of the global food infrastructure that we supply.”
4B Components, based in Morton, Illinois, US, is exempt from the state’s “stay-at-home” order as an essential business supplying products and services to the agriculture industry.
The company has implemented limited travel for all employees to business-critical only and select office employees will be working from home. Access to facilities will be limited to employees and essential vendors only.
“We appreciate your continued support and promise to do our best to provide our customers with the same excellent service you have come to expect,” said Johnny Wheat, president of 4B Components. “Our phones are on and our e-mail is up and working as usual. Our intent is to conduct business as close to normal as possible.”
Seedburo Equipment Co., also based in Illinois, said it is continuing to operate while taking the necessary precautions to protect employees and communities.
The company is not experiencing any major supply disruptions and is working to ensure it can continue to provide service and be responsive, said Tom Runyon, company president.
Garner Industries, parent company of BinMaster, based in Lincoln, Nebraska, US, said as an essential manufacture of products for the food and medical industries its production facility remains open. It is producing, processing and shipping new orders for all Garner and BinMaster customers.
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