Restaurant closures may increase grain sales

Consumers eat less meat and more grain when cooking at home, which could have significant implications for grain

Wheat could be a main beneficiary of shifting diets in the wake of COVID-19, say analysts.

The global pandemic has gutted the restaurant sector as literally half of the world is under a stay-at-home order.

That is causing a shift from diets rich in protein to those featuring starch, said Arlan Suderman, chief commodities economist with INTL FCStone.

His team in China uncovered some interesting findings contained in the 2017 China Health and Nutrition Survey.

It showed that urban residents in China consume 17 percent more red meat and 28 percent more poultry when they dine out compared to eating at home.

The differences are even more stark for rural residents who consumed 64 percent more red meat and 84 percent more poultry when eating out.

The study found that when people eat at home they tend to consume a lot more grains and vegetables and less red meat and poultry.

“I have searched and searched and cannot find anything close to the quality of this research data,” said the analyst.

Suderman believes the basic premise of the Chinese study is applicable in countries around the globe and that means less meat and more grain consumption.

“That favours markets like wheat and rice,” he said.

Protein markets suffered yet another blow when Smithfield Foods announced it was closing its Sioux Falls, South Dakota, pork processing plant.

Smithfield chief executive officer Ken Sullivan said the United States is moving “perilously close to the edge” of meat supply with the shuttering of this and other processing plants.

Errol Anderson, analyst with ProMarket Wire, said the flipside is that the outlook is shaping up nicely for portions of the grain sector.

“I genuinely believe that the Canadian grain market is one of the strongest industries in the world right now,” he said.

That is because key importers are trying to secure supplies of staple crops.

Reuters is reporting that Egyptian president Abdel Fattah al-Sisi has encouraged the country’s food buyers to boost reserves of strategic commodities like wheat.

“We’re paying close attention and if need be, we will make more expensive and bigger contracts so that out minimum reserves of three months are secured,” he said.

Anderson thinks many importers share those concerns and are busy bolstering government stockpiles of certain staple foods like wheat.

“I am a low-grade bull on wheat. I think that’s one that can pop,” he said.

A number of Black Sea exporters have taken steps to curtail exports, which could be fueling importer insecurities.

Russia has imposed a seven million tonne quota on the export of wheat, rye, barley and corn from April 1 to June 30, 2020.

Ukraine has restricted wheat exports to 20.2 million tonnes to the end of the 2019-20 marketing year. It should be noted that is only slightly less than the U.S. Department of Agriculture’s pre-restriction estimate of 20.5 million tonnes.

Kazakhstan has established a monthly export quota of 200,000 tonnes for wheat and 70,000 tonnes for wheat flour.

Anderson said the demand for Canadian grains should be strong for the remainder of the current crop year and into 2020-21.

Red lentil prices have already taken off and he expects yellow pea prices to firm a little as well.

Canola is a tough one to figure out because of the “crazy harvest” that is going to take place over the next couple months to get last autumn’s crop off fields. Nobody knows how much canola that will produce and what the quality will be.

Another bearish factor for canola is that crush margins are down about one-third from where they were at the end of 2019, due to the deterioration of the global vegetable oil complex.

Anderson thinks canola will continue trading in a wide range of about 50 cents per bushel in the cash market.

Corn is going to continue to struggle due to slumping ethanol demand. Global oil producers agreed to cut production by 10 to 20 million barrels per day but demand is down about 30 million barrels per day.

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