Supply? Demand? What are we dealing with?

Economists and analysts are wrestling with enormous uncertainty

Most of what goes into creating the price of crops and livestock comes from supply and demand.

More supply and less demand? Probably lower prices. More demand and less supply? Probably higher prices.

It’s a little bit more complex than that, but those are some of the basics.

But how do you project future prices when not only is demand a wildcard, considering the massive impact of COVID-19 on people and economies, but supply is also up in the air?

That’s something economists and analysts are wrestling with right now. It’s a challenging job, but it’s when an analyst’s chops get tested and many are taking it that way.

“I am looking at this through a few different lenses that I typically would not be as concerned about,” I was told by Chris Ferris, the senior economist for Economic Development Winnipeg, and a long time analyst of farm, food and agriculture industries.

“The main ones are disruptions to labour markets and disruptions to internal markets, as well as export markets.”

In other words, in this economic crisis, everything is in play.

That reality has been right in front of my face every day recently as I do my job covering farmers, agriculture and various food industries. Every element of supply and demand is in flux and the impacts from COVID-19 can come from any direction. How are we seeing that? Distribution problems in the grocery store system are causing milk to be dumped, despite booming demand. (I’ve got more milk in my refrigerator than ever before.) Toilet paper has become a much sought after and fought over commodity, despite there being no shortage of production capacity or in the underlying commodities butt-wipe is made from. Cash hog prices are collapsing as various plants have temporary shutdowns and slowdowns as new human biosafety features are added to their production lines, yet consumer demand is booming as people fill their freezers. (Yesterday a grocery delivery to my house had none of the pork chops, pork tenderloin, salmon or haddock I had ordered. Why was that? Was the meat and fish section of that grocery operation affected by a partial shutdown? I don’t know, but a whole class of foods became unavailable.)

I’ve spoken to a few economists and analysts in recent days and you can feel the intellectual adrenaline they’re experiencing as they tackle elements of supply and demand that are being hit with sudden shocks and are adapting at light speed. Where most have spent their time over the years surveying, following and projecting long term trends and isolated, temporary situation, they are now trying to see into rapid evolutions all around the economy.

“I see demand shifting away from restaurant, school and university markets to grocery stores for the next few months, possibly longer, thus affecting the mix of products companies will need to delivery,” Ferris told me, detailing just one element of S+D he’s following.

At our newspaper and other news sources, reporters are following these shifts in demand as they happen in real time and as farmers, processors, distributors and traders try to cope with the shifting situation.

Here are a few:

Pandemic causes French fry demand to collapse;

COVID-19 shifts flour sales;

COVID-19 stockpiling prompts surge in dry bean demand;

Beef plant to reopen after temporary halt.

I’ve never seen this scale of disruption and change in the decades that I’ve covered this part of the economy. I’ve seen isolated collapses and rallies, as with BSE, the 1998 hog market crash, and the crop market rallies of 2008 and 2012. But the present simultaneity of shocks, slumps, surpluses and shortages in agriculture is unprecedented in my experience, and probably in yours.

Fortunately we have people like Ferris watching this for us. They won’t have any magical answers. But through their careful, thoughtful and rational analysis we can at least hope to understand the shocks and surprises that are disrupting our lives, and that’s an important part of getting a grasp of our lives, our jobs and our businesses.

As this crisis goes on we’ll keep bringing you the insights of economists and analysts. That’s an essential part of what we always do, but today it’s more important than ever.

 

 

 

 

 

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