Back in late March, all signs suggested a food crisis was brewing in Europe. Supermarket shelves were emptied with indecent haste as lockdowns were announced by governments across the continent in a bid to limit coronavirus (COVID-19) deaths. Media reporting was post-apocalyptic, further enhancing the sense of panic. After toilet paper and hand sanitizer, atop the list for those frightened into stockpiling was flour, pasta and cereals.

Fast forward to late May and supermarket shelves are fully stocked. Was Europe really facing shortages of milling products or grains? “Not really” is the short answer from those who helped manage the demand spike. Nor are any major supply issues expected in the near future.

Indeed, the COVID-19 pandemic, which has slowed significantly in most Western European countries in recent weeks, has proven that Europe’s agricultural food supply chains are in fine condition despite the many operational, production and distribution challenges posed by coronavirus-induced containment and lockdown policies.

Explaining the supply chain management issues of the last three months, Laurent Reverdy, secretary-general of the European Flour Millers’ Association, told World Grain the pandemic had severely affected demand patterns as consumers stockpiled low or medium-priced products and staple foods.

“The pictures of empty shelves in supermarkets and shops were mostly the result of an exceptional surge in demand of consumers for retail flour in 1-kg packages, as people confined at home (started to do) more home baking,” he explained.

This was only problematic because typically European flour millers focus production on flour products aimed at business-to-business supply for the processing industry and the HORECA (Hotel/Restaurant/Catering) sectors. For example, Reverdy told World Grain that of 4 million tonnes of flour produced each year in France, just 190,000 tonnes are intended for sale as 1-kg packages sold in supermarkets and shops. Indeed, the 1-kg market, he said, represents only around 3% to 5% of flour demand across most of Western Europe.

1-kg flour demand ‘explosion’

Alex Waugh, director general of nabim. Photo by Chris Lyddon.

The demand “explosion” for 1-kg retailer flour packages in France, where Reverdy said “demand multiplied by two to five times” after containment policies were introduced, forced millers to make quick adjustments.

“It was necessary to re-direct volumes intended for foodservice to supermarket and retail shops, but this often requires different packaging that is not always available in the required quantity or takes time to be imported from another European country,” he said. “For example, French millers mentioned Germany as an important supplier of 1-kg small bags, but with Germany focusing on its domestic market due to the pressure of demand, (sourcing was difficult).”

Alex Waugh, director general of the National Association of British and Irish Millers (nabim), said COVID-19 had impacted member millers in myriad ways.

“At the beginning of the lockdown, everyone was really busy with customers trying to build stock, but then all the out-of-home demand for places like restaurants fell away,” he said. “Some of our customer groups who were supplying the out-of-home market effectively stopped work altogether because they didn’t have any demand at all from the restaurant or catering sectors.”

Demand normalizes

Waugh said the increase in demand for retail flour that emptied supermarket shelves prompted some bakers to start selling flour direct to the public, although by mid-May demand had plateaued.

“Bakeries that supply supermarkets are still busy and supermarkets themselves are still seeing strong demand so there are ups and downs depending on what your business mix is,” he said. “Overall demand is down from its normal level by a bit, despite very strong demand for retail flour and slightly up demand from the sliced bread market. Overall, businesses have done very well to set themselves up to manage all this with people off work and social distancing etc.”

Reverdy also said that while millers had enjoyed high demand for some products, many were now facing negative market pressures.

“The closure of food services (HORECA) in most European countries caused challenges for the flour millers,” he said. “The demand for flour from artisanal bakeries has fallen, which is particularly obvious in countries like France where the demand for fresh bread, pastries and Viennoiseries have severely decreased in the wake of the current economic situation, with salaried workers staying at home. In the end, overall flour consumption is likely to decrease despite the picture of shortages in supermarkets.”

Supply chain challenges

Nick Major, president of FEFAC. Photo courtesy of FEFAC.

The milling sector also has faced distribution challenges due to lockdowns, not least due to border crossing restrictions put in place even within the EU to stop the spread of COVID-19, although for freight movements the delays encountered were eased once the European Commission introduced Green Lanes at internal borders for trucks.

Nick Major, president of the European Feed Manufacturers’ Federation (FEFAC), said Europe’s food and feed system had proven itself to be resilient as it faced up to COVID-19.

“This enormous effort by the feed sector and all those in the food supply chain has been acknowledged by the European Commission and national governments,” he told World Grain. “As FEFAC president, I am very proud of the work done by all of our members and those that work in our industry. Feed manufacturing and supply for livestock was designated as an essential service in all Member States at the start of the crisis and as such have continued to operate throughout.

“Raw material supply chains, including those for grains, benefited from the creation of Green Lanes at internal borders. While there were some delays to begin with, which were exacerbated by limited availability of PPE (Personal Protective Equipment) for drivers, the Green Lane system has worked effectively. Ports and shipping routes have remained open.

“The main impact maybe yet to be seen as the complete closure of the foodservice, catering and hospitality sectors in most Member States is inevitably leading to lower demand for all categories of animal protein.”

Grain input price spike

One upshot of the increase in short-term demand for some milling products due to both governmental and consumer stockpiling was an increase in some grain prices.

“Regarding sourcing, wheat prices have increased temporarily due to growing short-term demand caused by stockpiling of both individual households and traditional importing countries, as well as announcements of trade restrictions by certain exporting countries — Russia, Kazakhstan, etc.,” Reverdy said. “According to the experts, much will depend on the new Russian crop, as stocks of major exporters are already somewhat tight for wheat.”

Waugh said that thus far at least, UK millers were not suffering supply issues.

“Grain is fine,” he said. “Most of the wheat we are using is grown in the UK, but what is imported is being shipped through ports with no significant issues.”

International Grains Council (IGC) economist Alexander Karavaytsev told World Grain that EU trade has been “quite brisk recently,” even though some bottlenecks were noted on the Rhine River due to low water levels.

“While port lineups in France are subsiding as the July/June season draws to a close, extra-EU common wheat shipments in April of around 1.6 million tonnes were the largest in that particular calendar month in four seasons,” he said. “At the same time, all-wheat July/June dispatches from the EU were up by 58% year-on-year as of May 3. 

“Concerning EU all-wheat shipments, which includes common wheat, wheat flour, durum and semolina, the 58% year-on-year increase stems from increased deliveries to many destinations, but particularly large deliveries have been noted to parts of Near East Asia (Iran, Saudi Arabia, Turkey), Pacific Asia (China, South Korea, Philippines, Thailand), North Africa (Morocco) and sub-Saharan Africa (Kenya, Nigeria, Sudan).”

EU maize shipments also have been quite strong. July/June EU deliveries nearly doubled year-over-year as of early May due to strong demand from North Africa and Near East Asia, with sizable purchases, too, from China and South Korea.

“Maize imports have also been notable amid competitive prices, averaging about 300,000 per week over the past month, albeit the recent triggering — and the following increase — of an import duty has reportedly underpinned interest to domestic supplies,” Karavaytsev added.

Labor and the harvest challenge

A far bigger threat than a rise in protectionism of the resilience of Europe’s food supply chains is the availability of labor, said Nathan Kemp, senior economist at the IGC.

“Labor availability is perhaps the biggest concern across the food value chain, but in terms of grains and oilseeds, we have yet to observe any major impact on a country level,” he told World Grain. “While few EU members publish detailed weekly planting statistics, we have reports from France that confirmed spring barley was finished as per normal by early April, while maize sowings are also progressing as expected — currently complete on a little more than three-quarters of the planted area as of May 7. There are likely to have been at least some localized problems securing or moving certain farm inputs, but at this stage there do not appear to have been any severe disruptions.

“In terms of harvest operations, that will only get underway in June, when combining of the main winter wheat and barley crops starts. For cereals and oilseeds, we anticipate that operations will also proceed more or less normally, with operators generally well placed to plan for potential bottlenecks.”

Major noted that even though Europe’s food supply chains and milling businesses have coped with COVID-19 remarkably well so far, further systemic shocks could follow.

“Like all business sectors, we remain alert to the possibility of further peaks in infection, which could still have an impact on capacity at all stages of the supply chain,” he said.

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