Coronavirus: Bord Bia details the huge task facing our food industry
Little if any effect on production of raw material, nor on processing, but huge disruption beyond the farm and factory gates, was the challenge described when Bord Bia issued its Covid-19 Response Plan for the Irish food industry this week.
Just how bad things could get was seen in the United States last week, when Smithfield Foods had to close its Sioux Falls, South Dakota plant until further notice.
The plant had to be closed last Saturday after hundreds of its 3,700 employees tested positive for Covid-19.
It is one of the largest pork processing facilities, with 4-5% of US pork production.
The company warned the closure of this and other plants across the industry pushed the US perilously close to the edge in terms of meat supply, with severe repercussions for many in the supply chain, first and foremost farmers who would have nowhere to send their animals.
It’s a plight that could be repeated worldwide because the US is not at the top of the rankings for cases of Covid-19 per million.
Earlier this week, the US was estimated to have 1,770 cases per million.
Large counties with higher incidence were all here in Europe, including Spain (3,690 cases per million), Switzerland (2,980), Belgium (2,685), Italy (2,638), and France (2,095).
The statistics depend on how much testing was done in each country, for example, Iceland was estimated to have over 5,000 cases per million, but this can be attributed to the testing of 10% of their population, far higher than anywhere else in the world.
Still, the figures illustrate the threat to the food industry and other industries, posed by Covid-19.
That’s why minimising the risk of the disease to their employes is such an important part of the huge task facing the food industry.
Bord Bia said all Irish dairy processors have risk mitigation plans and strict protocols with all milk collectors in place along the supply chain, with farmers advised accordingly.
All non–essential workers must work from home.
Nor had Covid-19 a material effect yet at production level on Irish beef, sheepmeat, pigmeat, or poultry (although value-added poultry lines were suspended),
However, Bord Bia said breweries were making difficult decisions around human resourcing, given the labour-intensive nature of their work, often in smaller spaces.
And labour is a big issue among Bord Bia clients in edible horticulture, with the reduced availability of seasonal workers from Eastern Europe a big concern.
Production and processing are not significantly damaged in the Irish food industry.
However, there is chaos beyond the farms and the processing plants, due to the Covid-19 pandemic effects on markets and logistics.
Most food sectors are trying to adjust to the loss of foodservice sales, counterbalanced by a very significant surge in retail demand.
This could be a nearly impossible task for some companies, even though Bord Bia says it has found grocery chains in Ireland are without exception open to helping Irish suppliers as much as they can.
Most have enacted improved payment terms for the short term, and agreed to work closely with Bord Bia to identify new Irish suppliers.
Still, the market shift from foodservice to retail has left our beef exporters hit by low demand for steak from foodservice, and from price-conscious retail consumers, while competing with low priced South American steak being sold in Europe.
So Irish steak prices paid to processors have plummeted, and they are unable to sell a lot of the carcase, which has to go into cold storage.
Of course, our dairy and beef industries depend 80-90% on export markets, and the big problem there has been the pandemic interfering with international logistics.
Even if demand were to jump overseas, due to local food industries being closed down by Covid-19, it is debatable if Irish companies could get product to them, to meet the demand.
This is mainly because of the lack of refrigerated shipping containers internationally.
That problem stems mainly from China.
Every country and company was trying to break in into the huge Chinese market with their foods.
But the downside of that is that Chinese ports have been operating at less than 50% capacity over the last months, as the country dealt with its Covid-19 outbreak.
The ports lockdown left more than two million refrigerated containers sitting idle. (The lack of supply is exacerbated by rising demand in some countries for use of these containers as morgues.)
More than 20% of sailings between China and Europe have been cancelled, according to some reports.
The imbalance of container distribution and the reduction in shipping availability has increased the cost and logistical complexity of exporting to China and other parts of Asia, with freight rates up as much as 200%, according to Bord Bia.
Such are the problems beleaguered food industry chiefs have to deal with.
And there are plenty more in the background, not least concern in the industry regarding cash flow and late payments from the worst-hit sectors of the food industry, such as the closed down foodservice sector.
Arguably, foodservice outlets face the biggest challenges of all, having had to close indefinitely across Europe and the US.
Only a small percentage of revenue losses are expected to be off-set by home delivery, still in its infancy in most countries.
The projected lockdown monthly loss in revenue before VAT, for the foodservice sector, is €2.4 billion for Germany and France, and €4.5 bn for Italy and Spain.
Another worry in the background for the food industry is limited cold storage capacity, to cater for market upsets, or for surplus food storage schemes which might be financed by the EU.
In its report, Bord Bia has done a comprehensive job of outlining the challenge; the guidance, supports and initiatives available from Government and State Agencies; and advice to guide the difficult decision making for these challenging times.
Bord Bia recommends financial management actions to manage food businesses through the crisis.
Companies are advised to continuously assess supply chain strengths and weaknesses.
Welfare and safety at the factory floor level is emphasised, an escalating concern as a consequence of Covid-19.
The workforce is described as the greatest asset of many companies, but also one of the largest expense items, and due to demand having been turned off with such speed and ferocity, some businesses have to reduce payroll costs, or avail of one of the Government’s new Covid-19 schemes for employees.
The surge in online sales has led many food brands to consider selling online for the first time, Bord Bia advises on the expertise and resources needed for eCommerce.
