Recalibrating the meat industry amidst Covid-19

Darin Friedrichs

The harsh onset of Covid-19 globally has dealt a wicked blow to humanity and the animal protein value chain.

With travel restrictions and lockdowns around us, the resulting supply disruptions related to logistic and production are leaving both suppliers and producers in a quandary. Asian Agribiz spoke with Darin Friedrichs of Intl FC Stone. He sees major hurdles ahead across the value chain, with a glimmer of hope as the situation settles.

“Currently the areas most affected to seem to be the poultry industry, and the imported meat industry. Both were facing challenges even before Covid-19,” he said. “The domestic poultry industry was facing tight margins and losses. Meanwhile the imported meat industry was dealing with price renegotiations following a drop in prices in China in November and December.

“The present crisis poses an opportunity for wet markets to be regulated. China might want to move the poultry trade to more of an industrial supply chain with slaughterhouses and cold-chain logistics,” he reckons. The same could happen across Asia in countries like Vietnam, Indonesia, Laos, Cambodia, Myanmar and South Asia, where wet markets rule. Although the process would be long-drawn and somewhat difficult, the transition is necessary.

Tempering pork prices

 “In the pork sector, the impact of ASF has already resulted in inflated prices. This can be tempered by imports,” said Mr Friedrichs.

Asian Agribiz sees this already happening in Vietnam. The country imported nearly 25,300 tons pork as of March 15, representing a rise of 205% over the same period last year, the Ministry of Agriculture and Rural Development showed. This was to ease short supply and rising prices as a result of ASF.

Pork was mainly imported from Canada (29%), Germany (19%), Poland (12%), Brazil (12%) and the US (5.5%). Prime Minister Nguyễn Xuân Phúc asked the agriculture ministry and relevant agencies to implement measures to lower pork prices.

“Imported meat will benefit the restaurant sector when the current situation returns to normal. A lot of imported beef from South America for example is mostly used in restaurants in China and that demand has been hurt,” he said.

Maintaining control measures

He added that the impact on the value chain depends on what kind of changes China makes to its food industry. “For example, many cities have put measures in place to limit the sale of live poultry, but at this point we don’t know if those measures will be relaxed later, or if they will become permanent. This could open some opportunities for US poultry meat exporters as part of the trade deal.

“I think it’s important to appreciate that the business in China is often very cyclical.  Many farmers went into poultry breeding as a result of ASF, but this led to over-supply and then to losses, which were compounded when school, restaurants, and catering businesses closed.

“But that situation won’t last forever, and we could see less production when schools and other food venues re-open, which could drive prices higher. Similarly, in H2 2019 there were massive investments in facilities to export meat to China, particularly in South America and Europe. But many of those companies faced losses when prices in China fell and contracts were renegotiated,” he said.

Driving delivery

As with Asian Agribiz’s news reports, Mr Friedrichs concurred that delivery services will be important in helping people maintain social distancing. “China was very well-positioned when it came to getting food to consumers. China already had a technology ecosystem of app-based payments, and a well-developed delivery infrastructure. Consumers can order restaurant delivery or groceries on an app for a small delivery fee, get a call an hour later that their order was delivered to their building, and retrieve that order without ever seeing or interacting with the delivery person.”

The same is now trickling across to the rest of Asia. The global food delivery industry is expected to reach USD 164 billion by 2024, with an annual revenue growth of 7.5%.

According to Statista, the largest market segment is held by platforms such as GrabFood, with a market volume estimated to reach USD 62.8 billion this year.

In Indonesia, the number of completed food orders of Gojek’s GoFood has increased 30 times. Its average number of orders last year reached 50 million/month with up to 16 million food choices.