While the farm supply trade is coping with the disruption from coronavirus and its control measures in the short term, the medium-term effect on the industry and its markets is harder to predict. Government must underwrite vital food supply chains and think hard about the timetable of its post-Brexit changes to farm support.
The COVID-19 disruption coincides with a busy time in the agricultural supply industry calendar. Demand for feed is high before grass growth can support full turnout, on top of spring calving and lambing needs; while the start of the crop growing season sees peak season fertiliser and crop protection applications underway after the exceptionally high demand for spring seed.
The AIC reports that supply chains are robust and products are getting through to farm, with distributors adopting safe working practices to safeguard the health of their employees and customers. And it has ensured that agribusinesses are classed as essential workers.
And yet the crisis will shape future demand and add pressure to businesses already facing a difficult period. Feed manufacturer Carr’s Group has issued a pre-Covid-19 profit warning, while ForFarmers and AB Agri reported lower feed volumes as demand slides from the record output in the 2018/19 year when that year’s hot summer reduced farm forage production. Equally, Agrii parent Origin Enterprises has warned that 2020 demand for crop inputs will fall in line with the reduced winter wheat area after the very wet autumn 2019 – more spring crops will not replace this volume.
At the same time, the supply chain will have to adapt to rapidly changing food demand patterns. The effective curtailment of the food service and catering sectors as a coronavirus lockdown measure has closed an important market for milk and beef, with the result that some farmers are already dumping milk and seeing beef prices plummet.
Government has stepped in to underwrite wages for those non-essential businesses who have had to furlough their workforce. It must also offer support for essential food production activities to ensure they are able to resume full supplies whenever the lockdown is lifted.
This support needs to continue into the medium term – the commitment to start reducing domestic farm support from 2021 before a replacement scheme is in place, already criticised by the industry as too hasty, now looks increasingly foolhardy.