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Procurement opportunities and challenges in the retail food sector

18 October 2021 Adam Speck

In looking at the context of global procurement for all things protein, it is important to note that animals do not ship and to remember that not all meat is the exact same commodity. Regions of the world have different levels of self-sufficiency as well as preferences for what meat can be imported. During the onset of the pandemic, packing plants around the world faced labor challenges as COVID harmed the labor pool. While most packing plants have had an ability to re-open and stay open, labor continues to be an issue and the animals that cannot get through plants is creating a backlog. Having extra animals backlogged is an unwanted scenario, so many regions globally have curtailed production of animal supplies in order to avoid this. Cattle placements and calf crops are down, hog herds have been thinned in some places, and broiler production continues to ebb and flow with shifting demand. Though the broiler meat supply chain is incredibly global, the distribution of such created challenges with mainland China's pull, the largest destination for broiler meat.

China in the midst of the pandemic was recovering from African Swine Fever and trying to rebuild its hog herd. While rebuilding efforts were underway, China set records for protein imports in 2020, continuing into the first half of 2021. Brazil and the EU attempted to grow their hog herds into 2020 in anticipation of China's buying, but no one else was able to increase their animal count. This put a stronger pull on what pork was available to distribute, about 12% of the world's pork production was eligible outside of producing nations' domestic consumption. The result has seen some countries fighting for the same piece of pork, while supply chains saw major disruptions for cold chain staging, container space availability and timing, as well as distance of distribution. The different styles of beef preferences and eligibility also had some fighting over the same piece of beef, with production around the world varied at the start of the pandemic. Not everyone had extra beef to ship and sometimes what was eligible was not preferred, based on the animal and finishing. Meanwhile, China rebuilt its hog herd to size by mid-2021 and that pulled China out of the market for extra pork, now creating over supply issues in some areas.

The world protein supplies will face many challenges into the start of 2022: plant production schedules due to labor shortages, temporary back logs of animals and the response to thin herds, increased feeding costs and breakeven levels, cold storage stagging and port of arrival distribution. Watch our webinar: Procurement Opportunities in the Food Retail Sector on demand and hear the discussion who had beef to ship and where it could go, who is producing the world's pork supplies and how much is available, and who is pulling on the broiler meat supply chain.

Posted 18 October 2021 by Adam Speck, Commodity Market Analyst, IHS Markit

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