Coronavirus and the food industry

How much does the coronavirus burden the German food industry? Tagesspiegel-Authors Heike Jahberg, Laurin Meyer and Thorsten Mumme take a glance at the supermarket shelves.

Crisis. What crisis? Germany is hoarding yeast, but Nestlé, the world’s largest food producer, continues to bake its Wagner pizza undaunted. While yeast is offered on the Internet by profiteers at the price of silver, the food multinational has taken precautions. Nestlé has enough of the sought-after mushroom in stock. “Our production is running according to plan,” says spokesman Alexander Antonoff. “We are currently working at full capacity”. Ravioli is particularly popular, but also water and baby food. “Everything is currently available,” reports Antonoff. An overview of how the food supply is doing in this country:

Fruits and vegetables

Spain and Italy are in a state of emergency, but miraculously the supply is running almost smoothly. 90 percent of the tomatoes processed in Germany come from Italy. “Deliveries are running without any problems,” stresses Monika Larch from the Federation of German Food and Drink Industries (BVE). And even from South Tyrol, one of the Corona core zones, the fruit arrives at German food producers without delay. Apples, for example.

“The warehouses are full,” reports Larch. Apple juice is mainly pressed from German, Polish and South Tyrolean fruit. According to the German Farmers’ Association (DBV), the market supply of German apples will probably last until the harvest in late summer. There is also enough cabbage, leek, carrots and onions until May.

The food industry remains hopeful

In the 2018/19 harvest season, the degree of self-sufficiency for vegetables in Germany was 35.7 percent and for fruit 22.1 percent. The Federal Ministry of Food does not want to completely rule out supply bottlenecks for certain products. “For example, a lot is imported from Southern Europe,” says a spokeswoman on request. “These countries are more affected by the Corona pandemic than we are. Workers are being laid off there as well, so it is possible that less will reach us.”

Another problem has been defused: With the decision to let Eastern European harvest workers come to Germany, Federal Minister of the Interior Horst Seehofer (CSU) has made life easier for German farmers. Not only the asparagus farmers, but also the fruit-growing companies are dependent on experienced seasonal workers.

Monika Larch of the BVE is confident: “It will be a good year for the apple harvest”, she believes. But Covid-19 still leaves its mark on the farmers. The prices for feed have risen because animal owners have bought hamsters. In Argentina, the corona spread threatens transports of soya to export ports. Difficulties in the supplies are also caused by the insolvency of a large oil mill.

Packages and milk

And China’s month-long fight against the virus has also made life difficult for German farmers. In the meantime, two thirds of the unloading capacities in the Chinese ports were not available, and even today there are still no containers left in China. “The costs for containers and freight have risen significantly,” criticizes the DBV. The food industry suffers from the fact that packaging material from China is scarce.

Dairy industry badly affected

The dairy industry is also affected by the crisis there, according to the farmers’ association. China is by far the most important importer of whey, skimmed and whole milk powder, the EU the biggest exporter. The problem is exacerbated for German dairy farmers because smaller dairies in Italy have reduced or completely stopped work due to the illness of their employees. However, Italy is an important buyer of German milk. “The supply chains are under enormous stress, but they still work,” DBV General Secretary Bernhard Krüsken told the Tagesspiegel. “We are concerned about the prospect of a global recession, which could also affect the prices of agricultural products.”

Wholesaler shelves

The situation in the wholesale trade is tense. After all, the supermarket chains have their own logistics channels, so you don’t get any of the hamster purchases in food retailing here. The wholesalers’ customers are usually restaurants, canteens, schools or public authorities – all of which are currently closed or working in the home office. “As wholesalers, we are used to ordering goods at various points in Europe,” explains Thomas Franz, owner of the Berlin-based Früchte Franz wholesaler. “However, this usually requires us to order a whole pallet for each item.” In normal times this is not a problem, but at the moment it is impossible because we cannot market these quantities at all”.

Wholesale warns of massive dealer death

Other wholesalers also report this. They currently generate only five percent of their normal turnover and can no longer offer fresh salmon, for example, because nobody buys the minimum order quantity from them. Franz fears that those responsible are overlooking the fact that the wholesale trade is facing problems in view of the rising sales in the retail trade and warns of a “massive death of dealers”. And he wonders how the supply of schools will be managed after the crisis, when the logistics of the wholesalers are no longer up and running – or are no longer there at all.

Shortages could therefore arise elsewhere than in the supermarkets. “It is now impossible for us to order goods via the channels that would be necessary,” continues Franz, who also knows about certain products that are now difficult to obtain and have therefore become considerably more expensive. “A good example is fresh ginger, which comes mainly from China or Brazil. There are no normal transports by ship at the moment,” he explains.

Rice

The restrictions in some producing countries could affect other food products. Due to the crisis, demand for rice in German supermarkets was at times three times higher than usual since the outbreak of the coronavirus. In Asia, however, there is growing concern about a food shortage. This is because output restrictions are paralysing both rice production and transport.

For the time being, dealers in India are not concluding any new contracts with foreign customers. Vietnam, Cambodia and Myanmar have also recently curbed exports. “How the rice segment will continue to develop and what effects this will have on the world market price, we cannot yet say at the present time”, says the company Rapunzel Naturkost, for example.

The organic trader buys the rice directly from the growing countries without any middlemen. Its supplier currently has a special permit for Basmati rice from India. The rice is also an important export good for India. “We therefore assume that we will continue to be supplied,” explains a spokeswoman. “But we must also expect delays in the supply chain.” However, the company can rely on an alternative to the grains from the Far East: rice from Italy. After all, the country is Europe’s largest rice producer. “So far, there are no restrictions.”

Coffee

The demand for coffee usually remains high even in times of crisis,” says Michaela Helbing-Kuhl, an analyst at Commerzbank. But the producing countries are already suffering from considerable restrictions. “Auctions to export companies do not take place, many ports are in minimal operation,” says Helbing-Kuhl.

Especially in Vietnam, the world’s second largest exporter, the coffee sector is at a standstill in many places. However, the supply of coffee could be hit even harder if the coronavirus also paralyses the Brazilian economy for a long time. After all, the South American country is the source of the Arabica beans which are much more popular in this country. “Everything depends on how long the situation in the affected countries will last,” says Helbing-Kuhl. Some importers and traders have therefore already tried to bring forward deliveries.

Melitta sees coffee supply at risk

In any case, the Melitta family business is already anticipating adverse effects. It is true that delays in the supply chain have so far been compensated for by short-term purchases in Europe – at prices that have already risen. “Overall, however, it can probably be assumed that the reliable supply of coffee, as we have been used to up to now, will not be guaranteed in the foreseeable future,” the company explains when asked.

Competitors such as Dallmayr and Tchibo have so far refused to make any forecasts. “Developments are too unpredictable for that,” says Tchibo. Commerzbank analyst Helbing-Kuhl is still optimistic: “So far, we assume that the restrictions will expire towards the end of the second quarter. In addition, Brazil is facing a record harvest starting in the summer, local producers estimate. Only if there were to be significant delays would this be problematic, the expert explains.

Eggs

However, one thing seems certain: there should be enough eggs this year as well. According to the Federal Ministry of Agriculture, the degree of self-sufficiency here is 70 percent. And if the egg shelf should be thinned out, some of you could take another look in your own supply cupboard. “Due to a currently somewhat higher stocking of eggs by private households, there may be short-term bottlenecks in some forms of husbandry,” the ministry says.

This article was published on tagesspiegel.de