Panic buying and lockdowns may drive world food inflation

The weekly market in Hanau, Germany, is quiet during the coronavirus pandemic lockdown. (Reuters)
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Updated 22 March 2020

Panic buying and lockdowns may drive world food inflation

  • There are ample supplies, but they need to be at the right time in the right place

SINGAPORE: Lockdowns and panic food buying due to the coronavirus pandemic could ignite world food inflation even though there are ample supplies of staple grains and oilseeds in key exporting nations, a senior economist at FAO and agricultural analysts said.

The world’s richest nations poured unprecedented aid into the global economy as coronavirus cases ballooned across Europe and the US, with the number of deaths in Italy outstripping those in mainland China, where the virus originated.

With more than 270,000 infections and 11,000 deaths, the epidemic has stunned the world and drawn comparisons with periods such as World War II and the 1918 Spanish flu pandemic.

“All you need is panic buying from big importers such as millers or governments to create a crisis,” said Abdolreza Abbassian, chief economist at the United Nations’ Food and Agriculture Organization (FAO).

“It is not a supply issue, but it is a behavioral change over food security,” he told Reuters by phone from Rome, the FAO headquarters. “What if bulk buyers think they can’t get wheat or rice shipments in May or June? That is what could lead to a global food supply crisis.”

Consumers across the world from Singapore to the US have queued at supermarkets in recent weeks to stock up on items ranging from rice and hand sanitizers to toilet paper.

The global benchmark Chicago wheat futures rose more than 6 percent this week, the biggest weekly gain in nine months, while rice prices in Thailand, the world’s 2nd largest exporter of the grain, have climbed to their highest since August 2013.

France’s grain industry is scrambling to find enough trucks and staff to keep factories and ports running as the panic buying of pasta and flour coincides with a surge in wheat exports.

Restrictions imposed by some EU countries at their borders with other member states in response to the pandemic are also disrupting food supplies, representatives of the industry and farmers said.

However, global wheat stocks at the end of the crop marketing year in June are projected to rise to 287.14 million tons, up from 277.57 million tons a year ago, according to the US Department of Agriculture (USDA) estimates.

World rice stocks are projected at 182.3 million tons as compared with 175.3 million tons a year ago.

Logistics are likely to be a major global issue, analysts said.

“There is about 140 million tons of corn that goes in ethanol in the US and some of that can used for food as it won’t be needed for fuel, given the drop in oil prices,” said Ole Houe, director of advisory services at brokerage IKON Commodities.

“The concern is having food at the right time in the right place.”

Asian buyers were inactive this week with uncertainty looming in the market.

“We are not sure about the demand. What it is going to look like in June or July?” said one Singapore-based purchasing manager at a flour milling company that has operations across Southeast Asia. “Restaurant business is down, and as a result demand is a bit soft right now.”

Asian wheat importers, including the region’s top importer Indonesia, have been taking a bulk of the cargoes from the Black Sea region amid a global oversupply.

Oil exporting nations in the Middle East, which are also net grain importers, are likely to feel more financial pain with crude losing more than 60 percent of its value this year.

“Net oil exporters’ capacity to buy grains has dropped given the fall in oil prices and depreciation in currencies,” said FAO’s Abbassian.

“There will be less capacity to take policy actions to boost economies.”


Cirque du Soleil walks a tightrope through pandemic

Updated 06 June 2020

Cirque du Soleil walks a tightrope through pandemic

  • Suitors wage backstage battle to rescue debt-stricken Canadian circus icon
  • Among the potential bidders is former fire eater Guy Laliberte, who fouded the acrobatic troupe in 1984

MONTREAL: Its shows canceled due to the COVID-19 pandemic, an already heavily indebted Cirque du Soleil’s fight for survival has invited an intense backstage battle to try to save the Canadian cultural icon.

High on a list of potential suitors is former fire eater Guy Laliberte, who founded the acrobatic troupe in 1984 but later sold it.

“Its revival will have to be done at the right price. And not at all costs,” said the 60-year-old, determined not to see his creation sold to private interests.

The billionaire clown said after “careful consideration,” he decided “with a great team” to pursue a bid, but offered no details.

Under his leadership, the Cirque had set up big tops in more than 300 cities around the world, delighting audiences with contemporary circus acts set to music but without the usual trappings of lions, elephants and bears.

Then the pandemic hit, forcing the company in March to cancel 44 shows worldwide, from Las Vegas to Tel Aviv, Moscow to Melbourne, and lay off 4,679 acrobats and technicians, or 95 percent of its workforce.

Hurtling toward bankruptcy, the global entertainment giant and pride of Canada commissioned a bank in early May to examine its options, including a possible sale.

Meanwhile, shareholders ponied up $50 million in bridge financing for its “short-term liquidity needs.”

Laliberte, the first clown to rocket to the International Space Station in 2009, ceded control of the Cirque for $1 billion in 2015.

It has since fallen into the hands of American investment firm TPG Capital (55 percent stake) and China’s Fosun (25 percent), which also owns Club Med and Thomas Cook travel. The Caisse de depot et placement du Quebec (CDPQ) retains the last 20 percent.

The institutional investor, which manages public pension plans and insurance programs in Quebec, bought Laliberte’s last remaining 10 percent stake in the business in February, just before the pandemic.

Since 2015, the Cirque has embarked on costly acquisitions and renovations of permanent performance halls, while its creative spirit waned, according to critics in the Quebec press.

Meanwhile, it piled on more than $1 billion in debt.

Fearing that the Cirque would be “sold to foreign interests,” the Quebec government recently offered it a conditional loan of $200 million to help relaunch its shows as restrictions on large gatherings start to be eased worldwide.

But the agreement in principle is conditional on the Cirque headquarters remaining in Montreal and the province being allowed to buy US and Chinese stakes in the company at an unspecified time in the future, “at market value” and with “probably a local partner,” said Quebec Minister of the Economy Pierre Fitzgibbon.

“The state does not want to operate the circus, but the circus is too important to Quebec (to leave it to foreigners),” he said.

In addition to Laliberte, other prospective buyers include Quebecor, the telecoms and media giant of tycoon Pierre Karl Peladeau, whose opening lowball bid was outright rejected.

“It is essentially the value and reputation of the brand” that has piqued interest in the company, says Michel Magnan, corporate governance chair at Concordia University in Montreal.

But “as long as there are restrictions on gatherings of people, the future is not very rosy” for the Cirque, he said.

Several challenges await, according to Magnan.

“There were a lot of people working in all of these shows. Where are they now? What are they doing? How are they doing? In what shape are they, what state of mind?” he said.

“The more time passes, the more this expertise risks evaporating.”

Small consolation: The Cirque resumed its performances on Wednesday in Hangzhou, China, five months after a coronavirus outbreak in the city.