Food industry experts warn of further fallout from COVID-19
Kieran Forde, Senior Consultant, MENA region, Farrelly & Mitchell looks at how the coronavirus in Saudi Arabia and neighbouring nations is impacting on food and agribusiness.
There is a feeling that the food industry in Saudi Arabia, like most of the world, was caught unawares from a risk management perspective. The emphasis has been very much placed on the strength of food suppliers in the region up to now.
Insufficient preparation has meant when force majeure, in the shape of the coronavirus supply chain impact emerged, food suppliers weren’t ready for the effect on the demand side and the food service industry shutting overnight. The devastation of the global trade network was so unlikely to happen it was never considered.
That said the country is very conscious about food security and that is helping the current response.
Coronavirus in Saudi Arabia and Gulf Coast Countries: Impact
The UAE and Dubai are probably better equipped to deal with this problem as it had already been established as an import-export hub and will have massive storage capacity.
That’s their business model and there is no indication that this area has been dramatically impacted. Cargo carriers are fully exempted from air travel restrictions, so the signs are they are better prepared to weather this upheaval.
Previous conflicts have informed Arabian food security
Saudi Arabian food security is solid in general because of the security dynamics of the region. The regional wars in Yemen, and latterly Iraq, had all added to the need for a sense of food security. It has for a long time been top of mind here and contingencies have been maintained in terms of storage and the overall integrity of the supply chain. It was common to see the ministry for commerce performing impromptu checks on supermarkets.
The upcoming few weeks will be a challenge for fruit producers with some of the farms in this country among the biggest in the Middle East. For stone fruit and grain fruit frappes producers, it is uncertain how it will pan out– a year’s revenue is derived in just a few weeks of harvest.
Perishable food companies badly hit
Companies in the perishable fruit and veg sector and are bound to take a big hit. The only plus is that they are in local markets only – because of concerns around water conservation they have not been allowed to export.
If curfew restrictions continue during Ramadan, they will continue to take a major hit. There is no capacity to store foods with a limited shelf life, as long as there persists coronavirus in Saudi Arabia.
Pandemic could herald change away from old farming methods
In addition, the country relies on a supply of seasonal labour from local HR companies that specialise in the provision of labour. As it stands, there won’t be enough labour on those farms to harvest production and food could rot in the ground.
Leaks have emerged from different ministries and what positives can be taken from that is those rumours have generally become reality, as 24/7 curfews and other rumours did eventually transpire.
There is speculation that the government wants to tighten down as much as possible before Ramadan, and then allow some manpower movement and a partial lifting of the curfew.
The Saudi ministry of health has dampened this speculation in recent days by cautioning that restrictions will continue during and after Ramadan.
The impact of coronavirus in Saudi Arabia may bring about change in how agribusiness is done in the kingdom. There has long been a hold out in terms of how farming is done here.
For example, there are constant submissions for exemptions from the water ban or forage ban. This may change as some of those fruit and arable farmers may be out of business following the current fruit harvest, which is just getting underway.
It could mean a positive disruption to the whole sector as more focus can be placed on higher value-added crops, greenhouse farming and desalination of seawater for crop irrigation. Coronavirus in Saudi Arabia could well be the launching pad, the catalyst for a new wave of high-technology farming.
Kieran has deep agri-food operational and strategy development experience with 35 years spent across Saudi Arabia, Europe and the wider EMENA region.
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