Despite concerns about the impact of Coronavirus and the associated economic downturn, there are potential benefits for the grocery retail sector, with a potential flow on to supply chain and production components.
Increased demand on supermarkets has lead to Coles to announce 5,000 new temporary jobs around Australia to meet consumer demand, while Woolworths has agreed to take on Qantas workers who have been temporarily stood down.
Supermarkets have seen unprecedented demand for products including hand sanitiser, toilet paper, meat, and long life goods such as canned foods, pasta and rice with some industry sources claiming that the retailers are experiencing an increase in sales volume of up to 160%.
One industry analyst predicts that supermarket sales are up at least 25% year on year, and that’s despite both retail giants closing down their online shopping and delivery services because their websites couldn’t cope with the surge in traffic.
Roger Drake, the owner of a chain of supermarkets in South Australia, says that he’s “never seen anything like it in 50 years of retailing.”
“We were just staggered; we could not believe it,” he said.
Grocery spending has helped the major retailers to weather the financial storm to date with Woolworth’s shares falling 2.6 per cent and Coles down 5 per cent, while the ASX / S&P index fell 9 per cent.
Truck drivers are in demand to fill the shortfall in restocking supermarket shelves, while the government has assured the industry that the inter state transport of food would still be protected from state and territory border closures.
“In terms of freight, that means livestock, to refrigerated foods, to general freight,” said David Smith, the president of the Livestock and Rural Transporters Association of SA.
“There is no restriction on freight, all freight is exempt from the border shutdown.”
Demand for food and other grocery items has lead to a spike in sales for the retail sector, with many brands imposing restrictions on the most popular items such as pasta and rice.
Uncertainties regarding grain supply in addition to the falling Aussie dollar have had a positive impact upon grain prices.
The Australian dollar took a dive to a 17-year low late last week before recovering to 57.5 cents to the US dollar on Monday.
The result is that Australian grains are much more competitive on the global market with increased demand from existing trading partners. In addition, new market opportunities have opened including the sale of Australia sorghum into China, leading to a $48 / tonne jump in price to $418.
The fall in the value of the Australian dollar along with supply uncertainty also lead to an increase in wheat and barley prices of around $15-25 / per tonne for stockfeed.
The value of new season milling wheat delivered in January 2021 jumped $35 / tonne for the week to $356 per tonne.