COVID-19 to hit grains in two waves

Rabobank global grains and oilseeds strategist Stefan Vogel said biofuel, which impacts feed grains such as corn and barley, and oilseeds such as canola, cotton and malt barley had been hardest hit in the immediate wake of COVID-19.

Mr Vogel predicted these sectors were expected to recover relatively quickly, within a year or so, but cautioned by then other areas, such as the animal feed industry, may come under more pressure due to less demand for meat in developing nations.

In terms of biofuels, Mr Vogel said it was a simple case of supply and demand.

"Clearly we've seen with the lockdowns, people were not driving as much to go out or go to work, so the demand for biofuels as a whole suffered," Mr Vogel said.

Malt consumption, with beer and spirits a discretionary item for consumers, had also suffered as belts were tightened in the wake of uncertainty about the economic outlook, combined with the complete or partial closure of the hospitality sector during lockdowns.

In terms of cotton, while clothing remains an essential, Mr Vogel said consumers had not bought as much as normal.

"People have not been buying as many clothes because they have not been going out or to the office as much, but instead stayed home."

However, in good news, Mr Vogel said the pain was expected to be temporary.

He said Rabobank predicted recovery in all these sectors in the next 12 months - albeit potentially not in full, but to 85 to 95 per cent of normal levels.

Further out, he said the animal feed grain sector which, along with food grain, had been relatively unscathed by the effects of the pandemic so far, the impacts of COVID-19 may become more pronounced in the coming 12 months.

This forecast is based on declining meat consumption in developing countries.

"We are actually thinking this could get worse in some countries where reduced incomes may see consumers not being able to afford as much meat as they normally consume," he said.

"We have to consider if there will be a reduction in meat demand and therefore a reduction in livestock feed demand," he said.

However, Rabobank Australia senior grains and oilseeds analyst Cheryl Kalisch Gordon said the long-term global picture still showed a lack of meat, and that mixed farmers in Australia confronted with low prices for traditional feed grains such as barley may use the grain themselves.

"Globally there is still an animal proteins deficit, so feeding stock isn't going to be a bad outcome, especially if you are a mixed farmer," Dr Kalisch Gordon said.