“Hey, Matt!” Martin’s voice came through recently. “You need any shrimp?”
Now, Martin knows I’m almost always in the market for fresh shrimp. It’s a treat.
“My friend caught a load, and we’ve got plenty,” he explained. “I’m at the dock, and we need to move them. The restaurants don’t take much, and the buyer isn’t paying much per pound.”
I heard a disgusted grunt on his end of the call.
He continued: “The closed restaurants messed up the supply chain so badly that the shrimp will go to waste. The other captains asked me to help sell them.”
“I’ll be right there,” I assured him and hung up the phone.
I grabbed a cooler and my daughter. I jumped into the truck and drove down to the dock.
This is one of the benefits of living in a small, coastal town in northern Florida. Here, locally sourced food includes my favorite shellfish.
The summer white shrimp from Northeast Florida are my favorite. They are big — often eight to 10 inches from horn to tail. Cleaned, you get about 20 to the pound. And they’re outstanding!
As we walked out to the shrimp boats tied to the end of the “T,” I grabbed my daughter’s arm. She was so entranced by the view that she almost put her foot in one of the many holes of the old dock.
This old dock may as well be a metaphor for the shrimping industry in the region. The last decade was unkind at best.
The region’s shrimpers have battled three headwinds:
- High diesel prices.
- High labor costs.
- Competition from imported, farmed tiger shrimp.
And today, conditions are worse.
The COVID-19 pandemic has brought whole new challenges:
- Diesel prices are down … but nobody is buying shrimp.
- Restaurants are closed in the heart of the tourism season.
- Shrimp prices are even lower than before.
The tech-savvy shrimpers are advertising on social media. And the older guys, like my friend Martin, are calling and texting their old contacts. That’s how I came to get a call.
I bought 10 pounds of fresh shrimp that day for $60. That’s less than half the price you’d pay for anything in the supermarket. And you can bet the crap they sell at the market doesn’t taste half as good.
From speaking with the guys at the dock, I know the shrimping industry will be different after the pandemic. And I believe it shows us what many areas of our food and agricultural industries will look like as well
A Tough Year for Farmers
Consumer buying patterns changed dramatically in the first half of 2020. According to Meagan Nelson, the associate director of the fresh growth and strategy team at data giant Nielsen, the pandemic has shifted consumer behaviors in the U.S.
We stopped going to restaurants and began cooking at home.
She believes it will take months for buying habits to return to where they were before the pandemic —particularly in fresh meat.
While demand for fresh meat in supermarkets was up, the pandemic hit the supply lines, particularly at the processing plants.
Some of the largest plants in the country closed as COVID-19 spread quickly through their workforce.
In April and May, thousands of processing plant employees all over the country tested positive for the virus.
Three of the largest pork processing plants had to shut down.
That’s nearly 15% percent of pork production.
And the fallout doesn’t stop with meat.
This is just the next leg down in a trend that began years ago.
The price of food, as tracked by the Commodity Research Bureau’s Food Index, just hit a 14-year low:
This index tracks the prices of hog, steer, butter and more.
And it shows in graphic detail just how far prices have fallen. That puts pressure on the producers. And even principal crops such as corn are feeling it today.
For example, the price of corn hit $2.87 per bushel at the end of April. That’s within a couple of cents of its 2014 lows.
And the export market for other crops, such as soy, remains in jeopardy because the U.S.-China trade squabble.
Our Plan Going Forward: Preserve Capital and Take Profits
As longtime readers know, I’m a contrarian by nature. That means I like to buy low and sell high.
But we need to remember that markets can remain low longer than we can remain solvent.
So, I wait for an uptrend before jumping into a market.
That uptrend won’t materialize in agriculture for 12 to 18 months — not in a way that will help our bottom line.
My advice is to stay away from agriculture for now. When it finally bottoms, we could see a massive uptrend in the sector. Until then, sit tight.
Editor, Real Wealth Strategist