What Does Food and Fuel Demand Look Like Post-COVID?
As it appears summer consumer behaviors are more normal in 2021 than in 2020, ag economist Michael Swanson from Wells Fargo joined AgriTalk to share his insights for what an ag economy looks like post-COVID.
Regarding restaurants vs. eating at home, Swanson is surprised how quickly the population is spending its food dollar away from home.
“We saw the April numbers from the Bureau of Economic Analysis at $55 billion–that's kind of their annualized number–and that's only a billion off the record right before COVID hit. So I'm predicting right now that even when we see the May and June numbers, now that California and New York are opening up again, we're going to see record spending away from home,” he says. “That shows there's a pent up demand for having somebody else cook and clean up.”
Listen to the full interview here:
Swanson sees the strength in the supermarket sector softening for two reasons: the increased consumption at restaurants as well as people still eating through the stocked up goods in their pantries and freezers.
“We were talking to sugar people just yesterday,” he says. “And it's like how many extra 5-pound bags of sugar are sitting in somebody's pantry right now that they thought it'd be used baking but they didn't. There's a lot of canned, dried and frozen goods that are probably gonna have to work their way through.”
While the restaurant industry appears to be on the rebound as a whole, there are some sectors that continue to struggle.
“Quick service restaurants–they're not back at 100%, because a lot of people still are working from their office. And when people work from their office, they aren’t stopping to get a breakfast sandwich on their way to work. So there's a lot of nuance about where we eat,” Swanson says.
And as summer travel season approaches, Swanson says there will be a lot more people on the road this year compared with last year.
Gasoline and ethanol consumption will be up in the short-term, but he is predicting a long-term trend toward electrification of the vehicle fleet.
“We saw the rollout of the Ford 150 Lightning and that battery technology. That's what we're looking at over the horizon and saying, ‘Well, how much demand destruction going forward will we see?’”
He says it’ll take fleet turnover to bring great change to gasoline consumption, and he says two factors will drive that adoption—federal policy and battery technologies. For example, he says 10 years ago battery powered vehicles had $50,000 in just the batteries. Today, the cost may be $12,000.
“There are 275 million private vehicles on the road today, and they typically have about a 14-year service life,” he explains. “So we add about 17 million vehicles per year; that was kind of the run rate. So it's going to take a long time, if we go to 4 million or 5 million electric vehicles, that means another 11 million or 12 million gasoline powered vehicles.”
