Research and Market Commentary

Global markets insights: Where’s the meat, and other questions for the future of retail

May 15, 2020

The May long weekend is typically the unofficial beginning of BBQ season in Canada, but COVID-related disruptions at meat processing plants may make those steaks a little harder to find. That’s just one of the pandemic’s impacts on retailers. Gold and the Canadian dollar, meanwhile, have held steady as markets weigh various continuing risk factors.


We asked Scotiabank analysts to weigh in with their latest insights on what the pandemic means for retail, foreign exchange and metals.



  • The latest COVID-19 related impact on Canada’s food supply chain and in turn the nation’s grocers is evident in shortages of beef, pork and chicken. While shortages in March were related to unprecedented demand as consumers stockpiled food, current shortages are supply related due to disruption at processing plants. All of this is happening as we head into the May long weekend, typically the kick-off for summer BBQ season and high demand for meat. Retailers have begun to limit purchases to prevent the stockpiling we saw in the early stages of lockdown. So far, we have not seen grocers raise prices. However, they are being faced with much higher product costs. In the last week of April, the price of 100 pounds of USDA beef was $349, up from $230 at the same time last year. As of May 7, the five-day day rolling average price climbed north of $400, up from $233 a year ago. Consumers inevitably will be facing higher prices at some point and grocers could see consumers trade down as a result. There is some suggestion the supply chain may not get back to normal production levels in 2020, suggesting a prolonged shortage. In an interesting move, Tyson Foods in the US has taken the decision to lower prices it charges restaurants and supermarkets for certain beef products by as much as 20-30% to try to help beef remain affordable.


  • Around the globe, non-essential retailers are getting ready for phased re-openings. In Canada, provincial governments are tasked with providing the guidelines and the permitted opening dates, and protocols vary. This provides an added complication for retailers who operate across the country. Most are trying to find ways of operating that make customers and staff feel safe. We are likely to see the adoption of plexiglass safety shields, first adopted by grocers, come to all manner of stores. But this measure, as well as the use of gloves and masks, may not enhance luxury or experiential shopping. Retailers will be looking for ways to limit customer density in stores, an unfathomable notion just a short time ago. Some retailers in Europe have taken to booking appointments to come into the shops or launching virtual customer assistants. Beauty retailers are finding new ways to permit customers to “try” new products either digitally or on paper. Not surprisingly, many are discussing sanitization and special social distancing protocols for dressing rooms. What is certain is that we are not returning to the shopping world as we knew it. The larger question is whether customers will be comfortable enough to return to bricks and mortar stores in numbers that will support the current physical footprints, and the answer is, not likely. Recent bankruptcy filings and various restructuring plans announced to date indicate operators are aware of that. In many cases COVID-19 is forcing retailers to finally address the issue of too many stores.


  • One positive outcome of the COVID crisis might be the development of a more agile decision-making culture. There have been numerous examples of companies bringing forward projects that had been slated for launch several quarters or years away. Organizations have moved far more quickly than they thought they could in executing important projects and quickly changing the way things were done. Innovative thinking and faster decision-making that outlast the pandemic can only make an organization stronger down the road.


—  Patricia Baker, Director, Retailing, Global Equity Research


Foreign Exchange

  • The major currencies have settled into broad and choppy ranges over the past week, leaving the USD generally mixed against its G10 counterparts.  The markets barely flinched in reaction to the surge in unemployment registered last Friday in both the US and Canada – a reflection of the fact that investors have more or less priced in the staggering economic consequences of the enforced economic hiatus to curb the spread of COVID-19 and expect the global economic shutdown to be relatively short-lived. 


  • The CAD has managed to pick up a little ground on the USD over the week as crude oil prices have firmed; Saudi Arabia has taken unilateral steps to further reduce its output and is urging OPEC+ producers to extend production cuts.  There are some tentative signs of improvement in storage constraints that were behind the April volatility in futures pricing. The CAD’s correlation with crude oil prices has softened in recent weeks, however, and we think broader market volatility – a concern with the S&P 500 slipping and the VIX index on the rise through mid-week as investors appear concerned that the economic recovery may be delayed – remains a key variable for the CAD outlook in the near term.


  • Client activity has become subdued as businesses have reduced visibility on economic prospects over the coming year, which is reducing hedging activity.  Absent an improvement in client flows, we expect the CAD to continue to pivot in a range around the 1.40 area over the coming week or so. 


—  Shaun Osborne, Managing Director, Chief FX Strategist, and Juan Manuel Herrera, FX Strategist



  • Focus remains on the precious sector, which continues to outperform all other commodities this year. Gold has held up relatively well around $1700 for over a month, despite the virus risk falling and US consumer sentiment turning with a belief that the worst is behind us.


  • However, as Europe begins to re-open, lockdown agony in the US persists that is increasingly aligned across political divisions, while trade and (geo)political risk are rising. This renewed threat to risk appetite, with a notable rotation and reversal in US stocks this week, has spared some gold bulls. The recently published World Gold Council Q1 demand trends quantified just how weak jewelry and physical was in in key regions like China and India. Jewelry sales fell to their lowest on record (-40% YoY), with physical trade imports/flows into China and India mimicking that.


  • In addition, the pace of central bank purchases has fallen off materially (on an annualized basis they have purchased at the slowest annual pace since 2008). The return to the physical market from these participants will be slow into 2020. These structural headwinds are well known and have been flagged for months – if the macroeconomic incentive dries up, or worse, paper interest turns net sellers, the pullback could be sharp and painful. For now, shaky risk appetite due to US political reopening U-turns and the inflation bid into real assets (due to the unprecedented interventionist monetary and fiscal response) is outweighing the lack of physical support.


— Nicky Shiels, Director, Metals Strategist, Global Equity Research


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