What is a Microsurge
July 20, 2020
Author: Guy Soreq
After an epidemic of African swine fever swept the Chinese pork industry beginning in 2018, pork producers around the world ramped up production anticipating increased imports by Chinese buyers. They were right to do so. Just this year, China’s January to June pork imports were up 140%. Since mid-June however, Chinese consumers are facing an increase in meat prices as Beijing has placed limits on imports from plans in select countries. COVID-19 outbreaks in processing plants around the world have raised concerns that the virus may be imported back into the country. In an effort to contain rising prices, China intends to sell more frozen pork from state reserves.
We know all too well that rising prices often urge customers to respond by overstocking, further disrupting the stable, predictable flow of goods across the supply chain. Meanwhile, meat producers around the world that expected to export their product to China are left unable to do so. Not only does this make for a volatile market, but the volatility itself is volatile. The market varies in different parts of the world and at different times. We’re no strangers to volatility in our industry, but COVID-19 has sent even more disruptions through already turbulent waters. Most of the time, they are almost impossible to predict.
At Glowlit, we call these location-specific market behaviors, microsurges. Microsurges are localized rapid changes in supply or demand, which result in localized changes in price. Given the global nature of trade, microsurges can have a cascading effect across the market. Whereas global sales or procurement teams once relied on top-down continent level metrics, today they are unable to do so. Simple multiples over GDP growth and usual seasonal patterns do not take into account variations in demand by country.
Navigating this new normal requires a great deal of organizational agility and the right technological tools to facilitate real-time decision making. Given the speed at which prices are changing, purchasing managers and sales executives may need to shift from annual or quarterly planning to weekly check-ins aimed at tracking specific product microsurges. Companies need to plan ahead while also having the flexibility to make decisions based on what the market looks like right now. We built Glowlit to give your team the tools to do so.