Food shortages or surpluses
COVID-19 has disrupted world trade in agricultural produce
Not only did panic-buying consumers hoard food because of coronavirus: countries are stockpiling too. India, Vietnam, Malaysia and Russia temporarily banned exports of rice and wheat to secure supply for their domestic markets, for instance.
Some of these measures have been lifted, but around 27 jurisdictions implemented temporary export curbs on food trade this year. Some economies also limited imports from China because of food safety concerns.
Meanwhile, the virus has disrupted global transport networks. Office closures delay port clearance. Passenger aircraft that also carried fresh produce are grounded. Travel restrictions can affect the availability of foreign seasonal labour to pick or plant crops.
Export restrictions and logistics disruptions have pushed up average international agricultural prices of rice and wheat. On the other hand, temporary restaurant closures have led to surpluses of some foods. Excess milk is being poured away and cows are being fed Indian strawberries intended for tourists and ice cream production.
Global food trade has more than tripled to $3.1 trillion since 2000. Latin America, Canada, Oceania and southern Asia tend to be net food exporters. Agricultural exports are also important for the US and Europe but the US is a large importer too. China became a net food importer in 2008, with rising incomes fuelling increased demand for meat and dairy products.
But not all trade policy responses to the pandemic have been restrictive. At least 18 jurisdictions have liberalised agricultural trade this year – temporarily reducing tariffs or removing export bans. Several countries have loosened requirements for paper-based customs documentation.
And 49 World Trade Organization members, including the EU, UK and US – but not China or India – have pledged to maintain open trade in agriculture and food products during the pandemic. They committed to not imposing agricultural export restrictions, restraint in building stocks of foods typically exported, and ensuring that any emergency trade measures are temporary.
But although logistics disruptions, worker shortages and temporary plant closures can affect supply, there is no shortage of food globally and international food prices remain weak. Food is still flowing across borders.
The reduction in global demand poses a greater challenge for food businesses. Weak demand could also affect China commitments to buy agricultural produce from the US. There is a risk that temporary food export restrictions may become permanent.
What can businesses do? Diversifying products and markets may help food firms weather the pandemic and they could repackage surplus goods and sell directly to consumers. Exporters may seek alternative destinations and plug gaps left by other suppliers. Importers could substitute suppliers.
Businesses could also look into alternative modes of transport or sources of seasonal labour. The post-COVID-19 era may also see new food-safety standards or export and import requirements.
Longer term, new technologies and evolving consumer preferences will disrupt how food is produced and traded. Blockchain could help improve food safety and traceability, for instance, and there could be growth opportunities for alternative proteins.
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