Miller Magazine Issue: 124 April 2020

65 INTERVIEW MILLER / APRIL 2020 The coronavirus pandemic, which spread across more than 180 countries, has almost taken the world hostage. The pandem- ic, which killed thousands of people, put tremendous pressure on the global food supply chain as well as the healthcare system. People run to the markets in panic and stock up on flour, pasta and pulses. Pasta and flour sales in France tripled compared to the same period of last year. Demand for flour has increased by 80 percent in Italy, one of the countries most affected by the pandemic. While the supply-demand balance in the grain mar- kets suddenly deteriorates, the governments are taking measures such as banning grain exports, primarily wheat and rice, and suspending flour sales abroad to ensure their own food security. However, the UN warns that these protective policies that restrict international grain trade can trigger a food crisis in the world. We talked the latest developments in the grain trade and sup- ply chain with one of the most reliable and competent experts on this subject: Arnaud Petit, Executive Director of the Interna- tional Grains Council (IGC), an intergovernmental organization providing accurate, unbiased information for the grain markets. Mr. Petit has been the Executive Director of the IGC since Febru- ary 2018. He has a deep understanding and experience of world grain markets and international food policy issues. Here is IGC Executive Director Arnaud Petit’s answers to Miller Magazine’s questions regarding the impacts of the coronavirus outbreak on the international grain trade. Mr. Petit, first of all, thank you for responding positively to our interview request in such a difficult time. At a time when the discussion goes on the coronavirus epidemic could trigger a world food crisis, the messages and information you give are really important. I want to start with a question that everyone is curious about: Is there enough grain for the whole world? What can you say for the panic-buying con- sumers, millers, and governments? How is IGC’s grain pro- duction (wheat, corn, rice) outlook for this season? The past month has seen escalating concerns about the global spread of the coronavirus and increasing uncertainty about the longer-term implications for production and consumption. While some commodities have seen a sharp upturn in nearby demand, especially for rice and wheat-based foods, weakening economic conditions could dampen usage in the longer term, particularly for industrial products such as maize-based ethanol and starch. Although import buying of some commodities has accelerated in recent weeks, logistical challenges are being reported as move- ment constraints and quarantine measures become widespread. Transportation restrictions could also hamper the distribution of farm inputs and disrupt spring fieldwork, however, at this stage, the Council assumes that planting intentions will be fulfilled. The forecast for world total grains (wheat and coarse grains) production in 2019/20 is lifted by 3m t m/m (month-on-month) to 2,175m, mainly because of an adjustment for maize output in the EU. With consumption trimmed, the figure for total grains stocks is up by 4m t. In 2020/21, global total grains production is projected to expand to 2,223m t, up by 2% y/y and an all-time high. At this level, the overall supply would be a fresh peak, but with assumed growth in consumption, another modest decline in ending stocks is foreseen. Once again, this is mainly linked to a drop in maize inventories in China, which more than offsets an accumulation of that grain in the USA. Wheat stocks are predicted at an all-time high, led by expansions in China and India. Growth of 2% is envisaged for total grains trade, with shipments of maize, wheat and sorghum accelerating. What about the rice outlook? The Council’s forecasts for global rice supply and demand in 2019/20 are broadly unchanged m/m, with carryovers rising to a peak of 177m t on the accumulation in China and India. Led by acreage increases in major exporters, world rice production in 2020/21 is projected to rise by 2% y/y, to a high of 509m t, with population growth supporting record uptake. Further gains in inventories are anticipated, mainly in key exporter and China. Trade is seen growing by 3% on bigger deliveries to Africa, with India the leading exporter. The spread of the coronavirus leads to the stockpiling of staples like flour and pasta. There is a spike in demand for these staples. What can you say about the demand side for wheat? Food demand for wheat has been given a nearby boost by consumer stockpiling, with some millers operating at increased capacity to meet the surge in demand. However, this is not nec- essarily new demand, as stored foods will be consumed over several months, rather than in one go. In most countries, con- sumption should stay quite resilient. However, the high likelihood of slowing economic conditions has the potential to negatively impact demand moving forward, though probably to a lesser ex- tent for wheat than for maize/oilseeds, for which industrial prod- ucts are more important. Currency movements could affect the consumption of wheat-based foods in some countries if imported food prices are inflated relative to local substitutes. ‘EXTREME PRICE VOLATILITY COULD PREVENT FULL CAPACITY PRODUCTION’ The virus is putting enormous strains on food supply chains. Many countries have implemented restrictive mea- sures against the grain and flour exports to safeguard na- tional food security. How do/will these measures affect the grain trade and prices? The major risk for all industries is that they are facing price volatility which could affect the affordability of the food and hence demand. Extreme price volatility could prevent the food sector from producing at full capacity. Furthermore, it is not yet clear what the impact of “panic buying” in some countries will be. Does it mean that consumers will buy less food during the second semester? It is too soon to say. ‘TOO RESTRICTIVE MEASURES PENALISE LOCAL FARMERS’ Do you have any concerns that closures, lockdowns, and restrictions of movement would cause a negative effect on grain production and harvests? Sanitary measures are necessary to overcome the pandem- ic as quickly as possible. There are a lot of reports that the