Miller Magazine Issue: 126 June 2020

52 53 COVER STORY COVER STORY MILLER / JUNE 2020 MILLER / JUNE 2020 agri-food sector, in particular in times of crisis. Disruptions can cause adverse impacts on the quality of food, fresh- ness, its safety, and can impede access to markets and af- fordability. Food and agriculture are being affected in all countries as a result of measures to contain the COVID-19 outbreak. The impacts differ across farming systems and make some countries more exposed than others. Most agricultural ac- tivities are season-specific and weather-dependent; they follow a fine-tuned pattern of timing, pacing and sequencing of activities. A delay in one activity can have impacts throughout the production process, affecting yields and output. Capital-intensive farming could be most affected, partic- ularly where production relies on a great variety and large amounts of intermediate inputs, such as seeds, feeds, fer- tilizers, pesticides, lubes and diesel. But also, subsistence farmers can be affected. While they rely more on their own farm-based inputs, many have to purchase their inputs on local or regional markets, including their seeds, feeds or diesel. Their input supply chains are typically more fragile and more susceptible to disruptions. Importantly, they use more manual labour and, where the disease takes a direct toll on their health or their movement, this can impede not only their ability to produce for others, but also undermines their own food security. Labour-intensive agriculture, such as fruit and vegetable production, relies heavily on tempo- rary or seasonal farm workers particularly during planting, weeding, harvesting, processing or transporting to markets. A lack or a delay of supply of these products affects people in the informal sector of urban areas who rely on produce from rural areas for their livelihood. The closure of restau- rants, cafes, and street-food vendors, for instance, can also lead to significant reductions in otherwise reliable market outlets for many farmers, whose incomes will decline when products cannot be brought to markets. The food value chain can be broadly divided into two groups: the staple commodities (wheat, maize, corn, soy- beans and oil seeds) and the high-value commodities (fruits, vegetables andfishery). The staple commodity production is capital intensive, and the labor shortage issue resulting from the coronavirus-related restrictions on movement has less impact on their production. However, the logistics to distrib- ute the commodities is affected, as it hampers food trans- portation across cities, provinces, regions and countries. There are sufficient stocks of staple commodities. Pros- pects for harvest in 2020 is favourable, assuring food avail- ability. However, logistics disruptions in the supply chains are emerging. For example, in Brazil, a key exporter of staple commodities, there are reports of logistical hurtles putting the food supply chains at risk. Internationally, if a major port like Santos in Brazil or Rosario in Argentina shuts down, it would spell disaster for global trade. Key staple commodities-exporting countries need to make every effort to find solutions to minimize logistics disruptions, so that major staple commodities can move across countries. In fact, the COVID-19 crisis is an oppor- tunity to identify the bottlenecks and address them. The logistics components of the supply chain need to be prop- erly tested and given special permits to move commodities. Port staff should be considered as essential personnel, and proper health and safety measures, including testing, pro- tective gears and practicing social distancing, need to be in place. These measures will bring stability to international markets. It is the responsibility of multilateral development banks and key donors to support staple commodities-ex- porting countries to enact these measures. Countries that depend on imported food are vulnerable as shipments slow and their currencies plunge against the dollar, reducing their purchasing power. Food price is likely to rise in most countries. Sudden and extreme food price shocks could occur amid drawn-out lockdowns. Following government-imposed quarantine, China saw a spike in food prices because of panic buys. In Italy, demand for flour and canned food shot up, leading to difficulties to sell fresh produce. Countries should immediately review trade and taxation policy options and their likely impacts to create a favour- able environment for food trade. During the 2007-2008 food crisis, the lack of information on market conditions (production, stocks, consumption, trade, prices) and unco- ordinated policy interventions by countries contributed to disruptions and food price hike. Today, countries have the Agriculture Market Informa- tion System (AMIS), which provides up-todate informa- tion on stocks and prices of key staple crops. Cooperation among countries can help prevent beggar-thy-neigh- bor policies, which happened during 2007-2008. Large countries increased export taxes and adopted export re- strictions, making things worse for everyone, not just for smaller trading partners. Sharp price increases dispropor- tionately burdened poor people everywhere, negatively affecting human development and economic productivity in the long term. Keeping the global food trade open is critical to keep the food markets functioning. Governments should eliminate existing export restrictions, including export bans. There are lessons learned from the 2007-2008 food crisis on how governments should respond. If one country starts doing it, all others will follow, and it would be a catastrophe for the markets. Harmful import tariffs and nontariff trade bar- riers should be eliminated. Lower import tariffs facilitate imports and therefore helps to address the immediate con- cern about low food supplies and rising food prices. The newly projected economic environments are likely to unleash profound impacts on food demand, access to food and nutritional outcomes, well into next year. The big question is whether COVID-19 will lead to a full-blown global food crisis, resembling what the world experienced over the years 2007 to 2009. At the beginning of the 2020 COVID-19 crisis, cereal stocks hovered around a multi-year high of about 850 mil- lion tonnes. In absolute terms, they were nearly twice as high as at the beginning of the 2007/08 crisis (472 million tonnes). These high stocks should provide a solid buffer against adverse shocks such as, for instance, a bad weather event in the 2020/21 growing season. While important, absolute levels of stocks are not all that matters for buf- fer capacity. Equally significant is the distribution of stocks over countries, over exporters and importers, and notably, their concentration over major storers. To put the importance of adequate global food supplies in further perspective, exporters of foodstuffs have an in- creasingly important role to play in meeting global food needs. Import dependency by countries on the internation- al marketplace for food has steadily increased over time, and now stands on average at around 28 percent globally. However, there is a significant dispersion in the level of food import dependency, with some countries relying as much as 98 percent on the global markets for their food needs. Indeed, many countries that are traditionally heavily reliant on international markets are economically vulnera- ble, such as those situated in sub-Saharan Africa and South Asia, as well as Small Island Developing States (SIDS). The degree of exposure of the global trading system to a crisis is also conditioned by the concentration of exporters and importers. A high concentration of exporters makes markets susceptible to logistical constraints or policy in- terventions (export restrictions) imposed by large play- ers, potentially jeopardizing access to food for importers. Conversely, a high concentration on the import side could mean that a sharp reduction in import demand by one or two major importers could significantly affect prices and jeopardize revenue streams for exporters dependent on these agricultural exports. SUPPLY CHAIN DISTURBANCES PRESENT A MAJOR OBSTACLE Agriculture and food supply chains are labour-inten- sive and the effects of the Great Lockdown are bearing down heavily. Labour market shocks arise from mobility restrictions on workers, especially the migrant workforce, and the direct health impacts of COVID-19 are weighing directly on the ability of workers to produce, harvest or process food. The labour force is also affected by a dete- rioration of occupational health and safety standards. In addition, COVID-19 is having a major impact on moving food to domestic and international consumers, depending on the mode of transportation. The Baltic Dry Index, which is a benchmark measure for the cost of shipping goods around the world, is hovering at the lowest level in 25 years. For the first quarter of 2020, the index slipped more than 40 percent as the rapid spread of the new coronavirus led to shipping restrictions and weakened demand for dry bulk vessels. The index started to strengthen again in April 2020 as a gradual restart of industrial activity in China led to rising demand for ship- ping vessels. While bulk shipments have seen few disruptions and no upward pressure in prices, container and truck shipments