Food crisis stares world in the face
Governments must work together to address the risk of disruptions to food supply chains
Even before the pandemic, there were signs that global food prices could soon surge. Extreme weather events induced by climate change have become more common. The worst locust blight in 70 years has destroyed crops in East Africa. In Kenya, the price of maize, a staple food, has risen by over 60 per cent since 2019.
Covid-19 is amplifying the risk of a worldwide food-price spike, which would trigger outright crises in many developing countries. In the poorest of these, food accounts for 40-60 per cent of the consumption basket, about 5-6 times its share in advanced economies.
In cities around the world, reports of panic buying and food hoarding have proliferated since the pandemic began. On the supply side, global grain stockpiles are healthy but could quickly be depleted as the virus disrupts food production and distribution. And shortages of animal feed, fertilisers, and pesticides have increased both the costs of farming and the risk of bad harvests.
Moreover, from harvesting fruit and vegetables in India to operating meat plants in America, labour shortages are becoming increasingly apparent as cross-border travel restrictions in much of the world disrupt the normal seasonal cycle of migrant farm workers. And transportation shortages are making it more challenging to get produce to market — when there is one.
Farmers need to reconfigure their supply chains away from bulk wholesale to restaurants, hotels, and schools, and towards grocery stores and home delivery. But that takes time. In the meantime, fresh produce has had to be destroyed.
Export bans
Furthermore, some major food-producing countries have already imposed export bans or quotas in response to the pandemic, as Russia and Kazakhstan have done for grain, and India and Vietnam have done for rice. Meanwhile, other countries are stockpiling food through accelerated imports, as is true of the Philippines (rice) and Egypt (wheat). Such food protectionism may seem like a good way to provide relief to the most vulnerable segments of the population, but simultaneous interventions by many governments can result in a global food-price surge, as happened in 2010-11.
One can understand these countries’ nervousness. While the Covid-19 pandemic has led to falling growth, rising unemployment, widening fiscal deficits, and soaring debt in advanced and emerging economies alike, the appearance of new infection hotbeds in developing countries will mean an even starker trade-off between saving lives and protecting livelihoods. Moreover, developing countries are already facing a sudden stop in capital and remittance inflows and a collapse in tourism, while the terms of trade and currencies of the many oil and primary-commodity exporters among them are crashing.
Food vulnerability index
Nomura’s Food Vulnerability Index ranks 110 countries based on their exposure to large food-price swings, taking into account their nominal GDP per capita, the share of food in household consumption, and net food imports. The latest reading shows that of the 50 countries most vulnerable to a sustained rise in food prices, nearly all are developing economies that account for nearly three-fifths of the world’s population.
In fact, surging food prices would be a global problem. Even in developed economies, a jump in food prices would drive a bigger wedge between the rich and poor.
No one should ignore the age-old connection between food crises and social unrest.
Multilateral institutions have mobilised quickly during the crisis to provide emergency loans to a record number of developing countries, while G20 creditors have agreed to a temporary suspension of debtservice payments from poor countries that request forbearance. But because the risks posed by surging food prices do not apply only to the most vulnerable economies, temporary debt relief may need to be extended to other countries as well.
With the pandemic threatening to wreak even more economic havoc, governments must work together to address the risk of disruptions to food supply chains. More broadly, some modicum of global policy coordination is essential to prevent food protectionism from becoming the postpandemic new normal.