Food and Agriculture Organization of the United Nations
    FAO Data Lab

    Monthly news digest - July 2020

    Collection and analysis of the news on food chain disruptions and countries responses to the COVID-19 impact on food chains issued during the month of July.

    Ulaanbaatar, Mongolia - Pig carcasses at a meat market.
    ©FAO/Sean Gallagher

    FOOD CHAIN DISRUPTIONS

    Impact of the coronavirus pandemic on the North American meat industry

    Most of the articles concerning the disruptions to the processing stage of the food value chains around the world focused on the challenges posed by the coronavirus pandemic to the North American meat industry. More specifically, animals in slaughterhouses are stored in refrigerated environments with recirculating air, which offer the coronavirus the perfect conditions to spread easily among the workers: this determined that around 25,000 meatpacking workers were infected with the coronavirus in the United States, causing a meat shortage and price increases.

      Ripple effects of the general meat shortage included the fact that millions of pigs in the plants gained too much weight and were eventually euthanized by farmers, a decrease in livestock prices, parallel to the increase in retail prices, and a growing demand for plant-based meat. The United States’ government responded to the meat crisis by establishing a Coronavirus Food Assistance Program and by introducing the Coronavirus Aid, Recovery and Economic Stability (CARES) Act, which provided additional funding for agriculture and meat producers.


    Disruptions within the global food commodity trade

    The imbalance within the number of news related to the disruptions along the export phase of the food supply chain in favour of developing countries is due to the number of articles concerning banana exports (mainly from Ecuador and the Philippines), soybean exports from Brazil to China, and rice exports from India, Thailand and Vietnam.

      Ecuador, one of the world’s top banana producers and exporters, saw the price of the fruit increase while its demand dropped because most of the buyers are hotels and restaurants, which closed during the early phases of the coronavirus pandemic. Similar fate for the Philippines’ banana production, which witnessed China’s shift toward Vietnam and Cambodia, that reported fewer Covid-19 cases (China asked different exporters to sign an official document that guarantees that their food products are not contaminated with the coronavirus). 

      Soybean exports from Brazil to China have greatly driven deforestation in the Latin-American country, resulting in an increase of GHG emissions, while Thailand’s rice export prices decreased as a consequence of a stagnation in demand, but will remain higher than those of its competitors, Vietnam and India (until new supplies enter the market). Persistent rains in the Mekong Delta hampered the rice harvest in Vietnam, while India’s rice production was damaged by the locust swarms that migrated to Northern India (responsible for most of the rice produced in the country) through Pakistan.


    Challenges faced by consumers

    Another imbalance that is easy to notice is the one related to the effects of food value chain disruptions occurred between June and July 2020 on consumers in developing countries. More specifically, the articles that highlighted how consumers reacted to the disruptions generally concerned food security threats in developing countries (much more frequently mentioned), and changes in consumers’ preferences determined by the coronavirus pandemic in developed countries.

      The pandemic worsened the pressing issue of food insecurity, which is projected to double by the World Food Programme, impacting around 265 million people in 2020. Some of the causes are connected to the effects of the pandemic, such as trade restrictions, which are particularly disruptive for the underprivileged citizens of food-importing countries, like Chad, Mozambique and Zimbabwe; some others are underlying factors, such as jihadist violence, the acceleration of global warming and political unrest in the Sahel.

      In Pakistan, the negative impact of the pandemic blended with a lack of coordination between the country’s sub-national authorities and the poor performance of the district administrations, which resulted in a wheat shortage and a substantial price increase despite the government’s efforts to fulfil the domestic needs by importing wheat for an unlimited period.


    Countries by food value chain stage 1Countries by food value chain stage 2

     

     

    IMPACT ON COMMODITIES AND FOOD PRICES

    Pork production and trade in the USA and China 

    Given the extensive news coverage on the disruptions of the US’ meat industry caused by the effects of the coronavirus pandemic on meatpacking plants around the country (due to a combination of long work shifts, cold temperatures and crowded spaces in such environments), pork is the most mentioned commodity in relation to the USA.

      Pork was also predominant in articles related to food chain disruptions in China (which is the world’s largest pork producer, with about 55 million tons of pork each year), mainly due to the African swine fever, whose spread was accelerated by the heavy floods that hit Southern China around the middle of July. The additional outbursts of African swine fever were caused by the fact that the heavy rainfall reduced the boundaries among mangers and pig pens, undoing all the efforts made to keep sick pigs or contaminated feed away from the healthy animals. The severe floods (which have been described as the worst since 1998) also left around 141 people dead or missing in China, and the African swine fever had the effect of keeping pork prices elevated and cutting the production by 30%.     

      The combined effect of the coronavirus pandemic and the African swine fever outbursts in China determined a shortage of pork, which was initially mitigated by increasing imports from the United States. However, pork imports gradually decreased as China applied specific anti-contamination measures to all food imports, asking US exporters to sign an official document that guarantees that their food products are not contaminated with the coronavirus.


    Wheat production in Central Asia and Argentina

    Wheat price trends were stable or decreasing on average in Afghanistan, while wheat export prices increased in Kazakhstan and Southern Russia. In early July, Pakistan was still recovering from the previous wheat crisis that led to a surge in its prices, when Punjab (the country’s most populous province) released wheat stocks early because of a general lack of proper planning (which is due to inaccurate production and consumption data in the country). The low level of cooperation between the other provinces of Khyber Pakhtunkhwa and Balochistan described in the first section of this monthly bulletin further aggravated the situation, which was temporarily mitigated when the federal government’s Economic Coordination Committee allowed significant imports of quality wheat for an unlimited period by waiving off all duties and taxes.     

      Wheat prices decreased over the last year in Argentina, whose wheat production was negatively affected by the coronavirus pandemic and by widespread vandalism on silo bags that store grain and oilseeds on-farm. In the Cordoba and Santa Fe provinces, such acts of vandalism required the action of the provincial governments, that increased police checks. The fluctuations in wheat prices also raised suspicions from the farmers, who were worried about a possible interference in grain markets by the ruling Peronist party. More in particular, traders and grain analysts believed that the distortions in the reference prices for wheat (used by exporters to pay farmers) would discourage exporters and benefit the local millers.


    Maize production in Southern Africa, and rice production in South-East Asia

    When it comes to maize supply, Southern Africa is normally self-sufficient; however, the start of the regional harvests this year coincided with the onset of the coronavirus pandemic, resulting in a lower net maize supply (around 4 million tons) and lower prices. The consequence is that the import gap in Zimbabwe will be well above average, while Zambia and Malawi will maintain their surplus at below-average levels. Furthermore, food access among market-dependent households in this region will remain constrained as long as the coronavirus lockdown measures will be in place.

      Prices also decreased for rice exports in South-East Asia. More in particular, Thai rice export prices decreased because of a stagnating demand but remained higher than those of the country’s rivals when it comes to rice production. Furthermore, rice exports from Thailand are projected to decrease over the next decade, and in order to stop this trend, the country’s Rice Exporters Association suggested increasing the research and development budget for rice in order to improve the quality of the product. This would make it more competitive on the global market and contain production costs. Contrary to Thailand, the Philippines have already invested large quantities of money (around PHP 8.5 billion) in agricultural development operations that will enhance rice productivity in the country.


    Countries by commodity

     

    COUNTRIES' RESPONSE

    Strong imbalances between measures taken by developed and developing countries

    Most of the articles during the month of July mentioned measures taken by international organizations and governments in developing countries, rather than in developed countries. Furthermore, such measures to tackle the consequences of food value chain disruptions (reforms, financing, provision of material and equipment, creation of new standards and schemes, and so on) were more diversified in developing countries, while they mostly consisted in financial and policy support in developed countries (23 mentions, out of a total of 37). Moreover, some of such measures were unique to only one type of country.

      For example, the creation of new international or national standards and certification schemes was only mentioned three times, twice in reference to the European Union, and one to the United Kingdom. The former related to the proposal by the European Committee of the Regions (one of the advisory bodies of the European Union) to create a new certification scheme that would protect forests in Latin America and Africa from intensive meat, coffee, cocoa and palm oil productions, and also to the European Commission’s plan to halve the use of pesticides and reduce that of fertilizers by 2030. The latter, on the other hand, referred to the Red Tractor foods standards scheme in the UK, which ensured remote assessments for farmers during the coronavirus pandemic. Humanitarian aid was predictably also associated to developed countries (to Germany, more in particular).

      On the other hand, those measures that aim at improving the farmers’ access to markets, creating new entities or bodies and providing farmers with new equipment and materials were only mentioned in articles related to developing countries, such as Ghana, Tanzania and Zimbabwe in Sub-Saharan Africa, and Morocco in North Africa. More specifically, three different farmer associations in Ghana called for the creation of a National Vegetable Authority and an agricultural sector investment fund, while both the governments of Ghana and Zimbabwe pledged to distribute agricultural machinery, such as tractors in Zimbabwe, and seedlings in Ghana. Finally, an emergency programme to fight the drought in Morocco, and another implemented by the African Development Bank in Tanzania had the effect of improving the access to agricultural markets for many smallholders and traders.


    Great variety of government measures in Ghana

    A big part of all mentions to the actions taken by governments to solve the difficulties faced by smallholder farmers in developing countries related to Ghana (a total of 15 mentions, out of 44). In addition to the measures detailed in the previous paragraph, the government of Ghana also provided timely policy and financial support, and distributed properties and equipment to farmers in more than one occasion during the month.

      For example, Ghana’s National Development Planning Commission developed a policy on genetically modified organisms that could play an important role in the modernisation of the country’s agricultural sector. Furthermore, the Ministry of Food and Agriculture launched an initiative supporting women’s farmer-based organizations that are involved in the post-production of agricultural products (that eventually assigned a GHS 2.5 million grant to the Chache Women’s Group, which processes shea butter for the local and export markets), and provided four refrigerated vehicles to different vegetable dealers in the country, in order to improve the sustainable supply of vegetable produce by facilitating the access to the markets.


    Policy and financial support in developed countries

    Most of the policy and financial support initiatives mentioned in articles related to developed countries focused on the United States. The most relevant ones were the Coronavirus Aid, Recovery and Economic Stability (CARES) Act and the Coronavirus Food Assistance Program (both mentioned in the first section of this monthly bulletin), which together provided a total amount of around USD 25 billion to agriculture producers and dairy, meat and row crops producers (both hampered by labour shortages and other disruptions determined by the coronavirus pandemic). The Providing Liquidity for Uncollectible Sales (PLUS) Act filled the gaps in the CARES Act, which did not solve the issue of the large debts owed by restaurants to distributors for food they could not use because of the coronavirus lockdown.

      In Europe, Spain’s Council of Ministers approved a draft legislation that will improve the country’s food supply chain by putting an end to the lack of transparency in price setting and improve working conditions in the fisheries sector, while the United Kingdom’s Food and Drink Sector Council elaborated a Covid-19 recovery plan for the country’s food industry. Finally, the leaders of the EU 27 member states agreed to create a EUR 750 billion recovery fund to rebuild the EU economies, by focusing on developing new measures to reform economies over the long period and on investing to build up resilience against future crises.


    Countries by governments' measures

     

    REGIONAL FOCUS

    Africa

    Ghana is the African country that was mentioned the most in the global media coverage related to food chain disruptions (followed by other Sub-Saharan countries such as Uganda, Kenya, Rwanda, Nigeria, South Africa and Ethiopia), mainly because of the varied concrete measures taken or proposals made by the country’s government, or by international organizations and local entities.

      An interesting situation that arose in Ethiopia was partially obscured by the news related to the consequences of the coronavirus pandemic: the dispute on how the Grand Ethiopian Renaissance Dam on the Nile should be operated by Ethiopia, with Egypt and Sudan. The dam has been under construction since 2011, and raised concerns in Egypt and Sudan because they both largely depends on the Nile for their water supply. If the dispute escalates, it may have dramatic consequences for the region; however, Saudi Arabia and the United Arab Emirates, which have invested in Sudan’s agricultural sector, are well positioned to play a leading role in avoiding confrontation between the countries involved in the dispute. 

    Africa
    North and Latin America

    As has already been said, the United States were the most mentioned country during the month because of the large number of news related to the North American pork and beef industries (especially during the last week of June and early July). The articles that mentioned Canada often contained updates on the country’s meat and fruit industries, and on its food exports; such as barley exports to China, after the country stopped importing this cereal from Australia.

      Most of the news related to Latin American countries focused on Argentina’s wheat and soy production, and more in particular to the acts of vandalism that caused fires and the destruction of many silo bags in the provinces of Cordoba and Santa Fe (Sarquis, 2020). The Central American countries (such as Honduras, Guatemala and El Salvador) and Venezuela, on the other hand, were often mentioned in relation to the serious food security concerns highlighted by the State of Food Security and Nutrition in the World 2020.

    North America
    Latin America
    Asia and Oceania

    China and India were by far the most mentioned countries in Asia, while Australia was the most frequent in Oceania. Most of the news related to China highlighted the difficulties posed by the coronavirus pandemic and by the African swine fever on China’s pork production (a particularly important sector of the country’s economy, being China the world’s largest pork producer), and by the floods that hit the Southern regions of the country in mid-July, which also raised concerns about a possible nutrition crisis in the country.

      News related to India and to the Southeast Asian countries (especially the Philippines, Thailand and Vietnam) usually covered rice export prices and the production of other kharif crops. Furthermore, the desert locust swarms that began damaging crops in the Horn of Africa in early 2020 moved towards the Middle East, and eventually reached Nepal and India through Pakistan, threatening wheat, rice and sugar crops. Finally, many articles also mentioned Australia’s wheat and barley exports to Southeast Asia and to China, where they eventually stopped because of the ban imposed by China, that is still in a trade dispute with Australia.

    Oceania
    Asia
    Europe

    Most of the articles related to Europe focused on the United Kingdom and Spain, and more in particular on the ways the respective governments chose to deal with food chain disruptions. For example, in late June the British government supported food producers and manufacturers through a specific plan containing a set of initiatives to enhance the small and medium enterprises’ trade relations with foreign commercial partners. Spain, on the other hand, seemed to focus more on supporting the fisheries sector, improving the fishers’ working conditions by adopting the highest standards currently existing in the industry.

    Europe