Food and Agriculture Organization of the United Nations
    FAO Data Lab

    News digest - 18/08/2020

    Selected daily news on food chain disruptions and countries responses to the COVID-19 impact on food chains.

     worker at the Mumias Sugar Factory harvesting dates for the production of palm oil.
    ©FAO/Ami Vitale

    FOOD CHAIN DISRUPTIONS

    The British and Indian dairy industries have been particularly impacted by the coronavirus lockdown and still face considerable financial pressure. In the UK, a temporary solution consisted in allowing dairy farmers to access a lump-sum payment of up to GBP 10,000 since early July to make up for their losses, while in the Indian state of Haryana all dairy farmers could sell their products to the state’s Milk Federation, which is spending more than it earns as milk sales dropped. In the US, on the other hand, the meatpacking industry (one of the most impacted by the coronavirus pandemic) could largely benefit from automation and artificial intelligence.

    UK dairy industry faced hardship during coronavirus lockdown

    The coronavirus lockdown resulted in significant supply chain disruption for dairy farms in the United Kingdom, due to a reduced demand from the hospitality industry and from offices: according to the National Farmers Union, in early April 2020 at least 2,000 dairy farmers were in financial difficulty. However, the dairy farmers that can demonstrate a reduction in the average price paid for their milk of 25% or more in April 2020 when compared to February 2020 have the possibility of applying for a GBP 10,000 hardship fund set up by the Department for Environment, Food and Rural Affairs in late June.

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    Meatpacking industry could largely benefit from automation

    Meat processing in the United States is the industry with the highest rate of cumulative trauma injuries (one out of 10 meatpacking workers suffers a cumulative trauma injury every year) due to the fact that the more animals are slaughtered per hour, the less it costs to process each one. Furthermore, as is well-known, thousands of slaughterhouse workers have tested positive for Covid-19 because they stand in close proximity for hours. This is why the meatpacking industry lends itself well to be automated: robotic systems would reduce the workers’ risk of coming into contact with the coronavirus, and the number of injuries sustained on the job.

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    Haryana Milk Federation faces financial stress as milk sales drop

    In the Indian state of Haryana, the coronavirus lockdown impacted on the private dairy firms, whose major distribution was focused on hotels and restaurants, which were shut due to the lockdown measures. The dairy farmers that were procuring milk to such private firms had no choice but approach the state’s Milk Federation, which was under considerable financial pressure as sales dropped while milk procurement prices skyrocketed.  

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    IMPACT ON COMMODITIES AND FOOD PRICES

    An overview of the vegetable oil industry in India: while palm oil imports from Malaysia sharply decreased this year, if compared with 2019, due to the former Malaysian prime minister’s negative attitude towards India’s move to strip Kashmir of its special status, the internal demand for mustard oil sharply rose due to the health-promoting properties ascribed to this product by Indians. Meanwhile, the former Malaysian prime minister was ousted by his successor in March, and this prompted the countries to renovate their usual commercial ties, while farmers are slowly depleting their stocks of mustard seeds.

    Malaysia-India palm oil trade back on track as countries repair ties

    In January 2020, the Indian government drastically reduced Malaysian palm oil imports as its former prime minister criticised India’s occupation of Kashmir: during the first half of 2020, India purchased 85% less palm oil if compared with the same period last year (400,000 tons against 2.6 million tons in 2019). The countries are now slowly repairing ties, and as a direct consequence Malaysia has recently signed a deal with India to purchase 100,000 tons of Indian rice, to which India reciprocated with a contract for 200,000 tons of Malaysian crude palm oil.  

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    Mustard oil’s medical properties drive domestic demand in India

    Mustard seed prices have increased by 26% over the past four months due to a short supply and rising domestic demand for mustard oil, which is believed to help individuals fight Covid-19 in the Indian state of Rajasthan. Since farmers are slowly depleting their stocks and the new season crop will begin 6-8 months from now, mustard prices are likely to remain firm throughout the rest of the year. While this price increase benefited farmers and stockists, some edible oil producers are supposedly blending cheap palm oil with expensive mustard oil to boost their sales, to the detriment of consumers.  

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    COUNTRIES' RESPONSE

    The United Kingdom is seeking new trade opportunities in Africa after its withdrawal from the European Union through the implementation of development projects, such as the Ghana-ECOWAS Food Systems and Export Network, which will create more market opportunities for smallholder farmers in Ghana. Australia, on the other hand, is trying to improve the traceability of the horticultural products it exports (70% of the whole production) by means of a cloud-based traceability system developed by the University of Tasmania. Finally, the Guangzhou authorities have recently banned all refrigerated food imports after a sample coming from Brazil tested positive for the coronavirus last week.

    UK-ECOWAS project set to create more market opportunities for smallholders

    The United Kingdom and the Economic Commission of West African Studies (ECOWAS) jointly developed a six-month project that will support the establishment of a food systems and export network for smallholder farmers, thanks to which they would have more market opportunities and the possibility to own up to 40% of the market for home-grown food crops. This project stems from the UK’s exit from the European Union, which will mark a shift in trade agreements between the United Kingdom and the African countries.

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    Guangzhou bans refrigerated food imports over coronavirus fears

    After a sample collected from imported frozen chicken wings from Brazil had tested positive for the virus in Shenzhen, the capital of China’s Guangdong province (Guangzhou) has suspended all imports of frozen meat, fish and seafood from coronavirus-hit countries, as China’s central government has identified a possible carrier of the disease in refrigerated food. Guangdong is China’s most populous province (113 million residents), and it imported around USD 665 million in frozen meat, fish and seafood just in the first half of 2020.

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    New system to trace Australia’s horticultural exports to China

    A new supply chain traceability system developed by the University of Tasmania could boost Australia’s horticultural exports to China by providing streamlined information for compliance, food safety and proof of provenance and authenticity for the Australian horticultural products (70% of which are exported, mainly to China). The project will be funded through a Commonwealth grant worth AUD 455,000 whose objective is modernising agricultural trade, and it will meet the increasing demand for traceability from importing countries.

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    REGIONAL FOCUS

    Southeast Asian countries are currently facing the effects of unsustainable palm oil production practices, which cause deforestation and the creation of transboundary toxic fumes; being the largest consumer of this commodity, India should focus on reducing its demand, in order to influence palm oil production. Since the global demand for fuel has plummeted due to the coronavirus-related travel restrictions, sugar mills in the region are dedicating more cane to making sugar instead of ethanol, thus increasing imports from sugarcane-producing countries such as El Salvador, and potentially leading to an oversupply of this commodity.  

    ASIA – India should play leading role in addressing deforestation in Southeast Asia

    The growing consumption of commodities like rubber, soy and palm oil is increasing the amounts of transboundary haze in Southeast Asia, contributing to pollution in this region. For example, the toxic fumes that emerge from burning forests in Indonesia and Malaysia to make way for palm oil plantations travel to Singapore, Thailand, India and other neighbouring regions. Since India is the largest consumer of palm oil, Indian consumers and businesses can paly a leading role in addressing unsustainable palm oil production practices by shifting the demand for this product.  

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    ASIA – China becomes largest sugar buyer from El Salvador, displacing Taiwan and South Korea

    Sugar is El Salvador’s largest and most profitable agricultural product, employing around 200,000 people and producing earnings that amount to over USD 200 million annually. Last year, China became the largest buyer, displacing Taiwan and South Korea, and many analysts believe that this was a strategic move to strengthen its political ties with El Salvador. However, sugar’s success has increased inequalities in the rural areas of the country, because monopolies are acquiring more and more land and resources at the expense of the farmers.

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