As soon as the Brexit transition period ends, Great Britain will definitely be outside of the European Union’s common market for goods, while Northern Ireland will remain inside: this will probably have negative repercussions on the Northern Irish food supply, because food exporters from Great Britain will have to purchase an expensive export health certificate and food products will have to be inspected at the border control post. Meanwhile, the Malaysian Palm Oil Council has recently announced that the coronavirus pandemic (and its effects on air travel and on food transportation) is likely to cause a contraction in the global demand for palm oil, and a decrease in Malaysia’s palm oil production output.
Selected daily news on food chain disruptions and countries responses to the COVID-19 impact on food chains.
FOOD CHAIN DISRUPTIONS
According to Northern Ireland’s first and deputy first ministers, there is a real threat to food supply if solutions to the operation of the new Irish Sea Border after the end of the Brexit transition period are not found: in fact, from 1st January, 2021, Northern Ireland will remain within the EU single market for goods, while the rest of the United Kingdom will leave it, meaning that food products arriving in Northern Ireland from Great Britain will need to be checked at a border control post. Furthermore, food exporters will also have to own an export health certificate, which is an expensive piece of administration and therefore will add to transportation costs.
According to the Malaysian Palm Oil Council, the global demand for palm oil is expected to contract by 4% (which corresponds roughly to 3.2 million tons of palm oil) due to the impact of the coronavirus pandemic. Furthermore, air travel restrictions affected migrant workers’ (who come mainly from Indonesia and Bangladesh and account for 84% of the plantation workforce) possibility to work in the Malaysian plantations, which caused the country to lose about 25% of its potential palm oil yield.
IMPACT ON COMMODITIES AND FOOD PRICES
Chicago soybean futures have recently got to a four-year high in the wake of the renewed optimism related to the progress in the trials of a coronavirus vaccine developed by Pfizer and BioNTech. In Pakistan, on the other hand, after an initial rejection of the Ministry of National Food Security and Research’s proposal to increase minimum wheat support price to provide farmers with an incentive to produce more, the federal cabinet has approved wheat support price at the rate of PKR 1650 per 40 kilograms for the coming 2020-21 crop.
Chicago soybean futures, which were already buoyed by a strong import demand from China and by the US and South American harvest prospects (as highlighted in the previous issues of this daily news digest), have recently edged up to a four-year high due to the market enthusiasm over a potential vaccine against Covid-19. Meanwhile, the soybean market is closely monitoring Argentina (a major soybean exporter), where a strike was organized by grain port workers.
Pakistan’s central government has recently approved an increase in the minimum wheat support price (which now amounts to PKR 1650 per 40 kilograms) for the 2020-21 crop, proposed by the Ministry of National Food Security and Research to incentivise farmers to produce more, and discussed thoroughly by the Economic Coordination Committee. This decision was delayed in late October, due to the fact that it is expected to lead to a rise in the overall inflation.
A new traceability system in Indonesia will let palm oil workers keep accurate transaction records thanks to digitalization: they will just have to take photos of paper receipts from processors, aggregators and transporters with their smartphones and upload them into an app, which will then automatically extract and verify the information. Thanks to this app, they will be able to build credit histories, which will increase their possibilities of getting proper access to credit. In China, on the other hand, the government has recently strengthened control measures for all imported food products in order to limit the spread of the coronavirus pandemic.
Indonesian palm oil workers currently struggle to build credit histories, which results in difficulties accessing to basic banking services. However, a global developer of artificial intelligence-powered solutions has recently announced a collaboration with a company that develops enterprise resource planning systems to create a platform that will assist Indonesian palm oil farmers, processors and transporters in verifying sales transactions simply by taking pictures of the paper receipts they get from buyers, thus ultimately creating a more sustainable palm oil supply chain in the country.
China’s government has issued a comprehensive disinfection workplan for imported frozen food, which it claims to be the source of coronavirus infections in port cities, such as Qingdao and Tianjin in north-western China. For example, the workplan includes the requirement for all imported frozen fish to have a fumigation and disinfection report with traceable documents before each sale. Furthermore, even if test results are negative for Covid-19, all containers and outer packaging have to be disinfected, too, and seal numbers of all containers must be recorded and kept for at least two years.
In Southeast Asia, millions of smallholder coconut farmers are currently struggling to lift themselves out of poverty due to the low prices of coconuts, to a lack of assistance from governments and to the competition with palm oil, which is supported and subsidised by the authorities. Meanwhile, Vietnam’s fruits and vegetables exports have decreased in recent months, due to the sharp fall in the export turnover of several fruits, such as dragon fruit, bananas, lemons and durians.
Coconut farmers are currently facing serious challenges across Southeast Asia, primarily due to low prices: around 3.5 million smallholder farmers in the Philippines and 4 million in Indonesia, for example, depend on coconut farming as a livelihood, but cannot meet their daily needs due to the low prices, to a lack of government assistance and to competition from palm oil, which has been heavily promoted and subsidised by the government in Indonesia, Malaysia and the Philippines.
In recent months, the export value of Vietnamese fruits and vegetables has witnessed a decline by 12.5% to USD 2.72 billion year-on-year: according to the Agro-Processing and Market Development Authority, this decline can be attributed to a sharp fall occurring in export turnover of several fruit products, including dragon fruit, bananas, lemons and durians. China remained the largest importer, making up 57% of the overall market share, and the exports are expected to grow again during the remaining months of 2020.