The outbreak of the COVID-19 pandemic tested the resilience of the network of trade in food and agriculture in 2020 and 2021.j The pandemic, and the measures taken by governments worldwide to contain it, posed a simultaneous shock to all aspects of the agrifood system. This shock affected demand, supply, logistics and the trade of food and agricultural products and their production inputs. On average, and despite the multiple challenges, the food and agricultural trade network proved remarkably resilient to the shock. In fact, the only visible effects at the global level were short-lived disruptions of trade at the beginning of the pandemic and when the worldwide restrictions in movement were imposed during March–April 2020.39, 40, 41
Increased connectivity among countries can strengthen the buffer capacity of the global food and agricultural trade network. Countries that are well-integrated in the global market and have a high number of trade links can benefit from trade by leveraging their comparative advantage globally (see Part 2). This would promote food security, better diversity of foods supplied and economic growth, alleviating pressure on the natural resource base (see Part 3). Higher connectivity would contribute to resilience to domestic production shocks and localized shocks in exporting countries.
For a country, domestic food production shocks, such as those arising from extreme weather events or geopolitical crises, can be effectively buffered by adjustments in the quantities traded, ensuring food security.42 In this way, shocks that are specific to individual countries or regions can be partly cancelled out at the global level. Trade is, therefore, a potentially powerful engine to even out supply fluctuations across the world and as a result to reduce price volatility. Nevertheless, there are also concerns that, with increasing import-dependency, greater connectivity between countries through trade may also act as an avenue to transmit negative shocks and increase vulnerability, rather than contribute to resilience.43, 44, 45, 46 The effects on importing countries can be aggravated and lead to self-propagating trade disruptions if other countries in the network react by imposing export restrictions or other measures, thus exacerbating price spikes.47, 48, 49, 50 Still, countries with a high dependency on food and agricultural imports from only a few major trading partners are more vulnerable to shocks impacting one of their partners than are those countries that are better connected and which can more easily source foods from other places.51
At the global level, the extent to which countries are vulnerable to external trade shocks depends on many factors. An important determinant is the structure of the trade network. If a few large players dominate the network and many other countries are connected to these hubs, but are not connected among each other, shocks affecting these large players can easily transmit through the whole network and possibly be magnified by global value chains (see Box 1.3 on the potential implications of the war in Ukraine on food security). A shock to the system can dissipate when all (or many) countries in the network are connected to many trade partners.52, 53, 54, 55
Network analysis can shed light on the extent to which the global food and agricultural trade network is vulnerable to shocks by assessing the connectivity of countries and the distribution of connectivity across the world. In 1995, only a few countries were highly connected to the trade network and these are shown by the long tail on the right-hand side of the distribution curve in Figure 1.14. Most countries – shown by the left-hand side of the distribution – were not well-integrated into global markets and remained in the periphery of the trade network.
FIGURE 1.14Distribution of connectivity across countries, normalized, 1995–2019
SOURCE: Jafari, Y., Engemann, H. & Zimmermann, A. 2022. The evolution of the global structure of food and agricultural trade: Evidence from network analysis. Background paper for The State of Agricultural Commodity Markets 2022. Rome, FAO.
Between 1995 and 2007, as the process of liberalization took hold, more countries increased their direct and indirect trade links with a larger number of other countries. As a result, the distribution of global trade links became much more even – the 2007 distribution curve in Figure 1.14 is flatter and both tails are symmetric resembling the shape of a bell. Over a period of 12 years, the trade network moved from a pronounced core-periphery structure to a more symmetric, balanced and resilient system. Between 2007 and 2019, the structure of the network remained stable, and there have been no major changes.
Considering not only the number of trade links per country globally but also taking into account the value of trade through these links – the trade intensity – provides additional insight into the structure of the global food and agricultural trade network and its resilience. Between 1995 and 2007 trade intensity became more evenly distributed across countries (the curve in Figure 1.15 becomes flatter in 2007), yet the trade network did not become significantly more balanced (the tails of the distribution curve are not symmetric). While many countries participate in international food and agricultural trade, few countries account for most of the value traded.
FIGURE 1.15Distribution of trade intensity across countries, normalized, 1995–2019
SOURCE: Jafari, Y., Engemann, H. & Zimmermann, A. 2022. The evolution of the global structure of food and agricultural trade: Evidence from network analysis. Background paper for The State of Agricultural Commodity Markets 2022. Rome, FAO.
The distribution of trade intensity across countries also suggests that the evolution towards a more stable trade system stalled in 2007. Some measures even indicate an increase in concentration between 2013 and 2019.56 In 1995 and 2019, most of the best-connected countries with the highest trade intensity were located in Europe, Northern America and Eastern Asia. Most countries with low connectivity and low trade intensity (these countries are located at the left end of the curves in Figure 1.14 and Figure 1.15) are Small Island Developing States or Landlocked Developing Countries. As these countries are small and geographically remote, they are more vulnerable to shocks in their domestic markets and in those of their trade partners.
Trade clusters are also important, as they affect how a shock in one country could spread within the global network of trade. For example, if the epicentre of a shock is within a regional cluster, countries in that cluster would be more directly affected than outside countries as they would face reduced supply from their trading partners and higher prices. Countries outside the epicentre cluster would be indirectly affected through increasing international prices and possible trade interventions by their own trading partners.57
Overall, there is strong evidence that the trade network became more connected and more diversified between 1995 and 2007, suggesting increased resilience within the system to shocks in terms of aggregate food and agricultural products. Mixed evidence for the period 2013 to 2019 suggests a slight drop in the resilience of the trade network. This may be due in part to the increase in regionalization, but also due to reduced trade between major economies as a result of trade tensions.58 However, when exports of individual basic foods are highly concentrated in only a few countries and shocks occur in the exporting countries (for example caused by extreme weather events or military conflicts), this can have serious implications for the food security of their trading partners (see Box 1.3).k
BOX 1.3The war in Ukraine and the resilience of the global food and agricultural trade network
At the aggregate level, for all food and agricultural products, resilience to disruptions in a major exporter can be better balanced through increased imports from other countries than at the individual product level. For a single product, such as wheat, only a few countries have a comparative advantage and are main exporters, which may imply a high dependency of other countries in the network on these key exporters.75
While global food and agricultural trade became more balanced and resilient on the aggregate, there are still considerable dependencies at the product level, especially in staple foodstuffs. Figure 1.16 shows that, despite an increase in resilience between 1995 and 2007, trade links at the product level are still much less evenly distributed than aggregate trade links at the country level (as shown by Figure 1.14). Only a few countries source a large variety of food and agricultural products from many different exporters. The imports of most countries are more concentrated on a fewer number of products from a limited number of trade partners.
FIGURE 1.16Distribution of connectivity across products and countries, normalized, 1995–2019
SOURCE: Jafari, Y., Engemann, H. & Zimmermann, A. 2022. The evolution of the global structure of food and agricultural trade: Evidence from network analysis. Background paper for The State of Agricultural Commodity Markets 2022. Rome, FAO.
Figure 1.17 shows that countries in Africa and Latin America and the Caribbean tend to have relatively few trade links in terms of food and agricultural products. While many countries in Latin America and the Caribbean are net food exporters, countries in Africa tend to be net food importers, especially those located in Northern Africa. For these countries, relying on imports of a small range of products and from few exporters can pose a risk to their resilience to supply shocks in the exporting countries.
FIGURE 1.17connectivity across products and countries at country level, 2019
SOURCE: Jafari, Y., Engemann, H. & Zimmermann, A. 2022. The evolution of the global structure of food and agricultural trade: Evidence from network analysis. Background paper for The State of Agricultural Commodity Markets 2022. Rome, FAO. Conforms to Map No. 4170 Rev. 19 United Nations (October 2020).
Relying on a few trade partners can lead to imbalances and vulnerabilities to shocks in both importing and exporting countries. A study found that countries are least resilient to disruptions in the grain trade network, which consists of only a few major exporters, and this was the case during the 2007–2008 world food crisis and the high-price phase during 2010–2011 when several major producers imposed export restrictions.76
In fact, the wheat trade network has been identified as one of the most vulnerable trade networks at the product level if shocks occur in one of the major exporters, such as Ukraine, the Russian Federation and some Northern American and Western European countries.77
Analyses of the global wheat network have shown that its resilience increased between 2009 and 2013, but some developing countries became more import-dependent and thus more vulnerable to the shocks in exporting countries. Countries in Northern Africa and Western and Eastern Asia were found to be most sensitive to supply shocks in wheat. For example, heatwave-induced yield losses in the Russian Federation and resulting export restrictions are thought to have contributed to increased wheat prices, which were associated with social unrest in some of these countries in the early 2010s.78, 79, 80
The Russian Federation and Ukraine are among the most important exporters of some agricultural products in the world. In 2021, either the Russian Federation or Ukraine (or both) ranked among the top three global exporters of wheat, barley, maize, rapeseed and rapeseed oil, sunflower seed and sunflower oil. The Russian Federation was also one of the world’s top three exporters of fertilizers. This sparked concerns about the risks of the war in Ukraine, which began in February 2022, spreading beyond the region.
By the end of March 2022, the war had already caused extensive damage and loss of life in key population centres in Ukraine, had spread across rural areas and had caused massive displacement. While the violence escalated rapidly, it remains extremely difficult to predict the evolution of the conflict and its effect on lives, livelihoods, food security and nutrition. At the time of writing this report, it was also uncertain whether Ukraine would be able to harvest existing crops, plant new ones or sustain livestock production as the war evolves. The war has already led to port closures, the suspension of oilseed crushing operations and the introduction of export restrictions for some crops and food products. All of these are taking a toll on the country’s exports of grains and vegetable oils.
Much uncertainty also surrounds the Russian Federation’s export prospects, given sales difficulties that may arise as a result of economic sanctions imposed on the country and their impact on future planting decisions.
The Russian Federation and Ukraine are key suppliers to many countries that are highly dependent on imported foodstuffs and fertilizers. Several of these countries fall into the Least Developed Country group, while many others belong to the group of Low-Income Food-Deficit Countries.
For example, Eritrea sourced the entirety of its wheat imports in 2021 from both the Russian Federation (53 percent) and Ukraine (47 percent). Many countries in Northern Africa and Western and Central Asia are also highly dependent on wheat imports from the Russian Federation and Ukraine. Overall, more than 30 net importers of wheat are dependent on both countries for over 30 percent of their wheat import needs.
Many of these countries were already grappling with the negative effects of high international food prices before the war. Globally, if the war results in a sudden and prolonged reduction in food exports by Ukraine and the Russian Federation, it will exert additional upward pressure on international food prices to the detriment of economically vulnerable countries in particular.
The war is also set to increase humanitarian needs in Ukraine, while deepening those of millions of people who, prior to its escalation, were already displaced or requiring assistance due to the more than eight-year conflict in the eastern part of the country. By directly constraining agricultural production, limiting economic activity and raising prices, the war has further undercut the purchasing power of local populations, with consequent increases in food insecurity and malnutrition. Humanitarian needs in neighbouring countries, where displaced populations are seeking refuge, have also increased substantially.
Ensuring and enhancing market transparency is crucial to providing timely information on potential bottlenecks and shortcomings and for offering alternative solutions. Policy dialogue should be strengthened to ensure that global food and agricultural markets continue to function properly and that trade in food and agricultural products flows smoothly. Countries that depend on food imports from Ukraine and the Russian Federation must find alternative export suppliers. They should also use existing food stocks and enhance the diversity of their domestic production bases.
SOURCE: Adapted from FAO. 2022. The importance of Ukraine and the Russian Federation for global agricultural markets and the risks associated with the war in Ukraine. Information Note. 10 June 2022 Update. Rome, FAO; FAO. 2022. Ukraine: Note on the impact of the war on food security in Ukraine. 25 March 2022. Rome, FAO; Torero, M. 2022. Op-Ed: Russia’s invasion of Ukraine should not cause a hunger crisis. Los Angeles Times, 4 March 2022.
Food and agricultural trade networks can be highly concentrated due to a number of reasons. Geographical proximity plays an important role. Production is concentrated in relatively few countries due to comparative advantages, trade policies, trade costs and natural resource endowments that, when combined, enable some countries to engage in trade more than others (see Part 2 and Part 3).
