European hospitality industries and exporters face difficulties

Both developing and developed countries faced issues related to agricultural exports during the month of October, but the retail and hospitality sectors of the developed countries were the most affected. This was confirmed by several newspaper articles mentioning reduced exports and shutdowns in the hospitality industries of several European countries, such as the United Kingdom, Ireland, France and Germany. More in particular, the adverse weather conditions affected wheat production in France towards the end of August (as mentioned in the previous issue of this monthly news digest), which later had repercussions on the country’s exports. Algeria is one of the largest customer of French wheat, but an increase in Russian supplies undermined France’s position in October: Algeria relaxed its wheat tender specifications to accommodate the Russian exporters and Russian shippers were invited to Algerian tenders; however, Algeria has yet to benefit from such decision, as Russian wheat export prices have increased in the meantime, due to the dry weather.

     Germany, on the other hand, has seen its pork exports to China, Japan and South Korea decrease after an outbreak of African swine fever in wild boars was confirmed at the beginning of last month, which also had an effect on pork prices, that decreased by 14% in the country. Wine trade in Europe also decreased during the first half of 2020: the value of Austrian wine sales in the United Kingdom plummeted, and so did wine exports from Spain, France and Italy to Germany. Finally, the new restrictions imposed by European governments to limit the growing number of Covid-19 cases in October severely damaged Ireland’s, Scotland’s, Wales’ and England’s hospitality industries, and fuelled protests in London.

Agricultural producers struggling in South and Southeast Asia

Last year, an oversupply of rice in the Philippines determined a collapse in rice prices that impacted on farmers; in October, rice prices saw a sudden drop again (towards the beginning of the month, one kilogram of rice was sold on average at PHP 12), which according to the president pro tempore of the country’s Senate was an effect of the current rice tariffication law, that opened the market to cheap imported rice from Vietnam and Thailand (where rice producers are backed by government subsidies). Owing to the increasing competition with Ecuador, Cambodia and Vietnam, and to the damages caused by the Panama disease and the fusarium wilt to banana plantations in the Philippines, the country’s banana industry was also struggling at the beginning of October.

     For what concerns India, the producers that were most affected in the country during the month were poultry and vegetables producers: the poultry sector was still operating at half its capacity at the end of September due to the pandemic-induced restrictions in the processing plants, which determined supply constraints (production decreased by nearly 40%) and egg price increases; the heavy rains in India started to pose difficulties to farmers during the second half of the month, when vegetable prices increased in the markets of several cities, and continued affecting producers until recently, when the government of Maharashtra announced a new financial aid package.

     Indonesian and Malaysian palm oil and coffee producers were also affected by demand contraction and adverse weather events. The coronavirus pandemic determined a contraction in household spending by 5.51% year-on-year in the country, which reflected negatively on coffee production: the low prices and the scarcity of buyers in the export market led many farmers in the country to hold tons of coffee under a warehouse receipt. More recently, torrential downpours have caused flooding in Vietnam’s rice fields and in Indonesia’s and Malaysia’s palm oil plantations, while Pakistan keeps struggling with the wheat crisis described in the previous issues of this monthly news digest, with prices still increasing throughout October.

Reduced grains and soybeans production in the United States and Brazil

The dry weather affected the production of soybeans in Brazil, which found itself devoid of sufficient supplies of this commodity after it exported large amounts of soybeans to China (whose demand increased exponentially when the country’s pig herd recovered after the outbreaks of African swine fever): these factors contributed to the increase in soybean prices, which the Brazilian government tried to limit by cancelling import tariffs, in an attempt to increase the supplies of soybeans in the country. For what concerns the United States, on the other hand, the generalized lack of rainfall raised concerns about the prospects for wheat planting in the country at the beginning of October, which were confirmed towards the end of the month. Large portions of land in Colorado, for example, are now in an exceptional drought that prevents cattle from feeding on sufficient quantities of pasture grass.

Most mentioned commodities in relation to developing countries

Wheat and rice have been by far the most mentioned commodities in relation to developing countries during the month, totalling respectively 30 and 26 mentions. More in particular, wheat was mentioned mainly in newspaper articles related to Russia, Ukraine, Pakistan and North African countries (such as Egypt, Algeria and Morocco). The updates on wheat production and exports in Russia primarily highlighted the country’s tendency to explore new markets (Pakistan and Algeria, for example) and the growing domestic and export prices of this commodity throughout the month in the Black Sea Region (due to a strong international demand for the Russian and Ukrainian wheat and the low productivity of these countries, caused by a prolonged dry weather). Pakistan, on the other hand, has been struggling to contain the increase in wheat prices by enhancing imports and by distributing wheat from the national reserves to flour mills.

     For what concerns rice, the most mentioned countries in relation to this commodity during the month were the Philippines, Bangladesh, Thailand, Vietnam and India. As mentioned in the previous section of this monthly news digest, the Philippines has witnessed an oversupply of rice during the month (caused by the increased imports) which translated into lower prices. This, together with the fact that traders prefer importing cheap rice rather than purchasing from local suppliers, has impacted on Filipino rice farmers, who are forced to sell their land to repay their debts. Rice producers in the other South and Southeast Asian countries were similarly impacted by heavy rains and floods, which delayed the harvests and pushed up domestic and export prices.

Most mentioned commodities in relation to developed countries

Wheat was frequently mentioned also in relation to developed countries, together with other commodities, such as pork, beef and wine. More in particular, wheat was mentioned four times in relation to the United States and to Australia: owing to the dry weather conditions in both countries at the beginning of October, wheat production forecasts were pessimistic. As already stated in the previous section of the digest, the US was also mentioned in relation to its exports of soybeans to China, which the country could improve thanks to the low production of this commodity in Brazil, while the news that focused on Australia also mentioned a lower sugarcane production towards the end of last month and a shortage of slaughter cattle that drove up heavy cow prices in Queensland.

     Another frequent commodity in relation to developed countries was wine, which was mentioned 15 times during the month, mainly in newspaper articles that focused on European countries and the United States. More in particular, as pointed out earlier, one article at the beginning of October highlighted that the value of Austrian wine exports to the United Kingdom plummeted by 26.9% during the first six months of 2020, and that Spain’s, France’s and Italy’s wine sales to Germany all decreased. Furthermore, the Distilled Spirits Council of the United States found out that the US whiskey exports to the European Union decreased by 41% to USD 339 million between August 2019 and July 2020, due to the 25% tariff imposed by the US on the imports of several alcoholic beverages from the United Kingdom, Germany, Italy, Spain, France and Ireland. This had repercussions on the exports of these European countries: for example, during the first half of 2020, the UK’s spirits exports recorded a 28% decrease year-on-year.

     Finally, the American wine industry was affected by the devastating wildfires that hit California in the summer: the smoke that was produced by the fires affected grapes (and cows, which were hit by respiratory damages caused by smoke entering their lungs) and, in some cases, made wine unfit for consumption. Since 85% of the wine produced in the country comes from California, the fires may have long-term effects that could represent a severe challenge for the US’ wine industry.

Improvements to technology and access to market in South Asia and Sub-Saharan Africa

Most of the newspaper articles related to countries’ measures selected for the Data Lab’s daily news digests during the month made reference to technological improvements and initiatives that were aimed at improving the farmers’ ability to access credit and markets in the developing regions of the world. Most of the technological improvements focused on China, India and Pakistan (6 mentions out of 12 in developing countries).

     More in particular, China expanded the use of its traceability technologies to its local varieties of watermelon and rice as a way to revitalize agriculture in the country’s rural communities and to provide consumers with more precise information related to the food products they purchase, while India improved the use of artificial intelligence to enhance the quality assessment processes for different agricultural products (rice, for example) and introduced the biofloc technology to improve fish farming in Jammu and Kashmir. Pakistan, on the other hand, has taken measures to improve agricultural data collection in order to strengthen planning and policymaking, and relied on the China-Pakistan Economic Corridor to introduce technologies that could support the production of barley.

     For what concerns the measures that improved market access for farmers in Sub-Saharan Africa, Ethiopia, Liberia, Kenya, Zambia and Namibia collected 7 mentions out of a total of 13 mentions to this specific kind of government measure in developing countries. Most of these measures were aimed at improving agricultural productivity, and therefore the livelihoods of thousands of farmers in Africa, thanks to the investments of governments and international organizations. More in particular, Liberia focused on the enhancement of its rice and cocoa production through the support of several UN specialised agencies (including FAO, WFP and ILO) and thanks to an agreement between the country’s government and the National Rice Federation of Liberia, while Ethiopia and Kenya respectively aimed at strengthening livestock productivity and at supporting herbs and spices producers.

Financial aid initiatives in North America, United Kingdom and Australia

Most of the news related to financial support in developed countries during the month made reference to English-speaking countries, such as the United States, Canada, the United Kingdom and Australia. Towards the end of September, the US Department of Agriculture funded a new study whose objective is to strengthen the resiliency of the meat, poultry and dairy production in the country against future external shocks, such as the coronavirus pandemic. But most of the news describing financial aid initiatives in the US and in Canada referred to farmers getting grant funding: for instance, several US state governments unlocked new funds through the Coronavirus Aid, Relief and Economic Security Act (Minnesota used them to support poultry producers, while Colorado assisted ranchers, farmers, food hubs and processors).

     The United Kingdom and Australia, on the other hand, chose to financially support companies operating in the hospitality and food manufacturing industries. More in particular, the UK government announced a set of financial measures that will allow all businesses in the country’s hospitality sector that incurred economic losses caused by the coronavirus restrictions to claim cash grants (after many people working in this sector demonstrated in London against said restrictions), while the Australian government launched the Modern Manufacturing Strategy, which provides for the investment of around AUD 1.5 billion for the creation of employment opportunities in the country’s food and beverage manufacturing industry.

Provision of training and agricultural inputs in West and East Africa 

Half of the news referring to the supply of equipment, material and training in developing countries mentioned either Ghana, Nigeria or Tanzania during the month. More specifically, the production of cassava in Ghana was improved thanks to the provision of almost 50,000 seedlings to more than 1200 farmers in the Savannah Region and to the commissioning of a new cassava production facility with funding from the European Union in the Western Region, where 600 farmers and young processors will be trained to produce cassava. In Tanzania, on the other hand, over 6000 farmers were trained on the use of solar dryers and received quality common bean seeds to improve their yields thanks to the support of the Netherlands’ Ministry of Foreign Affairs. Finally, the government of Nigeria launched the Empowering African Youths project, which aims at providing capacity development to young people wishing to become agriculture entrepreneurs.

Andrea Frusone

[email protected]