The torrential rains and hailstorms that hit the Khyber Pakhtunkhwa province in Pakistan during the first half of 2020 affected the production of different fruits, including peaches, apples, plums and persimmons, while a dry weather and low rains in Australia contributed to the depletion of the country’s rice stocks. Since the production in the main rice-producing state in Australia was constrained by the unfavorable weather conditions, the country will have to rely on imports from Vietnam. Finally, maize quality in the United States largely deteriorated as a consequence of the derecho storm that hit parts of the country on 10 August.
Selected daily news on food chain disruptions and countries responses to the COVID-19 impact on food chains.
FOOD CHAIN DISRUPTIONS
The unusual and untimely rains coupled with hailstorms that hit Pakistan’s Malakand division, in the Khyber Pakhtunkhwa province (during the season from February to May) destroyed the peach orchards in the country. After plums, peaches are the most important stone fruit in Pakistan, and they are mainly grown in the Swat valley, where most of the temperate season fruits are produced (including apples, plums and persimmons). Since 70% of the people living in this area are farmers, weather changes have badly impacted on the livelihood of about one million cultivators.
Australia is currently facing a rice shortage that is connected to the low rainfall and dry weather, and to the pandemic-induced panic buying. The country is expected to run out of the domestically grown product by Christmas, which means that rice imports from Vietnam will be increased. The country’s biggest rice supplier has lost more than AUD 400 million in exports, and it had to cut its workforce by one-third in one of the main rice-producing areas of Australia.
The derecho storm that hit parts of the United States in early August impacted on maize production, and in the weeks following the storm the condition of the crops worsened, affecting the quality of the maize grains. Maize’s quality determines the value of the grain, and therefore the probability that buyers are interested in purchasing parts of the harvests: that’s why grain quality should be assessed just before harvesting the whole field.
IMPACT ON COMMODITIES AND FOOD PRICES
Kenya, Nigeria and India are all currently facing foodstuff price increases, for different reasons. In India, the apple scab disease is ravaging crops in the northern state of Himachal Pradesh, where the prices of this fruit have already doubled in the local markets, while the Nigerian government had to release around 30,000 tons of maize from the state reserves in order to ease the cost of poultry production, which reflected on grains prices. Finally, Kenya is seeing an unusual cold weather, which negatively affects milk production, and therefore also impacts on dairy prices.
Apple growers in the state of Himachal Pradesh (northern India) are currently witnessing the disruptive effects of the apple scab disease (which has hit the state again after nearly four decades) on their production. This highly infectious fungal disease is spreading throughout India’s second-largest apple producing state, and it is expected to result in a 25% to 30% drop in production and in a correspondent hike in prices, which have already doubled in the local markets.
Nigeria’s economy is facing the combined effect of the coronavirus pandemic and of a sudden spiral increase in food prices. The hike in foodstuff prices was allegedly worsened by the speculative activities of several rice processors, who are ready to pay for paddy rice at any price to keep their mills running non-stop. The government has approved the release of food items from the strategic grains reserves across the country, including 30,000 tons of maize to reduce the cost of poultry production.
Milk production in Kenya is currently suffering from the unusual chilly weather conditions in the country (which are normally seen from mid-June to July), that are causing a substantial drop (by up to 36%) in milk volumes in key production areas across Kenya, and in price increases. This is mainly due to the fact that, when dairy cattle experience cold stress, they increase the amount of energy used to maintain their body temperatures, resulting in a loss of the energy that is available to produce milk.
While Madagascar chose to tackle low milk production in the country by importing 1000 dairy cows (raising objections from the country’s cattle farmers, who claim that the minister of agriculture is not focusing enough on supporting the local businesses), the Asian Development Bank has recently provided a USD 10 million loan to Bangladesh’s second-largest dairy processor, which will be used to source milk from a total of 13,200 dairy farmers, benefiting producers, processors and consumers. Finally, Nigeria has increased the share capital of its Agricultural Credit Guarantee Scheme Fund, through which farmers can gain access to credit and purchase equipment and agricultural inputs.
Madagascar’s Ministry of Agriculture has recently announced that the country will import 1000 dairy cows in order to tackle the low dairy production and reduce its reliance on imports: in 2019, Madagascar produced around 100 million litres of milk, against a total need of more than 140 million litres per year, and that is why the country was forced to import large quantities of this commodity. Cattle famers were opposed to the Ministry’s decision, claiming that it has not put enough efforts in supporting the national companies.
Nigeria’s president has recently approved the Agricultural Credit Guarantee Scheme (ACGS) Amendment Act, which aligns with the Central Bank of Nigeria’s intention to increase lending to the agricultural sector and to support food production, by increasing the share capital of the Agricultural Credit Guarantee Scheme Fund form NGN 3 billion to NGN 50 billion. The objective of the fund is to boost lending to agriculture, by guaranteeing bank loans to farmers, which can then improve transportation, processing, storage and equipment.
The Asian Development Bank (ADB) and Bangladesh’s second-largest dairy processor have signed a USD 10 million deal that will allow the latter to procure raw milk from the 12,000 smallholder dairy farmers that are already part of the value chain, and to 1200 additional farmers that would have lost their incomes otherwise. Furthermore, the loan will provide emergency working capital for additional support in response to the coronavirus pandemic, which caused several disruptions along the supply chain of milk in Bangladesh.
The 27 members of the European Union have managed to increase their agri-food exports despite the consequences of Brexit and of the coronavirus pandemic on trade: more in particular, pork exports to China and grains exports to Morocco, Algeria and Saudi Arabia grew, compared to last year. Myanmar’s sugar exports, on the other hand, have decreased because of a contraction of both the domestic and international demand, caused by the pandemic. Finally, for what concerns palm oil exports, major plant oil plantation companies from Indonesia and Malaysia have recently confirmed their efforts in making the palm oil supply chain more sustainable.
Thanks to the continued strong exports of pork, wheat and barley from the European Union, the EU27 countries are managing to mitigate the trade challenges posed by the coronavirus pandemic and Brexit during the first half of 2020: the total value of the EU’s agri-food exports between January and May rose by 2% compared to the same period in 2019, reaching around EUR 75.8 billion, and they were driven by pork to China and grains to the Middle East (Saudi Arabia) and North Africa (Morocco, Algeria).
Since tons of sugar that were meant for exports will remain in Myanmar, people are spending less in sugary snacks and beverages, and there are no festivals or events in the country (all due to the coronavirus pandemic), the country is experiencing a sugar glut, which reflected on prices (which are currently to a 10-year low). In fact, according to the Myanmar Sugar and Sugarcane Product Entrepreneurs Association, there are between 150,000 and 200,000 tons of unwanted sugar inventories in Myanmar, and that’s why farmers are reducing sugar acreage and the country is trying to increase sugar exports to China.
During an online conference yesterday, Indonesian and Malaysian palm oil plantation companies, which have faced criticism of widespread deforestation in recent years, affirmed that ensuring sustainability across the supply chain is the new business norm. For example, the major global buyers (such as Nestlé and Unilever) demand the implementation of supply chain traceability systems and policies on no deforestation, no planting on peatland and no exploitation.