Dairy producers in North America have been recently identified as perpetrators and victims of the difficulties that the sector is currently facing in this region. Regardless of the quality of their products, the Canadian dairy producers get the same compensations as a consequence of the country’s protectionist measures that aim at keeping domestic prices stable: for this reason, many of them have been accused of using palm oil extracts to increase milk production and the milk’s fat content in response to the increasing demand for butter prompted by the pandemic. The US dairy industry is still shaken by the repercussions of the health emergency and of the extreme weather events in Texas on the supply and production of dairy products. In Pakistan, on the other hand, the coronavirus pandemic is set to throw an additional 125 million people below the poverty line, while cocoa and cashew farmers in Nigeria are confronted with poor rural infrastructure services that affect the agricultural productivity.
Selected weekly news on food chain disruptions and countries responses to the COVID-19 impact on food chains (22/02/2021 to 28/02/2021)
FOOD CHAIN DISRUPTIONS
Both Canada’s and the US’ dairy industries are currently facing uncertainties prompted by differing factors. More in particular, the Canadian consumers have recently blamed the national dairy industry’s lack of transparency over the production of butter and the country’s long-lasting protectionist measures (that discourage foreign imports and keep the domestic prices stable) for a reduction in the quality of butter that is probably due to an excessive use of palm oil extracts. The US dairy sector, on the other hand, is still recovering from the disruptions caused by the coronavirus pandemic at national level, and from the distribution and supply issues caused by the recent winter storm in Texas at local level.
Agriculture is a fundamental sector for the development of low-income countries, such as Nigeria. In order to thrive, it requires the creation and preservation of efficient infrastructure services, which are lacking or inadequate in Nigeria’s rural areas. For this reason, the country’s agricultural productivity is hampered by several difficulties: for example, the lack of improved planting materials and the distribution impediments that affect the production of cocoa and cashew in Nigeria. More in particular, the productivity of cocoa and cashew trees is particularly low because most of them have not been replaced for 40 to 60 years, and due to the fact that most farmers produce their own planting materials, instead of using high-yielding seedlings.
The annual Global Food Security Index (which measures the underlying causes of food insecurity, such as the affordability, availability, quality and safety of food) has decreased for a second year in a row, due to the drastic impact of the coronavirus pandemic on food systems worldwide. The socio-economics impacts of the pandemic have been particularly hard on Pakistan’s food security: due to the coronavirus containment measures, food production and supply in the country was seriously hindered, and many people living in conditions of poverty had to cut down on the quality and quantity of their food consumption. It is estimated that around 40 to 62 million people in Pakistan are currently experiencing some form of food insecurity.
IMPACT ON COMMODITIES AND FOOD PRICES
Over the course of last year, the coronavirus pandemic (that limited the inflow of rural workforce due to the travel bans) and climate change phenomena had a considerable impact on agricultural production worldwide. Combined with a rising demand for food products that is an effect of a huge population growth in emerging economies (such as China), and of the advanced economies’ increasing dependence on food imports caused by globalization, the decrease in agricultural production is exerting a considerable pressure on food price inflation. In order to stabilize the inflation, Russia has recently applied an export tax on wheat, barley, corn and rye, while countries like Pakistan and India are bearing the brunt of the increase in food prices for specific commodities, such as broiler chicken and edible oils.
So far, Ukraine (one of the main global grain exporters) has sold around 40 million tons of grain abroad, almost 21% less than the same period last year. Meanwhile, wheat prices remain stable, while barley and corn prices have slightly increased. Another important global grain exporter, Russia, has recently announced restrictions on the export of grain in an attempt to curb food inflation: an export quota that will limit the export of wheat, barley, corn and rye between 15 February and 30 June 2021. More in particular, the export tax on wheat was doubled to EUR 50 a ton, while that on corn and barley was set at respectively at EUR 25 and EUR 10 a ton.
Domestic broiler prices in Pakistan have recently reached their highest level. This process began with the outbreak of the coronavirus pandemic in China (the world’s largest consumer of grain), which prompted a sudden fall in grain prices. However, with the start of the vaccination processes, global maize and soybean prices have recovered and they are now at their 7-year high, which also means that production costs have vastly increased for Pakistani poultry farmers. In India, on the other hand, edible oil prices have registered a 60% increase since April 2020, due to the shift in consumers’ preferences from palm oil to sunflower oil (palm oil is mainly used in the hotel industry), which is more expensive.
Food prices continue to increase around the world, mainly due to climate change (excessive rains in Southeast Asia and a dry weather in Latin America) and to a lack of agricultural workforce which is determined by pandemic travel bans that prevent workers from migrating abroad. Both of these factors are affecting agricultural production, and coupled with an increase in demand (especially in China) they are producing an upward pressure on food price inflation. The effects of this increase in food prices may be particularly impactful for middle-income countries, which are densely populated and where food costs make up a considerable share of consumer price baskets.
Tackling bottlenecks in the food supply chain and in agricultural technologies is the preferred approach for public and private administrations around the world when dealing with the consequences of food chain disruptions. One of the largest supermarket chains has recently adopted the blockchain technology for specific food products in the Middle East, Africa and Asia region in order to offer enhanced food traceability and to improve the operational efficiency of the local food supply chains. In China, on the other hand, renowned private companies are supporting the central government’s efforts to improve food production and quality by providing chicken farmers with smart bracelets that track the health of their poultry, and by installing smart sensors to gain real-time insights for rice irrigation. Finally, the US’ central and local governments have recently announced additional financial support initiatives for farmers and other actors of the food supply chain (such as processors and farmers markets).
The food value chain hosts hundreds of intermediaries: this offers consumers a great variety of options, but in many cases, it is also non-transparent and inefficient. However, combined with Internet of Things technology and data analytics, the blockchain technology allows every actor in the food supply chain to share data at each stage of the commodity’s journey. A renowned supermarket chain has recently adopted this technology to provide food traceability for its customers in the Middle East, Africa and Asia (MEAA) region. More in particular, it will set up a blockchain-enabled global ecosystem that will be capable to trace fresh chicken and microgreens back to their production sites, and to record information throughout the manufacturing, processing, distribution and handling phases of the food chain.
Because of its huge population (1.4 billion people), ensuring food security has always been a priority for China. This priority became an urgency after the outbreak of the coronavirus pandemic and of the African swine fever, and therefore the country’s government has made self-sufficiency in food a top state issue in order to avoid a food crisis. In order to tackle such issue, the government is accelerating the modernization of the agricultural sector by tackling bottlenecks in agricultural technologies and strengthening the homegrown breeding system, and it is countering food waste by promoting a green lifestyle and a green society. Some of the country’s largest private companies have also joined the government’s efforts to improve food production and quality.
The US central and local governments have recently announced a series of measures that will support the food and agricultural supply chain in the coming months. The most ambitious one consists in a USD 1.9 trillion economic stimulus package which includes USD 16.1 billion in agricultural and food provisions (assistance to minority farmers, fund commodity purchases and grants to farmers markets and producers). The government of Virginia will also provide grant funding to support local agriculture initiatives, while that of Nebraska will seek to connect schools with local farmers in order to strengthen the local farm economies.
The European poultry farmers, who were already hit hard by the repercussions of the coronavirus pandemic on production, will be dealing with the bird flu in the coming weeks: in Poland, that is the largest poultry producer in Europe, the disease has forced farmers to cull around 5 million birds, and this has already had consequences on the price of eggs. In Africa, the World Bank has recently elected South Africa as the first country in efficiently enabling agribusiness, but most of the countries in Sub-Saharan Africa find in bureaucracy the biggest obstacle to the sustainable development of agriculture (which is paramount for the advancement of the African Union’s Agenda 2063). Finally, India has gradually become one of the main exporters of rice and meat in the world during the pandemic, but its overreliance on Chinese containers may represent a challenge to the further enhancement of its food exports.
Avian influenza (H5N8, commonly called bird flu) is currently spreading in several European countries, after it was carried by migrating wild birds from Asia in autumn. The communicable disease is decimating flocks, thus putting poultry farmers (already hit hard by COVID-19) under considerable pressure: more in particular, it is shrinking the supply of eggs in Poland, the European Union’s largest poultry producer, where around 5 million birds (most of which were laying hens) have already been culled. This reduction in the supply of eggs is affecting prices, which increased by about 20% in Poland at the end of January, and are also rising in several other EU countries, such as France and Germany.
According to the African Union’s Commissioner for Rural Economy and Agriculture, a strong investment in agriculture will be fundamental to advance the Agenda 2063 (the Union’s strategic framework for the sustainable development of the continent): in fact, Africa hosts 60% of the arable land of the planet, and yet it imports USD 45 billion worth of food products. According to the World Bank’s biannual Enabling Business Agriculture report, South Africa is the first country in Africa in effectively enabling agribusiness, followed by Kenya, Morocco and Zambia. The main obstacle to the advancement of agriculture in Sub-Saharan Africa is bureaucracy, and the largest regulatory gaps are observed in registering fertilizer, protecting plant health and sustaining livestock.
Amid the coronavirus pandemic, India has become a major supplier of rice, meat and other agricultural products globally. Therefore, India aims at increasing its exports, but so far it has relied primarily on Chinese containers, and due to the increasing political tensions between the two countries, India has reduced its imports from China. This prompted a shortage of containers, that has caused many delays in the shipment of various goods. For this reason, the Indian Ministry of Ports, Shipping and Waterways has set up a committee to study the feasibility of manufacturing containers in the state of Gujarat.