According to a sugarcane availability report drafted by Kenya’s Agriculture and Food Authority, the country’s millers will face a shortfall of 677,584 tons of sugarcane by the end of June: this shortage is feared to cause a shortage of sugar that may necessitate the importation of the commodity in the coming months. A specific district in Nepal, on the other hand, is currently struggling with a deficit of rice, while the United States still faces a worrying shortage of chicken. In South America, two different protests in Colombia and Argentina are hindering the production and transport of poultry and lemons: many haulers in Colombia were blocked by the protests against the new tax and health care reform, while the Argentinian agriculture workers in the Tucumán Province demanded wage increases. Finally, 11 poultry processing plants in Brazil (which were already hit by the increasing prices of maize) saw their exports to Saudi Arabia suddenly suspended without prior notice.
Selected weekly news on food chain disruptions and countries responses to the COVID-19 impact on food chains (03/05/2021 to 09/05/2021)
FOOD CHAIN DISRUPTIONS
This week’s media coverage underlines three situations of actual or possible food shortages in different parts of the world. In Kenya, several sugar millers have reported a worrying deficit of raw materials, which will probably trigger a shortage of sugar in the coming months, that could require the importation of the commodity to stabilise supply. The Dolpa District in Nepal, on the other hand, is suffering from a shortage of rice due to the delays incurred by the Dinesh Transport Service due to the recent snowfall in the region. Finally, the United States is still struggling with a chicken shortage that, according to the National Chicken Council, was caused by the fact that during last year, chicken wing sales increased by 7%, while the southern states were not able to make supply and demand meet due to the record cold temperatures and volatile weather conditions all winter.
Colombia and Brazil have recently been struggling with issues related to the production and export of poultry products. More in particular, many Colombian poultry farmers and producers have expressed their concern about the risk of shortages of eggs and chicken, due to the fact that trucks loading poultry products and feed are blocked by the protests that began towards the end of April in the country against the new tax initiative and the health care reform proposed by the government. According to Colombia’s National Federation of Poultry Producers, 30 million birds are already in danger due to the lack of feed. 11 poultry processing plants in Brazil, on the other hand, saw their exports to Saudi Arabia suspended without explanation or prior notice. Due to the increasing maize prices and to the pandemic, the country’s chicken industry was already facing serious difficulties.
At the end of last month, just as the lemon season was getting underway in Argentina, a worker strike over wages in the country’s leading producing region has thrown the production of the fruit into jeopardy. The protesters have blocked the main roads, thus preventing the passage of trucks transporting lemons, and the conflict with citrus companies continues to escalate. According to the Argentine Citrus Federation, since the protest is delaying the lemon harvest at the beginning of the season, the country’s lemon exports are at risk: in the United States, for example, the window to export from Argentina begins at the end of April and ends in June, and the delays in production are also expected to reflect in the volumes of lemons shipped to Europe at the end of the month. On top of the protests, lemon production in Argentina is also expected to be lower than last year due to the low temperatures in the winter and to a dry weather in the spring.
IMPACT ON COMMODITIES AND FOOD PRICES
Maize production estimates in Brazil have recently been downsized due to the enduring dry weather conditions: this, coupled with a strong international demand (mainly driven by China and by meat and ethanol producers around the world), is highly influencing global maize prices, which have reached their highest levels since 2013. Meanwhile, both South Korea and Iran are dealing with gradual rice price increases, for different reasons: South Korean authorities are blaming the soaring prices on the rising packaging and logistics costs and on a rainy season that was longer than expected, while government critics in Iran consider widespread corruption and price manipulation as the main factors for the price increases. Finally, both Mali and Uganda are struggling with rising meat prices that were triggered by a tight supply (mainly due to the coronavirus pandemic, to the Ramadan celebrations and to the Foot and Mouth Disease outbreaks).
Planting of the 2021 second season maize crop in Brazil started in early February, when remunerative prices prompted farmers to expand the planted area for this crop. However, Brazil’s 2020/2021 total maize crop estimate was lowered by almost 8% to 104.1 million tons as dry weather is affecting the yields of the country’s second maize plantings. Therefore, the global supply of maize is particularly tight right now (also due to China’s large purchases), while demand from meat producers, ethanol makers (especially for cooking oils to make green diesel, since cars are the preferred transport in the post-covid era), livestock feeders and exporters is still very strong: this has an impact on maize prices, which hit their highest levels since 2013, and it is exacerbating the global food price inflation.
Rice factory prices (the initial prices quoted for pickup at the gate of a factory, before being shipped to wholesalers and retailers) in South Korea have recently increased due to the soaring costs of packaging and logistics and to a poor harvest caused by a long rainy season, with repercussions through the whole supply chain. For example, the rising rice prices in the country are starting to hit restaurants, where rice is a common ingredient and rice wine (or makgeolli) is widely consumed. Iran is also suffering from rice price increases, caused by the deposition of 100,000 tons of rice in Iran’s ports and customs, and according to the country’s Rice Importers Association, nearly 70 million people cannot afford this commodity right now. It is possible that rice sellers have influenced the country’s government to store rice in order to manipulate prices.
The price of meat has increased in Kayes, Mali, where major livestock markets are experiencing a sharp drop in supply due to the coronavirus pandemic amid a high demand during Ramadan: according to the Federation of Merchants and Breeders of Kayes, external supply markets are experiencing skyrocketing prices, so that the cost of a kilogram of meat increased from FCFA 3,000 to FCFA 3,500 over just a few days. Meat is similarly becoming unaffordable in Uganda, too, where traders have predicted that the prices will more than double in the coming months due to a shortage of livestock (which was mainly determined by the outbreak of the Foot and Mouth Disease in Uganda) and to the COVID-induced restrictions, which have caused exorbitant increases in the cost of animal transportation.
The governments of Ghana and the United States have launched a joint project (the US Government Food Security Strategy) to enhance agribusiness in Ghana: the first initiative of this project committed USD 19 million to increase the access to agricultural finance in selected staple and commodity value chains, in order to improve food security, increase trade and investment flows and support resilient and inclusive economic growth. In Uganda, on the other hand, a new digital platform is now allowing smallholder farmers to access indemnity-based insurance services for their yields thanks to a lower cost of premiums: for the moment, the platform is only being launched with a small group of farmers, but in the future anyone with a smartphone will be able to purchase crop and animal insurance through the platform. By linking farmers to inputs and markets and by providing them with access to credit and insurance, rural communities will be able to develop and build their resilience.
The Vice President of Ghana and the United States Ambassador have recently unveiled the US Global Food Security Strategy for Ghana (GFSS), a five-year, interagency effort that has the objective of increasing agricultural productivity, improving nutrition and raising household incomes for millions of agricultural workers in the country. The first activity under this ambitious project (the “Mobilizing Finance in Agriculture” project) aims at attracting USD 261 million in private sector financing to small agribusiness firms in Ghana (with special consideration given to improving access to finance for women and the youth) by facilitating transactions between buyers and sellers. This project will run for four years and seeks to increase access to agricultural finance in specific commodity value chains, such as maize, groundnuts, shea, soy, mango and cashew.
According to Australia’s Commonwealth Bank, agriculture financing is currently sitting at a seven-year high in the country: farmers and producers are investing more and more in transport, sowing and cropping equipment as the next winter crop production is expected to be significant. The beef industry is also one of the sectors experiencing a significant uptick in confidence, following several difficult years of drought. Furthermore, Australian beef producers can now count on a new blockchain traceability technology that aims to deliver AUD 115 million in additional sales by 2025 by providing details such as information about the breeding property, the conditions under which the cattle were raised, the processing practices, the certifications and a full-life traceability journey of the beef products.
Most of the Ugandan farmers are unable to access indemnity-based insurance services, due to low awareness and to the unaffordable costs of premiums. Furthermore, since serving rural customers in remote areas is quite expensive, for a long time insurance providers have overlooked smallholder farmers, thus making them a less profitable customer segment for the industry. However, a new digital platform called Inputi is now providing a digital crop insurance scheme that targets smallholder farmers: crop insurance is traded on the platform as a commodity, and the insurer covers up to 75% of the farmer’s expected crop yield against losses that are caused by natural disasters (floods, drought, forest fires, and so on), while the premium is charged at 5% of the expected value of the yield.
The coronavirus pandemic has had a far greater impact on agri-food systems in sub-Saharan Africa, compared to the effects occasioned on the same sector in the Middle East and North Africa (MENA) region. This is mainly because sub-Saharan Africa is a net importer of food, and many grain exporting countries issued a ban on grain exports at the peak of the global health crisis. Furthermore, the region struggled with several pandemic-related disruptions to the food supply chain, while countries like Egypt, Sudan, Yemen and Jordan showed substantial resilience as agriculture was one of the least affected sectors. Meanwhile, many European supermarkets and food companies have urged the Brazilian government to revise a bill that proposed specific land reforms that would allegedly allow asset owners and private-sector firms to claim invaded land as their own.
The slowdown in economic activity, the job losses, the disruptions to food supply chains and a ban on grain exports by major exporting countries (such as India, Russia, Cambodia and Vietnam) occasioned by the coronavirus pandemic have all contributed to exacerbate food insecurity in sub-Saharan Africa. More in particular, the pandemic had devastating effects on smallholder farmers, who struggled to get seeds, fertilizers and services in time for growing seasons due to movement restrictions and limited support from public financing. However, there are possible solutions to support the African farmers’ recovery: for example, the development of efficient and reliable e-commerce platforms and the improvement of logistics facilities and services, such as crop storage and cold-chain solutions (in sub-Saharan Africa, more than 40% of food perishes before it reaches the consumers).
Around 40 European supermarket chains and food companies have recently called in an open letter the Brazilian government to revise a controversial bill that opened the door to the legalisation of the private occupation of public land. According to the signatories, the bill represents an enormous threat to the Amazonian rainforest, as it would essentially allow private-sector firms or individual asset owners to claim invaded public land as their own and use it to cut trees down mainly to clear pasture for livestock. According to the Amazon Environmental Research Institute, almost 19 million hectares of land in the Amazon have not been designated for any specific purpose yet, and around 80% of them is already illegally claimed by private owners.
A new report issued by the International Food Policy Research Institute (IFPRI) details the effects of the coronavirus pandemic on agri-food systems and household incomes in the Middle East and North Africa (MENA) region, and more specifically in Egypt, Jordan, Yemen and Sudan. According to the report’s findings, agri-food systems showed relative flexibility in the Middle East, where the percentage of decline in agricultural food output ranged between 3-9% in Egypt, Yemen and Sudan (agriculture was one of the least affected sectors in these countries), while it reached about 38% in Jordan. Therefore, thanks to its relative resilience, the agri-food sector in the MENA region represents a strong basis for recovery after the coronavirus pandemic.