Last week, China’s president has called on the country’s citizens to drastically cut down on food waste in a new initiative called the “Clean Plates Campaign”, in an effort to ensure food security during the following months amid the devastating consequences of floods, epidemics and locust swarms. In Australia, the retail sector managed to stay afloat by focusing on e-commerce, while all travel-dependent commercial activities and the hospitality industry are still facing substantial difficulties; furthermore, the Philippines, which was one of the largest buyers of Australian cattle up until the beginning of 2020, had to slow down beef imports from the country due to the lockdown restrictions.
Selected daily news on food chain disruptions and countries responses to the COVID-19 impact on food chains.
FOOD CHAIN DISRUPTIONS
A new national campaign (the “Clean Plates Campaign”) that aims at tackling food waste in China is raising concerns about the government’s ability to ensure food security for its 1.4 billion citizens, which are currently facing the combined effects of a global pandemic and the African swine fever, locust swarms, floods and the rising tensions with trading partners. Government officials assured the citizens that the country’s food reserves are ample, but many observers are sceptical about the campaign’s efficiency at a time when the country is still recovering from the negative impacts of the coronavirus pandemic.
The general fear of being infected with the coronavirus in Australia determined a huge growth for specific industries: home cooking and food delivery are definitely more popular, and people have been buying new laptops, office chairs and speakers to work from home, for example. On the other hand, industries like tourism, aviation and hospitality are suffering a major setback: while retail managed to avoid insurmountable losses by focusing on e-commerce, some sectors of the hospitality industry and all travel-dependent companies are still lagging behind.
In early 2020, the Philippines was re-emerging as a larger buyer of Australian cattle, but then it became one of the most heavily impacted countries by the coronavirus pandemic in Asia, and it went into recession for the first time in 29 years. Since the Philippines has limited oil and mineral resources, it is heavily reliant on sustainable agriculture, and local and imported cattle provide added value from the by-products that are available. The disruptions to trade caused by the coronavirus pandemic determined a reduction in the Australian supply of fresh beef in the Philippines for both the wet markets and the supermarkets.
IMPACT ON COMMODITIES AND FOOD PRICES
As mentioned in earlier issues of this daily news digest, the Economic Coordination Committee in Pakistan had already allowed importing 1.5 million tons of wheat, but the decision about the operational issues remains pending and the country is still facing wheat shortage and price increases. Therefore, the Trading Corporation of Pakistan mandated to place an import of around 200,000 tons of wheat in the public sector. Meanwhile, China is still struggling with a pork shortage caused by the African swine fever, which is driving the demand, and therefore the imports. The main suppliers are the United States (were pork prices are steadily moving downward), Germany and Spain, while Latin American countries and Australia are supplying beef to China.
Pakistan is still experiencing wheat price increases (currently at PKR 2000 per 40kg, against the PKR 1500 from two years ago) and depleting stocks at the same time. Importing wheat may slow down the rising pricing trends, but the commodity has huge budgetary import costs. The government’s Economic Coordination Committee has recently allowed the Trading Corporation of Pakistan to import 200,000 tons of wheat from the public sector, and maybe the arrival of an additional 700,000 tons of wheat in the coming months will discourage hoarding, and therefore limit wheat’s price volatility and shortage.
Since the African swine fever destroyed approximately 40% of China’s pig herd, the industry’s recovery will probably need several years to be completed. Therefore, China’s pork and beef imports are still rising, and year-to-date pork imports (mainly from the United States, Spain and Germany) are currently up 153%, while internal retail prices are almost double what they were a year ago. Beef imports, on the other hand, are up 43% compared to last year, and they mainly come from Latin America (especially Brazil and Argentina), but Australia remains the primary supplier of chilled beef.
According to the US Department of Agriculture, despite still being higher than last year, prices on beef, pork and chicken are moving downward in the United States, probably due to a general lower wholesale price trend. Calf prices, on the other hand, have been steadily climbing since before the coronavirus pandemic and they are still trending higher, probably because of a sufficient rainfall over the last months and a parallel high demand for cattle and lower corn and feed prices. However, if the drought continues in West, North and Central Texas, producers may face price declines.
Three different focuses to boost agricultural production and exports in South Asia and Sub-Saharan Africa: the government of India issued multiple new market reforms that were designed to attract investments from the private sector to agritech start-ups, which will bring modern inputs and provide a better access to markets for farmers; Kenya will distribute a EUR 4 million financing from the European Commission’s DG ECHO through the Kenya Cash Consortium, which will provide cash transfers to 15,000 food insecure households; Rwanda drastically increased its coffee exports to China by focusing on boosting online sales advertised on Chinese social media platforms.
Different agritech start-ups in India are working to bring modern inputs and best practices to the country’s agricultural sector to address different supply chain issues (boosting production and providing a better access to markets for farmers, above all). Furthermore, their work is supported by many new policies from the government, which will unlock some markets and draw more investments from the private sector. Driven by these market reforms and by the disruptions caused by the coronavirus pandemic, more and more traditional players are likely to begin investing in digital technologies for agriculture.
The combined effects of the locust swarms, the floods and the coronavirus pandemic was devastating on Kenya’s crops, and therefore on the country’s food security levels. This is why the Kenya Cash Consortium (which provides cash transfers, one of the most efficient ways to support vulnerable groups during the pandemic) will provide cash assistance to over 15,000 households facing food insecurity, thanks to the European Commission’s Directorate-General for European Civil Protection and Humanitarian Aid Operations (DG ECHO), which released EUR 4 million to the Kenya Cash Consortium.
According to the Rwanda Development Board (RDB), the country is increasing the popularity of its coffee among the Chinese consumers through online sales with popular celebrities that are hosted on Chinese social media platforms. In May, 1.5 tons of Rwandan coffee beans were sold to China in a second, thanks to these livestream sales, and the RDB has been encouraging other companies to increase their production and supply to meet China’s demand ever since.
The coronavirus pandemic further exposed Africa’s need to diversify its economies in order to limit its overdependence on tourism, on high commodity prices and on the exports of primary products to Europe. Therefore, the African countries should focus on improving resilience and on strengthening the internal markets, in order to face less difficulties during future economic crises. Latin American countries, on the other hand, plan to increase their pork exports to China (whose demand for this commodity has been growing ever since the African swine fever hardly hit its pork production), provoking debate around the potential environmental impacts of intensive pig farming.
One of the wake-up calls prompted by the coronavirus pandemic in Africa concerns the continent’s regional integration: during the early phases of the health crisis, border closures and lockdowns determined a reduced economic activity which contracted the demand in Africa’s key markets, dragging down commodity prices and depressing export revenues. Therefore, this issues exposed the continent’s overreliance on raw materials exports and on high commodity prices, and the African economies’ lack of diversity and resilience. An initial solution to this complex issues consists in focusing on the African market, boosting local production and consumption.
According to UNAIDS’ regional director for Eastern and Southern Africa, the African economies largely depend on tourism and trade with Europe and China, to which they export primary products such as oil, coffee, cocoa, metals and minerals. Since the demand for these commodities and oil prices have plummeted, and tourism was heavily damaged, the African countries now have to focus on resilience and innovation on the one hand, and on attracting stimulus packages to decrease the levels of food insecurity on the other.
Argentina’s government has recently announced a program that aims at increasing pork exports to China, which caused a debate around the environmental impacts of Argentina’s and other Latin American countries’ production development model. Pork production and export has pros and cons: from one side, it produces substantial incomes, which could be used to strengthen public infrastructures (and therefore to create jobs) and even to implement green policies; from the other, industrial pig farming poses numerous threats to the environment, including air pollution and water contamination with toxic waste particles.