This week’s media coverage highlights the consequences of the winter storm that has recently hit Texas, causing power outages, shortages of running water and a series of negative repercussions on the state’s food supply chain (such as the closure of food banks and pantries and several difficulties related to the supply of grocery stores). The Philippines and Australia, on the other hand, keep struggling with decreasing exports: more in particular, a drop in the production of bananas in the Philippines (caused by the logistical difficulties posed by the coronavirus pandemic and by a fungal disease that affects banana crops) benefited the competing banana-exporting countries in the region that rapidly filled the gap left by the Philippines; Australia, on the other hand, is coming to terms with China’s enhanced import tariffs on Australian wine and with a shortage of agricultural workforce caused by the COVID-19 movement restrictions.
Selected weekly news on food chain disruptions and countries responses to the COVID-19 impact on food chains (15/02/2021 to 21/02/2021)
FOOD CHAIN DISRUPTIONS
Food insecurity is currently on the rise in Texas, due to the unusual extreme weather conditions the state has recently faced, which have disrupted every phase of the local food supply chain. In fact, the power outages and the poor conditions of Texas’ road links determined the suspension of school meal programs, the closure of food banks and pantries, and the failure to supply most grocery stores with food. Furthermore, millions of people are still without power and reliable water, and farmers are struggling to prevent fruit and vegetable crops from freezing and to keep livestock alive.
According to the Philippine Statistics Authority, the country’s banana exports in 2020 were 18.35% lower than the previous year, due to the combined effect of a rapid spread of diseases that affected banana crops (such as the Fusarium wilt, a fungal disease that mainly infects tomato, tobacco and banana plants) and the logistical difficulties determined by the coronavirus pandemic. As reported by the Pilipino Banana Growers and Exporters Association, in the meantime other banana exporters have filled the supply gaps left by the Philippines, so the outlook for 2021 does not look promising.
The relations between Australia and China have worsened in recent months due to the former’s call for an international investigation into the origins of the coronavirus pandemic. Owing to such diplomatic frictions, China has increased the import tariffs on Australian wine as a form of retaliation (officially in response to complaints made by Chinese wine producers related to alleged dumping practices), thus heavily affecting Australian wine exports to China. The country is also struggling with labour shortages in the farms, mainly due to the movement restrictions caused by the pandemic that prevent seasonal workers from reaching Australia.
IMPACT ON COMMODITIES AND FOOD PRICES
The FAO Food Price Index tracks the changes to the international prices of several groups of food commodities each month: towards the beginning of February, the Index highlighted a sharp 7.1% monthly increase (which is the eight increase in a row and marks a six-year high), mostly led by international maize corn and soybean prices, and therefore also by meat prices (the increasing cost of animal feed impacted on the international prices of meat). In fact, meat could become a major driver of the global food inflation, which was anticipated by the US and European bond markets that are currently sending signals that inflation may be back. Finally, banana domestic and import prices have recently been on the rise in China, mainly due to the unfavourable weather conditions and to several disruptions to the fruit’s value chain in the region.
According to the FAO, global food prices have increased for the eight-consecutive month in January, reaching their highest level since 2014. The food chain disruptions determined by the negative effects of the coronavirus pandemic had a huge impact on food prices, but there are other factors, such as the spread of the African swine fever (which reduced pork supplies and caused inflation to jump to 17% last month in the Philippines).
One of the repercussions of the raise in food prices is that farmers around the world are now feeling the pressure of the highest prices for corn and soybeans, which raised the costs of feeding cattle. Therefore, meat is likely to become the main driver of the global food inflation, and that is primarily due to the increasing feed prices, which are driven by a bad crop weather that is shrinking the world harvests, and by a high demand in China. Due to the plummeting profits, farmers reduce their herds and cause a further rise in meat prices at retail grocery stores.
Last month, large portions of banana production areas in China were affected by a cold wave that caused frost damage to the crops, thus inducing a drop in the domestic production volume of the fruit. As a direct consequence of this, banana prices increased, while the price increase for import bananas has slowed down in February. However, import prices remain high due to a limited supply of the fruit and to disruptions in the trade of bananas in the region (for example, the military coup in Myanmar and a drought in the Philippines).
Thanks to the Green Climate Fund (the world’s largest dedicated climate fund), and to a partnership with the Zambian Ministry of Agriculture that was mobilized by the United Nations Development Programme through a coalition with the Food and Agriculture Organization and the World Food Programme, millions of small-scale farmers will be able to effectively cope with the worsening climate change impacts in Zambia. In the country, women’s leadership is increasingly being recognised as fundamental to counter the negative effects of climate change on Zambia’s agricultural sector; just like in Nigeria, where, thanks to an additional financing provided by the Central Bank of Nigeria, a huge growth in agriculture managed to offset a sharp drop in oil production, and therefore to lead the country out of a recession in the fourth quarter of 2020.
Thanks to a project financed by the Green Climate Fund (which assists developing countries in tackling the challenges posed by climate change) and led by the Zambian Ministry of Agriculture, 76 farmer schools have been established to train small-scale farmers in Zambia to identify climate change adaptation practices. The final objective of this initiative is to improve farming yields, reduce poverty and improve food security in the country, by strengthening the Zambian farmers’ resilience to climate and weather shocks that lock rural households in the poverty cycle.
Since the start of the coronavirus pandemic, authorities around the world have noticed an increase in rural criminal activities, such as livestock rustling and theft of equipment. However, a recent technological progress in the field of rural digital transformation is allowing farmers to maintain a real-time view of their farming operations, by using motion sensors and pressure pads, and by individually tagging assets to track and secure them. These technologies are playing a fundamental role in creating effective farm security systems across the entire supply chain.
Thanks to an initiative of the Central Bank of Nigeria that has facilitated over NGN 148 billion in investments in agriculture, the country is slowly coming out of an economic recession that was mainly caused by the coronavirus pandemic and by a drop in oil production, and a huge role in the success of the agricultural sector during this period was filled by female entrepreneurial players. Research institutions also had an important part in this process: for example, the International Institute of Tropical Agriculture and two other institutions have recently disclosed a plan to meet the cassava farmers’ demand for cassava stems.
One of the consequences of Brexit is beginning to affect the Irish bakery sector, as a new import tariff that applies to imported raw materials may influence bread prices, because Ireland imports flour from the United Kingdom, but made from Canadian wheat for the most part (and therefore it is subject to non-EU tariffs). In Africa, a series of measures related to technology and risk assessment is supporting the improvement of African agriculture and livestock resilience to COVID-related disruptions: several digital platforms allow farmers to easily access government subsidies for the purchase of agricultural inputs, while FAO’s Emergency Centre for Transboundary Animal Diseases is assisting national authorities in conducting joint risk assessments to mitigate the negative impacts of the coronavirus pandemic on the livestock and wildlife sector and to safeguard small producers and pastoralists.
Due to the changes introduced by Brexit towards the end of last year, the price of bread in Ireland may increase by about 10%: that is because of the rules of origin, which state that if a food is made from raw materials of which 15% came from outside of the European Union or the United Kingdom, the trader loses preferential tariff access. Since Ireland imports flour that is mainly made from Canadian wheat, it will face a full import tariff of EUR 172 per tonne (which is equivalent to a 50% price increase for flour). The Irish bakery sector is trying to get a derogation from this tariff, because Ireland has no industrial milling capacity.
Agriculture and livestock value chains have been under considerable pressure during the coronavirus pandemic, especially in underdeveloped regions of the world, such as Southern, Western and Central Africa. However, there are many technological solutions already in use for agriculture in different African countries, such as platforms that facilitate loans, fast-track trade payments, and the access to government subsidies for inputs. For what concerns the livestock sector, on the other hand, the FAO is coordinating animal disease prevention, preparedness, detection and response in the region through the Emergency Centre for Transboundary Animal Diseases.
The banana market in South America is slowly emerging from a bad period, characterised by a strong imbalance between supply and demand. Transit times from Ecuador to Dubai have gradually shortened, while trade links with Mexico are still lacking; however, bananas are still scarce and expensive for the moment: production is recovering in Mexico, although temperatures are still low, while Costa Rica (that is currently going through its dry season) has recently experienced issues related to a scarce rainfall that affected the quality of the fruit.