Covid-19 Industry Focus: The Effect on World Food Markets

Could the coronavirus pandemic cause a global food crisis? Worker morbidity and containment policies created by the Covid-19 pandemic has introduced a shock to labour-intensive food production. Some countries have introduced protectionist policies to restrict food exports amid concern for domestic supplies. The World Bank has analysed the potential effect of the pandemic on world food markets, predicting that the global export supply of food could decrease by 6-20%. The main concern is that if countries begin to restrict food exports, it may induce a chain of similar policies as other countries retaliate, potentially escalating world food prices far beyond the initial shock caused by the pandemic. The possibility of this multiplying effect means that import-dependent countries, particularly those that previously experienced the impact of the 2007/8 global food crisis, will accelerate their food-security programmes.

Presently, Kyrgyzstan is restricting exports on food items, including cereals, sugar and eggs, while Turkey restricts the export of lemons. So far 20 countries have imposed food export restrictions linked to the Covid-19 pandemic, with about ten countries having introduced restrictions on overseas sales of grains and rice. These measures are part of a worrying trend, given that countries continue to restrict exports. The 2007/8 global food crisis has provided a greater understanding of problems generated by the collective action of states restricting exports to stabilise prices in domestic markets. If such a trend continues, import-dependent countries (which will face the most significant food security impact) tend to lower duties while desperately trying to buy more food, leading to world food prices to soar higher.

The UAE and Saudi Arabia are among those import-dependent countries concerned about food security during the pandemic. These countries have sparse arable land and minimal water resources, making it challenging to grow enough food domestically. The UAE imports 90% of its food. Saudi Arabia imports two-thirds of its food. Both countries have accelerated their food security programmes, which include investment in overseas agricultural resources and investment in agricultural technology such as indoor vertical farms and research to improve the domestic food supply. The two countries have signed an agreement to co-operate on a range of food security measures. Previously, Saudi Arabian food policy proved ineffective. In 1970 the Saudi Arabian government heavily subsidised agriculture, and particularly wheat exports. This investment was unsustainable as farmers were paid six times higher than global prices and the country’s already meagre water resources were depleting. The 2008 efforts of the Gulf states rushing to secure overseas farming projects in African countries such as Sudan and Ethiopia were also ineffective.

Food diplomacy seems to be a better response to food security concerns than risky investment into food-insecure countries and unsustainable subsidy. This opinion is shared by the WTO, which looks to persuade countries to agree not to impose trade restrictions on food. G20 agricultural ministers have agreed to “guard against any unjustified restrictive measures that could lead to excessive food price volatility in international markets” which would threaten “the most vulnerable living in environments of low food security”.

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