Protectionism may aggravate supply chain vulnerabilities during COVID-19, stresses FAO

21 Apr 2020 --- Industry’s pandemic-related concerns now include the collateral impact of agricultural labor shortages and adverse protectionism policies in trade. FoodIngredientsFirst speaks to the Food and Agriculture Organization (FAO) on its latest report exploring how the ongoing crisis may continue to exacerbate existing conditions in what it calls “food crisis countries.” Creating a better understanding of ongoing crises and related vulnerabilities is now critical and urgent for all stakeholders in the agri-food chain.

“The COVID-19 pandemic could deepen the severity and extent of the food crises highlighted in the Global Report on Food Crisis 2020. It is therefore crucial to rapidly mobilize to preempt the COVID-19 impacts on food security and on the food systems that provide the basis of the livelihoods of the most vulnerable in food crisis countries,” says Lavinia Antonaci, FAO Technical Officer, Agricultural Development Economics Division (ESA).

Movement restrictions necessary to contain the spread of the virus will disrupt the transport and processing of food and other critical goods, increasing delivery times and reducing availability of even the most basic food items. FAO details that the collateral global effects of COVID-19 could result in an increase in food prices through agricultural labor shortages and the adverse effect of protectionism policies. Already in February, pandemic concerns contributed to a World Food Price dip.

“While there has been an uptick in international prices for some key staples such as rice, food prices are more broadly declining as key factors are subdued to declining incomes and the prospect of a global recession,” details Antonaci.

Concerns of growing protectionism in Europe’s agri-food sector have also recently been raised by UK F&B stakeholders, who noted that in the context of maintaining food affordability, it is “incumbent on developed nations to lead the way and reject moves toward protectionism.”

On the food supply side, harvests have been good and the 2020 outlook for staple crops is promising, FAO maintains. However, movement restrictions necessary to contain the spread of the virus will disrupt the transport and processing of food and other critical goods, increasing delivery times and reducing availability of even the most basic food items. 

To avert this risk, heavyweight suppliers like Cargill have been piloting previously untested solutions such as blockchain-powered trading platforms to expedite inter-continental deliveries. Meanwhile, Bunge has announced the launch of Vector, a technological solution that allows freight scheduling via smartphone for faster transport.

“The pandemic affects significant elements of both food supply as well as demand. We risk a looming food crisis, unless measures are taken fast to protect the most vulnerable, keep global food supply chains alive and mitigate the pandemic’s impacts across the food system,” stresses Antonaci.

As reported previously on FoodIngredientsFirst, what is currently going relatively unnoticed is the huge surplus of produce that is effectively stuck at its source due to constricted trading corridors. Here, a drop in demand plays a significant role – potato growers in the Netherlands, for instance, have faced huge losses and a dire forecast of a one million metric ton surplus of French fries.

FAO further forecasts that for households dependent on food production and livestock rearing, any disruption in the supply chain of agricultural inputs – or the inability to access livestock markets –  will likely lead to declines in crop and livestock production and sales.

Last month, Europe’s dairy and livestock sectors spoke out about “deteriorating” market conditions. Producers and their cooperatives are now demanding urgent action from the European Commission including calls for extraordinary measures to mitigate the crisis emerging within the agri-food industry. 

The pandemic may drive up acute food insecurity levels in countries that are dependent on food imports, such as Small Island Developing States (SIDS).Small players are hit hard
While COVID-19 does not discriminate, 55 countries and territories are presently home to 135 million acutely food-insecure people in need of urgent humanitarian food and nutrition assistance, according to FAO statistics. These are flagged as most vulnerable to the consequences of this pandemic, considering their limited to no capacity to cope with either the health or socioeconomic aspects of the shock. 

Additionally, the pandemic may drive up acute food insecurity levels in countries that are dependent on food imports, such as Small Island Developing States (SIDS). “Order closures, quarantines and market supply chain and trade disruptions could restrict people’s access to sufficient/diverse and nutritious sources of food, especially in countries hit hard by the virus or already affected by high levels of food insecurity,” Antonaci tells FoodIngredientsFirst.

FAO is now seeking US$110 million to maintain the provision of critical assistance where there are already high levels of need, while meeting new needs emerging from the effects of COVID-19. Within this initiative, FAO’s efforts will focus on four main activities:

1. Set up a global data facility, in close collaboration with partners, to monitor COVID-19 impacts on acute food insecurity.

2. Ensure availability of and stabilize access to food for the most acute food-insecure populations.

3. Ensure continuity of the critical food supply chain for the most vulnerable populations.

4. Ensure food supply chain actors are not at risk of virus transmission.

A critical need to rapidly mobilize is now upon industry. “Support for food processing, transport and local food markets is vital, as is advocating for trade corridors to remain open for the continuous functioning of the critical food supply chain and agri-food systems in food-crisis countries,” FAO concludes.

For more pandemic-related industry updates, readers may visit our new daily news feed entitled “COVID-19 updates,” for relevant insights needed to guide your business through this challenging period.

By Benjamin Ferrer