From Italy to the US, stories of mass hoarding of food have led to fears around shortages in food supply. At the same time, analysis of food stocks around the world compared to consumption reveals that the aggregate global stock of food, particularly for key staples such as rice and wheat, are more than adequate to meet current needs, and are at the highest levels in the past decade (Exhibit 1). The World Bank also notes that global production level for the three most widely consumed staples (rice, wheat, and corn, which account for 97% of grain consumption in the world) are at or near all-time highs.
The pertinent issue facing the world’s food systems today is that the flow of food has been restricted. Whether intentionally through export bans or unintentionally through preventative measures that limit workers’ ability to process and move food, new policies have upended the global network of food trade, creating shortages and inflating prices for basic commodities.
These restrictions to food access and increase in prices are likely to impact the poor the hardest, given many of these individuals are already food insecure in the first place and would be hardest hit by the lost income from lockdowns, restrictions and loss of employment. Even in the US, the nation’s food banks are facing severe pressures as they try to feed a surge of Americans newly facing food insecurity due to the pandemic, at the same time as they are facing steep drop-offs in food donations from supermarkets and farms. The increasing numbers of workers falling ill in the US as a result of the pandemic in meat processing plants, warehouses and grocery stores is also starting to put a strain on the nation’s food supply chain. For the world’s almost 212 million chronically food-insecure and 95 million acutely food-insecure individuals, a large majority of whom reside in sub-Saharan Africa, the consequences of further food shortages will be all the more severe.
While we recognize that issues facing the global food supply chain go beyond any one product, in this research brief we focus on rice as an example to highlight some of the effects of different policies and measures on the movement of food. It is important to note that rice trade is particularly concentrated, with the top three exporters, India, Thailand, and Vietnam, collectively accounting for ~60% of rice exports.
Enhanced trade restrictions
In the wake of COVID-19, a number of food-exporting countries have explored policies and restrictions that limit the trade of food, in efforts to insulate citizens from initial food price increases. As of April 15, at least sixteen countries have announced exports bans, restricting the movement of food around the world. For rice and wheat in particular, restrictions from top exporting countries could limit the trade of these commodities by ~10-30% (Exhibit 2). We note that, while it may still be too early to tell the full effects of COVID-19 on food trade, current levels of food restrictions have not yet reached the level of restrictions announced during the 2007-8 food crisis (when countries around the world witnessed serious price surges).
In the case of rice, Vietnam, the world’s third largest exporter, has announced it would not sign any new rice export contracts to ensure sufficient domestic supplies to cope with the pandemic. This action alone could impact 9% of global rice trade.
Disruptions to domestic production and logistics
Aside from intentional policies that restrict the flow of food, a combination of labor and capital disruptions are contributing to shocks in food supply and access. Processing plants, where workers often have to work elbow to elbow, could pose significant health risks. For example, Smithfield recently closed its plant in Sioux Falls, South Dakota, after 350 employees (10% of all workers) tested positive for COVID-19. Three other major meat plants in Iowa and Pennsylvania had to shut down earlier in the month as a result of the outbreak. Severe outbreaks of COVID-19 in major cereal-exporting countries could lead to significant disruptions in the normal functioning of crucial ports; in Brazil, workers had been considering a strike over safety concerns at Latin America’s biggest port for exports of corn and soybeans.
In the case of rice, India, the world’s largest exporter, has experienced significant labor shortages and domestic disruptions that have hampered producers’ ability to fulfill existing contracts, let alone sign new ones. The government’s strict mobility restrictions have also affected market operations, as trucks and laborers are unable to reach sellers of food. And whilst there is currently a robust level of rice storage and production, there is some concern that the timing of the lockdown could lead to the planting season being missed, which could impact rice production in the near future.
Putting it all together: countries that are impacted by disruptions in food supply chains
As a result of disruptions to the flow of food, some food-importing nations are threatened by shortages and price spikes for key staples, adding to financial burdens at a time when the pandemic has heavily eroded their economies and purchasing power. In the case of rice, the contracted trade of some of the world’s largest producers have led to global price increases of close to 50% in the past month. Other food commodities, like eggs, have also recorded price tripling since the beginning of March.
Countries that rely on trade for these staples are particularly at risk of significant shortages, while exporters are benefiting temporarily on inflated prices. Some of the world’s largest rice importers, including Saudi Arabia, Iran, Iraq, Bangladesh, and Benin, are facing significant first-order effects of these disruptions, with 80% or more of their rice imports originating from India and Vietnam (Exhibit 3). The rest of the countries are likely to face similar pressures as disruptions lead to broader increases in rice prices.
In sub-Saharan Africa, where rice and wheat have become the second most important source of calories after corn, and where as a region rice imports are soon expected to surpass those of Asia, any price hikes in rice (and other staples such as corn, millet, and wheat) will have a large impact, given the already high risks of malnutrition faced by the region’s populations. Among the bottom 20 ranking countries listed by the Economist Intelligence Unit’s Global Food Security Index, fifteen are in sub-Saharan Africa (Exhibit 4).
Within countries, lower income communities are also disproportionately feeling the strains the current pandemic has placed on the food and economic systems. An early study by Rozelle et al. (2020) finds that rural households in China have suffered income losses totaling more than $100 Billion as a result of travel restrictions due to the COVID-19 outbreak. The majority of villagers have reduced spending on food and drastically altered diets, switching from meat and produce to grains and staples. The study indicates a decline in nutrition among a share of rural families, and there is particular concern for families with young children, for whom nutritional deficiencies in early childhood can significantly inhibit cognitive development.
In the wake of large-scale disruptions to the global food system, governments and organizations around the world are pledging their support to players across the food system, as well as advocating for solutions that could lead to long term sustainability in food access. The World Bank has invested in targeted programs in countries like Angola and Pakistan, where their capital can be used to improve operations of existing food supply chains and enhance food production in least-served communities. Colombia’s government has temporarily lifted conditionality on cash transfers to the program’s 10 million plus beneficiaries, and introduced a bonus subsidy and VAT tax returns to allow the most vulnerable and food insecure populations of the country to have an adequate provision of basic necessities like food. In countries where schools are closed due to COVID-19 – which means that millions of children are no longer receiving the school meals they normally depend on for nutrition – the World Food Programme is working with governments and partners to identify alternatives such as take-home rations and provision of cash or vouchers – to help ensure children continue to receive the nutritional support required. These actions, and more, are crucial to stave off the risks of severe food insecurity around the world.
- Year ending April. The stocks-to-use ratio is a measure of supply and demand interrelationships for commodities. This ratio indicates the level of carryover stock for any commodity as a percentage of the total use of the commodity.
World Bank (2020)
Economist Intelligence Unit (2019)
The Observatory of Economic Complexity (2020)
Rozelle et al. (2020)
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