Maximo Torero Cullen1
Chief Economist and Assistant
Director-General
Economic and Social Development Department
Food and Agriculture Organization of the
United Nations (FAO)
WHAT WE KNOW
Countries have shut down the economy to
slow the spread of the coronavirus. Supermarket
shelves remain stocked for now. But a
protracted pandemic crisis could quickly put a strain on
the food supply chains, a complex web of
interactions involving farmers, agricultural inputs,
processing plants, shipping, retailers and
more. The shipping industry is already reporting
slowdowns because of port closures, and
logistics hurdles could disrupt the supply chains in
coming weeks.
In order to avoid food shortages, it is
imperative that countries keep the food supply chains
going. Unlike the 2007-2008 global food crisis, scarcity is not an issue this time. The supply
of
staple commodities is functioning well,
and the crops need to be transported to where they are
needed most. Restricting trade is not only
unnecessary, it would hurt producers and consumers
and even create panic in the markets. For
high-value commodities that require workers (instead
of machines) for production, countries
must strike a balance between the need to keep
production going and the need to protect
the workers.
As countries combat the coronavirus
pandemic, they must also make every effort to keep the
gears of their food supply chains moving.
WHAT WE SHOULD DO
First, health is the top priority. Countries
must ramp-up testing as much as possible and put
isolation measures in place in order to
slow the spread. Second, countries should meet the
needs of the most vulnerable people, as
the measures to contain the pandemic cripple the
economy. Third, countries must keep the
food supply flowing by prioritizing the health of the
workers in the sector and their outputs.
The following are specific recommendations.
1. Expand and improve
emergency food assistance and social protection programs
These measures provide a buffer to help
the most vulnerable people comply with stay-at-home
regulations, given that they need daily
income to survive. With massive layoffs, families are
struggling to put food on the table. More
than 160 countries have implemented nationwide
closures of schools, impacting over 87 percent of the world’s
student population. It means the
cancellation of school meals, often the
only source of nutrition for children in vulnerable
households. School meal suppliers and
caterers are losing their income, too.
The emergency assistance needs to be
provided as early as possible to contain the spread of the
virus and to protect livelihoods during
recovery later. Food banks and community-based groups,
supported by both governments and private
charities alike, should be mobilized to deliver or
mail food, as families stay home. The
delivery mechanism can be used to provide other in-kind
assistance, such as protective kits, to
elderly people or those with chronic illnesses. In the long
term, countries need to invest in
improving emergency outbreak preparedness across the food
supply chains to address not only the
direct threat of an infectious disease but also the indirect
toll that poor nutrition takes on health.
For vulnerable households, one-off or
multiple cash transfers early on can soften the full-blown
impact of the crisis when it arrives. Cash
transfers can tide families over until circumstances
improve, especially as disruptions to
social services occur. Mobile payment systems are ideal to
ensure quick delivery and to minimize
human contact through cash exchanges. Vulnerable
families also need forbearance on tax and
mortgage payments. Social protection programs
should be expanded to assist those who
didn’t previously have coverage and who are extremely
vulnerable today, including the elderly
populations. Complementary entitlements to offset the
loss of income is a good example. Any
conditionalities attached to assistance should be
temporarily lifted.
As of 20 March 2020, a total of 45
countries have introduced or expanded their safety net
programs in response to the pandemic.
Examples:
• Italy is assisting laid-off workers, putting a
moratorium on personal and business
mortgage payments, and cancelling debts as
part of a EUR 25 billion relief
package called
Heal Italy. The program includes a one-off EUR 600 payment to
households with children
under 12.
• The United States of America. is offering a USD 2 trillion economic stimulus plan. It
includes a one-off payment of USD 1 200
for most adults and an USD 500 additional
payment for every child, and expanded
unemployment coverage. This package follows a
USD 100 billion aid program that included
emergency paid leave for workers.
• France is assisting parents to stay
home to look after children and is offering sick leave to
people who are under self-quarantine.
• China, Hong Kong, SAR and Singapore are giving universal, one-off cash payments to all
citizens.
• Portugal is providing as much as EUR 1 097 up to 12
months to self-employed workers.
• China has accelerated payments of unemployment
insurance and expanded social
assistance programs to cover families falling
into poverty, while suspending
social security
contributions for businesses.
• Peru has created a bond to protect 3 million vulnerable families and is advancing pension
payments for senior citizens, building on existing programs
like Pensión 65. It is providing
vulnerable families with a complementary
entitlement in addition to national cash
2. Give smallholder farmers
support to both enhance their productivity and market
the food they produce, also
through e-commerce channels
Restrictions on movement are curbing
farmers’ access to markets to buy inputs and sell
products. Fresh produce is accumulating at
farms, resulting in food loss. It is causing labor
shortages as migrant seasonal workers are
unable to travel. The Ebola outbreak in 2014
disrupted the agricultural market chains
in West Africa for the same reason, leading to
shortages of food and price increases.
Africa is especially vulnerable right now with desert
locust infestations already threatening
the continent’s food supply. In China, logistics
constraints and labor crunches have caused
losses of fresh vegetables, limited access to animal
feed and diminished capacity of
slaughterhouses.
Countries must implement the following
core measures. First, they should bring collection
centers closer to smallholder producers to
reduce the need for mobility. Collection centers
should have high capacity. Food banks can
play a significant role given their knowledge, as well
as horizontal and vertical coordination
mechanisms with farmers’ associations engaged in
contract farming arrangements. Second,
countries, when feasible, should establish warehouse
receipt systems to farmers to use the receipts to get their payments. Third, countries should
accelerate the development of e-commerce for smallholders.2 Fourth, smallholder farmers
must have access to finance, so that they
can continue to produce.
A number of countries are introducing
stimulus packages that lack clear incentives for
smallholder farmers. Farmers need cash
handouts and safety net programs that can enhance
their productivity. Banks should wave fees
on farmers’ loans and extend payment deadlines. A
capital injection in the agricultural
sector can help small and medium agri-businesses to
continue operations. Improving storage can
help reduce post-harvest crop losses along the
supply chain. Any constrains to domestic
trade, including bureaucratic hurdles, should be
removed in order to link smallholder
farmers to markets.
Governments should meet the basic energy
needs of smallholder farmers and rural households.
For many children in rural areas, too,
school closures mean that they don’t have access to
healthy diet. For producers, it translates
into loss of income. Local governments must consider
an alternative to school meals, such as
home delivery of meal to keep the producers employed
and children nourished. During an
emergency, governments can purchase agricultural products
from smallholder farmers to establish
strategic emergency reserves especially for nonperishable
commodities to boost food supply. This can
be used to deliver safety net programs
and school meals even when schools are
closed.
Countries should put measures in place to
assure the safety of farm workers. On-site healthcare
professionals can ensure workers are not
ill. If possible, workers should be tested for the
coronavirus. At-home coronavirus tests,
when they become available, could make this easier.
Governments should expedite migrant
workers’ visas to prevent labor crunches on farm and
plants, even if it seems counterintuitive.
Growers and warehouses should eliminate visitors.
Shops should reduce their hours, rotate
the staff and double down on their delivery services.
Warehouses and processing plants should be
re-engineered to enable workers to practice social
distancing. Health professionals should
take temperatures of employees and make sure they are
wearing masks, gloves and other protective
gears.
2 The Alibaba Group, JD.com,
Meituan-Dianping and other companies have transformed the Chinese consumers’
shopping behavior,
by moving it to online often
through a “super app.” As of 2019, China’s e-commerce penetration reached 36.6
percent of retail
sales with 71 percent of
Chinese consumers performing transactions online mostly via smartphone apps.
Smartphone apps
comprise 80 percent of
e-commerce transactions.
Poorer countries can seek international
funding to support their smallholder farmers. There are
funding mechanisms, such as the Global Agriculture and Food Security
Program, which was
created in the aftermath of the 2007-2008 food crisis for this purpose.
Actions taken by China and Italy to
protect smallholder farmers and their agricultural
productivity are worth noting.
China
• During the lockdown, China adopted the “Vegetable
Basket” policies to lessen the
virus’s impact on change the smallholders
and keep food shortages to a minimum. In
the late 1980s, the project increased urban access to fresh produce by expanding
vegetable farms in the suburbs and
establishing reserves. Under this scheme, farmers
and merchants in nine provinces worked
together to supply grains, oil, meat,
vegetables, milk, eggs and aquatic
products to Hubei province, the epicenter of the
outbreak.
• Some local governments have unified purchases,
centralized animal slaughtering and
cold chain storage of county cooperatives,
and fully subsidized the storage costs.
• E-commerce platforms are facilitating the trading of accumulated produce to
help
boost sales. For example, the Chinese
e-commerce company Alibaba set up a special
fund to help farmers find markets for
unsold agricultural products and is building a
“green channel” dedicated to fresh
agricultural products.
• The central government in Beijing distributed USD 20
million in subsidies for machine
and tools purchases to revive agriculture. It is giving low
interest rate loans and rent
reductions to firms to develop high-tech
agriculture technologies, such as agricultural
drones and unmanned vehicles to reduce
human contact while keeping the supply
chains moving.
Italy
“Heal Italy” has several measures to support the agriculture
sector, complementing existing
national policies that ensure access to
agricultural services, including supply of seeds and
fertilizers.
The program allocates EUR 100 million to
support agricultural or fishing companies that had to
suspend their operations and another EUR
100 million for financing. It allows farmers to receive
advanced payments from the European
Union's subsidies for farmers. The program boosts the
EU budget for distributing food to the
poor by EUR 50 million. The program includes EUR 600
transfer to agriculture workers with
short-term contracts.
3. Keep the food value
chain alive by focusing on key logistics bottlenecks
The food value chain can be broadly
divided into two groups: the staple commodities (wheat,
maize, corn, soybeans and oil seeds) and
the high-value commodities (fruits, vegetables and
fishery). The staple commodity production
is capital intensive, and the labor shortage issue
resulting from the coronavirus-related restrictions
on movement has less impact on their
production. However, the logistics to
distribute the commodities is affected, as it hampers food
transportation across cities, provinces,
regions and countries.
The high-value commodities, on the other
hand, require a large amount of labor to produce. So
they are substantially affected when
employees get sick or local and migrant laborers are not
able to travel due to lockdowns.
Logistical barriers that disrupt the food supply chains affect the
high-value commodities even more because
of their perishability. The high-value supply chain
includes food processing plants, which are
also labor intensive. Currently, most of the sorting
and packing lines do not comply with the
social distancing requirements.
There are sufficient stocks of staple
commodities (see Figure 1). Prospects for harvest in 2020 is
favourable, assuring food availability.
However, logistics disruptions in the supply chains are
emerging. For example, Rosario in central Argentina is the country’s major grain export hub,
as
well as a major soybean production area.
Argentina is the world’s largest exporter of soymeal
livestock feed. Recently, dozens of
municipal governments near Rosario have blocked grains
trucks from entering and exiting their
towns to slow the spread of the virus. Many are defying
the federal government’s order to unblock
their roads, citing health concerns. Soybeans are
therefore not being transported to
crushing plants, affecting the country’s export of soybean
meal for livestock. Similarly, in Brazil,
another key exporter of staple commodities, there are
reports of logistical hurtles putting the
food supply chains at risk. Internationally, if a major port
like Santos in Brazil or Rosario in
Argentina shuts down, it would spell disaster for global trade.
In short, key staple commodities-exporting
countries need to make every effort to find solutions
to minimize logistics disruptions, so that
major staple commodities can move across countries.
In fact, the COVID-19 crisis is an
opportunity to identify the bottlenecks and address them. The
logistics components of the supply chain
need to be properly tested and given special permits
to move commodities. Port staff should be
considered as essential personnel, and proper health
and safety measures, including testing,
protective gears and practicing social distancing, need to
be in place. These measures will bring
stability to international markets. It is the responsibility of
multilateral development banks and key
donors to support staple commodities-exporting
countries to enact these measures.
FIGURE
1 | Global stocks of food staples
Source: Agricultural Market
Information System
Maize Wheat
Rice Soybeans
The supply chains of high-value
commodities are more complex, and countries need to move
fast to identify them as a priority sector
and ensure that migrant laborers can access the farms
and plants. Countries must find best ways
to strike a balance between the need to keep
production going and the necessity of
protecting the workers.
4. Address trade and tax
policies to keep the global trade open
Countries that depend on imported food are
vulnerable as shipments slow and their currencies
plunge against the dollar, reducing their
purchasing power. Food price is likely to rise in most
countries. Sudden and extreme food price
shocks could occur amid drawn-out lockdowns.
Following government-imposed quarantine,
China saw a spike in food prices because of panic
buys. In Italy, demand for flour and
canned food shot up, leading to difficulties to sell fresh
produce.
Countries should immediately review trade
and taxation policy options and their likely impacts
to create a favourable environment for
food trade. During the 2007-2008 food crisis, the lack of
information on market conditions
(production, stocks, consumption, trade, prices) and
uncoordinated policy interventions by
countries contributed to disruptions and food price hike.
Today, countries have the Agriculture
Market Information System (AMIS), which provides up-to date
information on stocks and prices of key
staple crops. Cooperation among countries can
help prevent beggar-thy-neighbor policies, which happened during 2007-2008.
Large countries
increased export taxes and adopted export
restrictions, making things worse for everyone, not
just for smaller trading partners. Sharp
price increases disproportionately burdened poor
people everywhere, negatively affecting
human development and economic productivity in the
long term.
Keeping the global food trade open is
critical to keep the food markets functioning.
Governments should eliminate existing
export restrictions, including export bans. There are
lessons learned from the 2007-2008 food crisis on how governments should respond. If one
country starts doing it, all others will
follow, and it would be a catastrophe for the markets.
Harmful import tariffs and nontariff trade
barriers should be eliminated. Lower import tariffs
facilitate imports and therefore helps to
address the immediate concern about low food
supplies and rising food prices. Countries
should also temporarily reduce VAT and other taxes to
help stabilize world food markets.
5. Manage the macroeconomic
ramifications
China’s manufacturing and service sector
activities declined dramatically due to the pandemic.
The disruption has lowered production and
created shocks to supply. China is the world’s
biggest producer of manufactured
components, and closed Chinese factories means having
difficulty finding components to make
everything from cell phones to cars. There are shocks to
the demand side as well. The 2008 global
financial crisis demonstrated how reduced income
and uncertainty can lead to a recession.
Many economies are already in recession
because of measures taken to stop the spread of the
coronavirus. But the pandemic must be
brought under control before the economy can recover.
In fact, countries must be willing to
incur greater economic costs to minimize the impact of the
pandemic and protect the lives of their
citizens.
As countries battle the health and
economic crises with aggressive public spending, they need
to hold down inflations, especially to
reduce the risk of inflating food prices. Governments
should assess the impact of their relief
and stimulus packages on the balance of payments and
ensure they do not run deficits. Likewise,
they must ensure adequate levels of foreign exchange
reserves. In case food prices jump, they
should assess their fiscal measures carefully when
responding.
The pandemic is also likely to create more
burden for poorer countries and countries that are
already experiencing food crisis. They
need international financial support, so that they can
import additional food without getting
themselves deeper into debt.
The world was awfully unprepared for the
pandemic. But by keeping the gears of the supply
chains moving and actively seeking
international cooperation to keep trade open, countries can
prevent food shortages and protect the most vulnerable
populations.
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