Source: Cairo – Khaled Hosni
It seems that the world is on a date with a new crisis whose features seemed looming in the near horizon, with the trend of food prices to rise, in light of the repercussions and risks left by the spread of the new Corona virus and the closure of borders and economies.
A recent analysis expected that the situation in the emerging markets would worsen, calling on governments to work together to address the disruptions in the food supply chains and prevent food protectionism from becoming a new normal after the epidemic, according to the analysis published by Project Syndicate.
The analysis indicated that even before the epidemic occurred, there were signs that global food prices could soon rise as weather phenomena caused by climate change became more common.
He drew the African swine fever invasion of more than a quarter of the number of pigs in the world last year, which caused food prices in China to increase by 15 to 22% year on year so far in 2020.
This year, the worst locust scourge in 70 years destroyed crops in eastern Africa, and the price of maize in Kenya, which is a staple food, has risen by more than 60% since 2019. The Corona virus has increased the risk of global food prices, which could lead to Direct crises in many developing countries.
In the poorest of these countries, food represents between 40 and 60% of the consumption basket, which represents about 5 to 6 times their share in developed economies. While closures have led to a collapse in demand for durable goods and luxury services, the opposite is true for food as reports of food panic and stockpiling have spread since the epidemic began.
On the supply side, the global cereal stock is sufficient but it can quickly deplete as the virus disrupts food production and distribution.
However, the shortage of animal feed, fertilizers and pesticides increased both the costs of agriculture and the risk of damaged crops.
As labor shortages become increasingly evident, as restrictions of cross-border travel in most parts of the world disrupt the regular seasonal cycle of migrant farm workers. Travel restrictions also make it difficult to transport the crop to the market as required.
Farmers need to remodel their supply chains away from wholesale to restaurants, hotels and schools (currently closed), toward grocery stores and home delivery.
But this takes time, as commercial and consumer food products are prepared and packaged differently, and meanwhile fresh produce has to be damaged. Moreover, some of the major food producers have already imposed export bans or certain rations in response to the epidemic, as Russia and Kazakhstan have done for grains, India and Vietnam on rice.
The World Bank estimates that protectionism accounted for about 40% of the increase in the world price of wheat and 25% of the increase in corn prices at that time. While the epidemic has reduced growth, increased unemployment, widened the fiscal deficit, and raised debts in both developed and emerging economies alike, the emergence of new hotbeds of infection in developing countries will mean stricter trade-offs between saving lives and protecting livelihoods.
Moreover, developing countries are already facing a sudden hiatus in capital and remittance flows and the collapse of tourism, while trade and currency conditions for many oil and commodity exporters among them are deteriorating. Nomura’s food risk index ranks 110 countries based on their exposure to large fluctuations in food prices, taking into account the nominal GDP per capita, the share of food in household consumption, and net food imports.
The latest reading shows that among the 50 countries most vulnerable to the continuing rise in food prices, almost all are developing economies that account for nearly three fifths of the world’s population. But in reality, higher food prices will be a global problem, because they are steep everywhere.