Food for Thought
Thomas Böck sums up an extraordinary fiscal year and takes a look ahead.
is a Senior Lecturer in Law at the University of Cardiff. In her research, the French legal expert focuses on topics such as food democracy, food security, agri-technology, sustainable agriculture, and rural development, as well as the impact of the coronavirus crisis. She regularly collaborates with national governments and international institutions such as the World Health Organization (WHO).
The spread of the lockdown from Asia to Europe to North America resulted in millions of people being shut away from public life, shaking the global agricultural markets to their very core. Prices for palm oil, milk, potatoes, and corn, as well as for poultry and pork, fell across the board, dramatically in some cases. Demand for corn in ethanol production, for instance, has collapsed, with crude oil available practically being given away due to the economic crisis and the reduction in mobility. In Europe and North America, farmers are ploughing under ripe potatoes by the ton. It’s a similar story when it comes to milk: consumption has dropped significantly, particularly in the U.S., since the closure of coffee shops and schools. On April 26, the chairman of the board at U.S. meat processor Tyson Foods shone a spotlight on the precarious situation in the meat industry with a full-page newspaper advertisement consisting of just six words: The food supply chain is breaking.
The world’s third-largest rice exporter, Vietnam, stopped its rice exports in late March. Kazakhstan, a key wheat exporter, followed suit with its exports, while countries such as the Philippines, Egypt, and Saudi Arabia began stocking up on huge volumes of rice and wheat. The effects were even felt in Germany, where hoarding led to rice sales doubling. For Abdolreza Abbassian, Senior Economist with the Food and Agriculture Organization (FAO), all of the elements were in place for a global food supply crisis. He warned that panic buying from importers and governments could trigger a food crisis. The thing is, there wasn’t even a shortage in agricultural products. Fabrizio Zilibotti from Yale University spoke of a global “supply shock.” Farmers were producing products in sufficient volumes, but they simply weren’t reaching the people who needed them. Consumers were cut off from producers, and supply chains were no longer open.
Successful intervention from international organizations
According to Dr. Ludivine Petetin, Senior Lecturer in Law and a specialist in agriculture law at the University of Cardiff in Wales, success in initially averting a global crisis was all thanks to international trade and health organizations and the Food and Agriculture Organization of the United Nations: “Organizations intervened at an early stage and with great success. Under pressure from the international community, Vietnam lifted its ban on exports after just two weeks. Other countries followed, while governments stopped stocking up so much. This all helped ease the situation.”
The French legal expert has been observing international agricultural markets for many years. “No one can yet provide a solid assessment of the impact of the pandemic,” she says. But she views the progression of the coronavirus crisis with concern, with millions of people still in lockdown in South-East Asia, Africa, and Latin America. “This means that there won’t be enough workers in the fields, which will affect sowing and field cultivation.” China is just one example, where more than three million tons of fruit and vegetables have been left to rot on fields and in plantations according to estimates by consulting firm BRIC Agri-Info Group, simply because there is no one to harvest the produce. More than 300,000 of China’s travelling beekeepers have not been able to make their usual trips across the country with their hives due to restrictions on travel, leaving many crops such as rapeseed and soybean unpollinated. In Petetin’s homeland of France, the government has already called on the population to help out in harvests. In Germany, the lengthy absence of workers from Southern and Eastern Europe posed major issues for asparagus and strawberry growers.
Petetin believes that distributors, slaughterhouses, packaging, and processing operations are the link in the supply chain most at risk from the disruption: “Even our daily staples cross as many as five international borders for processing and packaging before they land on consumers’ plates.” In the United Kingdom, flour was in short supply on supermarket shelves at the beginning of the lockdown. But the problem wasn’t a shortage of flour, it was a shortage of flour packaging. “The United Kingdom imports this packaging, and the border closures brought the supply chain to its knees,” explains Petetin.
It was a similar story across the globe, as Ben Brown from Ohio State University in Columbus explains: “We have to keep the chains open,” urges the expert in risk management.
Proof of what can happen when chains aren’t kept open came in the spring, when U.S. slaughterhouses and other food processing operations were forced to close due to clusters of coronavirus infections. The blockages to the supply chains resulted in a situation that initially appeared bizarre but was simple to explain in economic terms. “Consumers were paying top prices because the bottom had fallen out of the supply, with the processing industry hamstrung,” Browns says. “At the same time, prices for farmers at the other end of the chain were low. Some farmers even had to give away their produce or destroy it because they couldn’t find any buyers. The problem was particularly severe for pork and beef.”
is an Assistant Professor of Professional Practice in Agricultural Risk Management at Ohio State University. He grew up in a farming family and one of his roles is Program Manager of the university’s Farm Management Program that shares knowledge between the department faculty and industry.
Brown is now much more optimistic when it comes to the supply situation: “Producers have done their homework and are now operating much more securely, so they can avoid closures.” New supply chains are being established, and Brown is also seeing retailers begin to process meat themselves.
Brown believes that the crisis-hit months were a real eye-opener for farmers when it comes to setting up a functioning risk management system. “This means negotiating long-term contracts with buyers, making better use of financial market instruments such as hedging, and in so doing securing prices today for the harvest of tomorrow,” he says. According to Brown, the U.S. government is also supporting farmers with subsidies for business interruption insurance. There is also a trend towards more diversification in operations, both in terms of products and in terms of buyers.
Brown also expects to see an increase in automation. After all, machines cannot catch a virus, don’t need to self-quarantine, and are not affected by a lockdown. “Technology is becoming increasingly important and this is the perfect time for manufacturers to showcase their innovations,” says Brown. He believes that harvests need to be completed more quickly and with a greater degree of automation, making it safer for people to work. There are plenty of opportunities here for manufacturers of agricultural equipment in his view. According to a survey conducted by the German Mechanical Engineering Industry Association (VDMA), manufacturers in Germany are significantly more positive than their international competitors when it comes to the outlook ahead.
Supermarkets in the United Kingdom ran out of flour at the beginning of the lockdown, even though there were no flour shortages. The problem was a lack of packaging, which is normally imported.
More value creation on farms
In Europe, Ludivine Petetin is observing how farmers are creating more value on their farms by taking on responsibility for initial processing rather than simply delivering unprocessed goods. Consumers are also returning to regional produce. Farmers are responding to the trend, setting up farm shops and diversifying their range of products. Organic farming appears to be one of the main beneficiaries emerging from the crisis, with sales of organic produce up 27 percent in March 2020 compared to the previous month. However, here too there is a reliance on global supply chains: the majority of organic seed used in the EU originates from China.
of workers on U.S. farms are seasonal workers from abroad. Depending on the time of year, the number of migrant workers can total up to 2.7 million.
The day of the U.S. meat processor Tyson Foods’ chairman of the board’s full-page advertisement in a daily newspaper declaring: The food supply chain is breaking.
less beef was produced in the U.S. in April compared to March 2020.
Chinese seed producers existed in March 2020.
was the percentage by which poultry supplies fell year on year in China due to transport issues.
of which were closed due to the coronavirus crisis at this point.
was the increase in the price of pork in many areas in China in spring 2020 compared to 2019.
travelling beekeepers were affected by travel restrictions in China, leaving many crops unpollinated.
of workers in the German meat industry are migrant workers from Eastern Europe, according to estimates.
was the margin by which sales of organic produce rose in Germany in March 2020 compared to the previous month.
seasonal workers travel from abroad to Germany to work in agriculture every year.
of the soybeans required – mainly for animal feed – in Germany are imported.
is the margin by which supply exceeded demand for pork in Germany; the majority of this amount is exported to China.
of soy was imported to the EU from North and South America per capita in 2018.
The DataConnect interface is opening up more possibilities to use data and is a unique partnership in the industry.