Tribune News Network
Doha
Despite an increase in crop production and international trade following a pandemic-disrupted 2020, global food prices have risen to 10-year highs, increasing pressure on many emerging markets, Oxford Business Group (OBG) has said in its latest report.
Following a two-month respite from month-on-month (m-o-m) declines, the UN’s World Food Price Index averaged 130 points in September, representing a rise of 1.2 percent m-o-m and 32.8 percent year-on-year (y-o-y). The index is now sitting at highs not seen since 2011.
While food prices are high across the board, the report said, cereal prices are seeing a notable spike.
Wheat prices, for instance, are currently up as much as 40 percent year-on-year. A key driver of this is the exapnded use of wheat for livestock feed, which in turn stems from higher coarse grain prices.
Maize prices are similarly up 38 percent, partly due to weaker crop prospects in Latin America, but are expected to drop with the start of harvest season in the US and Ukraine.
For billions of people globally, grains like wheat, maize, barley and rice provide the most accessible form of energy. Wheat alone covers 18 percent of total dietary calories in the world and 19 percent of proteins.
High prices will therefore exacerbate ongoing problems related to food security sparked by the pandemic: the UN World Food Programme estimated that by the end of 2020 there were 272 million acutely food-insecure people in 79 countries, up from 149 million at the end of 2019.
While cereal prices are rising, there are two senses in which this spike may seem counter-intuitive.
The first is that world cereal output is on course to hit an all-time high in 2021, with a total of 2.8 billion tonnes.
However, global cereal needs for the 2021-22 period are also forecast to have risen by 1.8 percent. This should see the world’s cereal stocks-to-use ratio ease to 28.4 percent, down from 29.2 percent.
The second is that many economies – including those of some leading cereal producers – are beginning to re-open, with their sights set on post-pandemic growth and recovery. This is driving both demand and production.
In Morocco, for example, the government recently announced that it expects a 206 percent increase in production levels relative to 2020-21 of its three principal cereals, namely soft wheat, durum wheat and barley.
Global trade is also seeing an upturn. After a strong second quarter, the World Trade Organisation is now predicting that 2021 will post 10.8 percent growth in merchandise trade volumes.
Nevertheless, as OBG has recently detailed in the context of the global microchip shortage, the effects of COVID-19 are still being felt in a number of industries that rely on highly globalised supply chains. Indeed, as the world moves from an emergency footing towards the slow process of reconstruction, there is a sense in which the longer-term disruptions occasioned by the pandemic are only beginning to unfold fully.
Strong international demand is outpacing export availabillity, and localised increases in production are insufficient to offset broader disruption to the supply chains that ensure cereals find their way to end consumers.
High cereal prices stand to impact most heavily the countries that combine elevated household spending on food with high dependence on imports, such as Egypt, Nigeria and Pakistan.
Nigeria, for example, is already experiencing widespread constraints on household purchasing power and food access, exacerbated by conflict in the country’s north-east. While this will be alleviated somewhat by the upcoming harvest season, internal displacement and high input costs – a further consequence of global supply chain disruption – are expected to limit the harvest’s potential.
In June the Famine Early Warning Systems Network warned that there was a chance of famine affecting certain areas of the north-east region.
In Costa Rica, meanwhile, the cost of cereal imports was 34.8 percent higher in the first five months of this year relative to the same period in 2020, although import volumes rose by just 5 percent.
Elsewhere, the MENA region is one of the world’s largest food importers, as well as its most water-stressed, making it harder to develop local production capacity. These two factors combine to make the region particularly vulnerable to food insecurity.
In addition, many economies in the region are heavily dependent on oil prices, which have seen a similarly turbulent couple of years.
In response, international bodies and national governments are taking steps to reduce dependence on cereal and other food imports in developing nations.
These efforts tend to centre on leveraging innovation to boost yields and resiliency in national and regional supply chains, with a focus on the uptake of new technological solutions and practices that are adapted to local agro-ecological contexts.
In Guatemala, for example, the World Bank-funded Responding to COVID-19: Modern and Resilient Agri-food Value Chains project, launched earlier this year, is an agro-industrialisation strategy that aims to reduce food losses and increase the uptake of climate-resilient technologies.
Similarly, the World Bank’s ongoing Resilient Productive Landscape project in Haiti mobilised emergency funding to help more than 16,000 farmers access seeds and fertiliser.
Other initiatives focus on boosting farmers’ know-how. For instance, the Climate Corporation, a subsidiary of German pharmaceuticals giant Bayer, provides smallholder farmers in India with an app that provides location-specific insights regarding crop protection.
Some countries are working on broad-based strategies to develop more independent, sustainable national food ecosystems.
Qatar is an interesting case study in this regard. The trade dispute between Qatar and some of its neighbours that started in 2017 spurred it to ramp up domestic production capacity. This positioned it to withstand many of the worst disruptions of the pandemic, and a number of integrated strategies and programmes continue to guide long-term food security priorities and enhance self-sufficiency in essential items.
At the same time, as OBG has covered, the pandemic has prompted a widespread fortification of regional logistics networks.
A leader in this regard has been the GCC, which implemented an integrated food security network, developed a strategic food reserve and made investments in local agriculture.
As with other post-pandemic challenges, addressing cereal shortages in emerging markets will likely require a holistic blend of solutions.
Doha
Despite an increase in crop production and international trade following a pandemic-disrupted 2020, global food prices have risen to 10-year highs, increasing pressure on many emerging markets, Oxford Business Group (OBG) has said in its latest report.
Following a two-month respite from month-on-month (m-o-m) declines, the UN’s World Food Price Index averaged 130 points in September, representing a rise of 1.2 percent m-o-m and 32.8 percent year-on-year (y-o-y). The index is now sitting at highs not seen since 2011.
While food prices are high across the board, the report said, cereal prices are seeing a notable spike.
Wheat prices, for instance, are currently up as much as 40 percent year-on-year. A key driver of this is the exapnded use of wheat for livestock feed, which in turn stems from higher coarse grain prices.
Maize prices are similarly up 38 percent, partly due to weaker crop prospects in Latin America, but are expected to drop with the start of harvest season in the US and Ukraine.
For billions of people globally, grains like wheat, maize, barley and rice provide the most accessible form of energy. Wheat alone covers 18 percent of total dietary calories in the world and 19 percent of proteins.
High prices will therefore exacerbate ongoing problems related to food security sparked by the pandemic: the UN World Food Programme estimated that by the end of 2020 there were 272 million acutely food-insecure people in 79 countries, up from 149 million at the end of 2019.
While cereal prices are rising, there are two senses in which this spike may seem counter-intuitive.
The first is that world cereal output is on course to hit an all-time high in 2021, with a total of 2.8 billion tonnes.
However, global cereal needs for the 2021-22 period are also forecast to have risen by 1.8 percent. This should see the world’s cereal stocks-to-use ratio ease to 28.4 percent, down from 29.2 percent.
The second is that many economies – including those of some leading cereal producers – are beginning to re-open, with their sights set on post-pandemic growth and recovery. This is driving both demand and production.
In Morocco, for example, the government recently announced that it expects a 206 percent increase in production levels relative to 2020-21 of its three principal cereals, namely soft wheat, durum wheat and barley.
Global trade is also seeing an upturn. After a strong second quarter, the World Trade Organisation is now predicting that 2021 will post 10.8 percent growth in merchandise trade volumes.
Nevertheless, as OBG has recently detailed in the context of the global microchip shortage, the effects of COVID-19 are still being felt in a number of industries that rely on highly globalised supply chains. Indeed, as the world moves from an emergency footing towards the slow process of reconstruction, there is a sense in which the longer-term disruptions occasioned by the pandemic are only beginning to unfold fully.
Strong international demand is outpacing export availabillity, and localised increases in production are insufficient to offset broader disruption to the supply chains that ensure cereals find their way to end consumers.
High cereal prices stand to impact most heavily the countries that combine elevated household spending on food with high dependence on imports, such as Egypt, Nigeria and Pakistan.
Nigeria, for example, is already experiencing widespread constraints on household purchasing power and food access, exacerbated by conflict in the country’s north-east. While this will be alleviated somewhat by the upcoming harvest season, internal displacement and high input costs – a further consequence of global supply chain disruption – are expected to limit the harvest’s potential.
In June the Famine Early Warning Systems Network warned that there was a chance of famine affecting certain areas of the north-east region.
In Costa Rica, meanwhile, the cost of cereal imports was 34.8 percent higher in the first five months of this year relative to the same period in 2020, although import volumes rose by just 5 percent.
Elsewhere, the MENA region is one of the world’s largest food importers, as well as its most water-stressed, making it harder to develop local production capacity. These two factors combine to make the region particularly vulnerable to food insecurity.
In addition, many economies in the region are heavily dependent on oil prices, which have seen a similarly turbulent couple of years.
In response, international bodies and national governments are taking steps to reduce dependence on cereal and other food imports in developing nations.
These efforts tend to centre on leveraging innovation to boost yields and resiliency in national and regional supply chains, with a focus on the uptake of new technological solutions and practices that are adapted to local agro-ecological contexts.
In Guatemala, for example, the World Bank-funded Responding to COVID-19: Modern and Resilient Agri-food Value Chains project, launched earlier this year, is an agro-industrialisation strategy that aims to reduce food losses and increase the uptake of climate-resilient technologies.
Similarly, the World Bank’s ongoing Resilient Productive Landscape project in Haiti mobilised emergency funding to help more than 16,000 farmers access seeds and fertiliser.
Other initiatives focus on boosting farmers’ know-how. For instance, the Climate Corporation, a subsidiary of German pharmaceuticals giant Bayer, provides smallholder farmers in India with an app that provides location-specific insights regarding crop protection.
Some countries are working on broad-based strategies to develop more independent, sustainable national food ecosystems.
Qatar is an interesting case study in this regard. The trade dispute between Qatar and some of its neighbours that started in 2017 spurred it to ramp up domestic production capacity. This positioned it to withstand many of the worst disruptions of the pandemic, and a number of integrated strategies and programmes continue to guide long-term food security priorities and enhance self-sufficiency in essential items.
At the same time, as OBG has covered, the pandemic has prompted a widespread fortification of regional logistics networks.
A leader in this regard has been the GCC, which implemented an integrated food security network, developed a strategic food reserve and made investments in local agriculture.
As with other post-pandemic challenges, addressing cereal shortages in emerging markets will likely require a holistic blend of solutions.