Food supply chain is next virus headache

It’s not just manufacturing that’s struggling with disrupted logistics. As more countries bring down the shutters to limit the spread of the coronavirus, risks are rising for the world’s complex food supply networks. Snarl-ups in processing and transport could result in painful price spikes for many fresh goods, even if farms in developed markets can keep working through the outbreak.
The picture isn’t all gloomy. On a global scale, stocks of corn, wheat, soybeans and rice are healthier than before previous periods of food inflation. While some prices have been heading higher, increases aren’t across the board.
Sugar and corn have been held back by reduced demand from biofuels producers as oil plummets. Low fertiliser and crude prices, meanwhile, will help offset other rising costs for farmers.
Yet with infection rates rising there are worrying signs of fraying nerves, as countries engage in their own version of the toilet paper panic. Kazakhstan has banned exports of buckwheat and wheat flour to preserve domestic supplies. Russia, the world’s top wheat shipper, could limit some sales overseas, a threat that has already pushed up prices. Vietnam, meanwhile, is stockpiling rice and has suspended new export contracts. During the 2006-08 spike, such behaviour accounted for 45% of the increase in rice prices, and almost a third for wheat, according to a study published by the World Bank.
For now, such protectionism isn’t the norm. Kazakhstan, after all, accounts for less than 5% of wheat exports. And cereal harvests are looking decent. The US Department of Agriculture expects global wheat production to rise almost 5% this year, while rice is seen as stable. Still, supply of key products is concentrated. With restrictions dragging on and more countries scrambling to contain the virus, the resilience of the world’s shopping basket will face further tests.
After years of low food inflation, several factors were already pushing up bills before the coronavirus pandemic: severe droughts in Southeast Asia and Australia; an African swine fever outbreak in China that decimated the world’s largest pork producer; and, more recently, swarms of locusts in Kenya, Pakistan, India and beyond. The United Nations’ Food and Agriculture Organization said in January that, left unchecked, the number of crop-munching insects could increase 500 times by June. One desert locust can eat its own weight in a day — about
2 grams — and swarms contain hundreds of millions.
While prices are still well below 2008 or 2011, there are glimpses of how quickly the situation could change. Chinese food prices surged more than a fifth in January from a year earlier as the epidemic took hold, and pork prices more than doubled.
Rice is already feeling the combined impact of drought, rising demand from stockpiling households and export
restrictions.
—Bloomberg

Clara Ferreira Marques is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times