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CORONAVIRUS

How the coronavirus disrupts food supply chains

By , Published April 21, 2020

The coronavirus is putting each link of the food supply chain under immense stress. From agricultural production and transportation to supermarket sales, governments around the world face tough political decisions to stem rising food costs and the real possibility of economic and humanitarian crises.

Some countries have begun to stockpile certain provisions or impose strict trade restrictions to ensure domestic supply. Some key suppliers, such as Vietnam, Kazakhstan and Russia have limited, or are considering, limiting their food exports.

Major food exporters (US$ millions, 2017)

The United States exports more food than any other country, but even America has experienced periods of decline and growth over the last 20 years. This is largely due to two main factors: the diversity of crops and the volatility of international demand.

World cereal stocks (2020 forecast)

What is a food supply chain?

The process of delivering food, from farm to table, includes production, processing, distribution, consumption and waste. The food moves along a chain from producer to consumer, while the money consumers pay filters back down the chain. Each stage of this chain uses human and natural resources. When any link is affected, it will have a knock-on effect on the entire cycle, manifesting as changes in the price of food.

PRODUCERS

ELEVATED RISKS OF FARM WORK DISRUPTIONS

The availability of seasonal workers is the most pressing issue. As an increasing number of countries restrict the movement of people to prevent the coronavirus spreading, migrant workers find themselves unable to work on French farms or pick fruit in Australia. Labourers also risk infection by working and living in close proximity to others, and transiting to and from work. Lockdown restrictions also limit farmers' access to markets to purchase and sell produce. Consequently, produce begins to accumulate on farms, resulting in food loss.

FARM LABOUR

The rich agricultural regions of Europe rely on seasonal migrant labour, mostly from Eastern Europe, and provide limited-time work visas for hundreds of thousands of workers.

EUROPE’S GIG ECONOMY

Temporary workers in countries with more than 10 per cent of workforce in temporary employment

Crop Calendars

Crucial months for the food supply chain in producer countries

EXTREME MEASURES FOR EXTREME TIMES

Some governments have started to take short-term measures to deal with food security problems

FOOD SUPPLY PROBLEMS BEFORE COVID-19

The pandemic is likely to affect food prices internationally and plunge developing economies into deeper debt. If the world can cooperate internationally and agree to activate food markets, vulnerable populations might be sheltered from dramatic food shortages.

A number of countries were facing food shortages before the Covid-19 outbreak. Here are some of the problems:

Desert locusts

Plagues of desert locusts are threatening crops and food security, as well as livelihoods in the Horn of Africa, and beyond. The fast-moving swarms ravaged Kenya, Ethiopia and Somalia during the rainy season when the planting season begins, which is also when locusts lay their eggs. These hatch in May, giving rise to new swarms in June and July – the harvest season.

Desert locusts can eat their own weight in a single day with swarms containing hundreds of millions of insects that bear two to five generations per year. They migrate over long distances and have already travelled as far as the west coast of Yemen on the southern end of the Arabian Peninsula.

Swarms have also been seen along the coastline with Oman and north of Aden with hopper bands detected in Iran and Pakistan.The UN Food and Agriculture Organisation warned in January that the number of locusts could increase 500-fold by June.

African swine fever in Asia

The virus causes a haemorrhagic fever resulting in a high level of mortality in domestic pigs. In some cases, the animal can die as quickly as a week after infection. Countries that have experienced contagion risk spreading the disease to other countries in East and Southeast Asia through the movement of live pigs and pork products. As the largest number of pigs are produced in Asia, especially China, the escalation of the virus will severely affect the health of livestock and food security at a global level.

Outbreaks since 2019

Domestic pigs with sporadic cases reported in wild boars

FOOD SECURITY

“Food security means that all people, at all times, have physical, social, and economic access to sufficient, safe, and nutritious food that meets their food preferences and dietary needs for an active and healthy life” – United Nations

Food security is vital for all countries, rich or poor. Factors causing food prices to fluctuate can create unpredictable markets with the potential to escalate into economic crises, social unrest and even the collapse of a government in an unstable country wholly dependent on the import of food.

Countries in need of external supplies of food

Percentage of imported food

Typically, countries dependent on food imports tend to be small with land reserved for urban planning. Countries such as Djibouti, Tuvalu or Brunei have virtually no space for agriculture. Other countries that depend heavily on food sourced elsewhere include the Middle East, some Asian countries, as well as developing nations in Africa.

Some countries like the United States, China, Germany, Japan, Britain and other developed economies are large importers of food, but this does not mean those countries are food insecure. It is important to understand that many countries importing large amounts of food are also among the richest, and are potentially capable of becoming fully self-sufficient if they so choose. In these cases, the importation of food is due to the desire for a greater diversity of produce to satisfy demanding consumers, not to guard against famine.

Case study: Singapore

Singapore is highly urban, with arable land particularly inaccessible. The island city-state has 724sq km with just one per cent allocated to food production.

In 2017, Singapore imported 90 per cent of its food from 170 countries, one of the highest percentages in the world. Food destined for Singaporean plates comes from neighbouring countries like Malaysia, Thailand and Indonesia, as well as from as far away as Argentina and Uruguay. In recent years, this has led to significant increases in prices and shortages of products like eggs and some types of fish and shrimp, particularly from Malaysia.

VALUE OF AGRICULTURAL IMPORTS (US$ MILLION)

FOOD ORIGIN

The government has set itself a goal of making Singapore 30 per cent self-sufficient by the year 2030, without increasing the amount of agricultural land. This means that the productivity of existing farms will need to be three times greater than they are now.

Top 5 commodities (US$ Million)

DISTRIBUTORS

Food exchange is a strategic sector which governments can manipulate through subsidies, direct incentives or by providing facilities to boost performance, which can add tension to the supply chain. The coronavirus makes distribution much more precarious than usual. For instance, ports face temporary closure any time dock workers who test positive for Covid-19. Distribution efficiency is also challenged because manual workers, including transport workers, cannot work from home. There are threats of strike action amid fears of contagion, and with many workers part of the gig economy, many livelihoods are at stake.

Marine transport and cargo disruption

The shipping industry is at grave risk with anxiety surrounding the health and safety of passengers and crew. It is difficult to release crew members once a ship sets sail and some transport workers are refusing to go to areas affected by the coronavirus. To make matters worse, there are often delays authorising ships to approach ports with the possibility they will not be granted the right to load or unload merchandise.

Ports operating the flow of containers in twenty-foot equivalent units (TEU) need to operate 24/7 to communicate with ships using efficient and coordinated systems to ensure safety
Each container has a set time to unload, transit, wait, and reload from land to sea transport modes, and vice versa. Any adjustment adds to costs and directly affects the price of goods
The slightest delay to the process hinders the traffic chain and can have a domino effect on ports and ships globally
DELAYS The delay in the arrival of the cargo at the destination can have financial consequences for all parties involved. Delays are not generally covered by insurance contracts
DEMURRAGE CHARGES Delays due to excessive time loading or unloading a ship, or the dispatch of merchandise can lead to fines and penalties for the owner of the ship and/or cargo
ACCUMULATION OF CARGO High fines can be imposed when cargo accumulated in transit is located in a warehouse or a container yard longer than the time limit allowed by insurers
DEVIATION In the event that the destination port is declared unsafe due to coronavirus or other factors, the ship must divert to another port, which increases costs, causes delays and may result in product shortages for the final receiver

Lack of stevedores

Stevedores work round-the-clock shifts to load and unload cargo to and from ships as safely and quickly as possible. They are an important link in the supply chain that stretches from the consumer to the producer of the cargo.

Main Shipping routes and key points

(Hover over the ports for further details)

Panama Israel Turkey Egypt Algeria Gibraltar Libya Italy Spain Netherlands Cameroon South Africa Kuwait Malaysia Philippines Hong Kong
Canal operations continue without interruption
The Marine Department assures the shipping community that services to Hong Kong-registered ships will continue as normal
Vessels must send a report to the Ministry of Health of Israel stating that all crew and passengers are healthy and that the vessel did not visit China in the last 15 days. Vessels that have visited China's ports in the last 15 days before arriving cannot enter Israel
The Kuwaiti Ports Authority suspended all vessels from Iran until further notice due to the recent increase of Iranian coronavirus cases
All vessels arriving in Malaysia are now subject to quarantine clearance, irrespective of their last port of call. No crew change is currently permitted for foreign nationals at any of the country’s ports
All vessels that have sailed from China, Macau or Hong Kong in the past 14 days must dock at the quarantine anchorage, hoist the yellow flag and immediately inform the quarantine station. No embarkation or disembarkation is allowed
The Sanitary Authorities and coastguard board all vessels to check if the vessel and crew came from, or transited through a contaminated country in the past 14 days
Vessels from “countries at risk” must wait at base buoy for a minimum of 14 days. After 14 days, port health service will board the vessel at anchorage to consider clearance
All vessels arriving for Suez Canal transit and/or entering Egyptian ports will be subject to the examination by the authorities. Special attention is given to vessels coming from Chinese ports and/or other hotspots. If cases are detected or a crew members is suspected of being infected, the vessel will be held from transiting the canal or entering the port
Vessels that have called at a country that has recorded Covid-19 cases will be quarantined for 14 days at anchorage.The quarantine period starts from the date the vessel sailed from the previous port of call
South African ports have reduced staff numbers but remain operational to facilitate the import and export of essential goods such as food products, medical supplies and fuel. Delays are expected
The following special conditions will be applied to vessels which have transited through or visited China in the last 15 days, have personnel from Covid-19 affected countries or crew members suffering flu-like symptoms include:
Remote pilotage requirements
No crew members will be allowed to disembark
Any shore personnel embarking or attending the vessel will not be allowed to disembark
Rotterdam port continues to handle cargo and production unabated, with the Harbour Master Division constantly monitoring safety and public order. Amsterdam port is closed to all sea and river cruise ships, and all events are cancelled until 1 July, 2020
The loading and discharge of goods is ongoing at all ports. Stevedores and personnel attending vessels are instructed to wear masks and maintain 1.5 metres social distance
The Turkish General Directorate of Health for Borders and Coasts has advised that vessels will not be able to call at Turkey for 14 days after calling at a “contaminated country” regardless of cit or port
Italian ports are fully operational with “suitable measures” guaranteeing safety of port operations in order to keep the movement of goods unrestricted

NUTRITION AND SUPPLIERS’ INCOME

Nearly 87 per cent of the world's student population has been affected by the implementation of the closure of schools and educational centres in more than 160 countries. This measure means the cancellation of school meals, sometimes the only source of nutrition for children in vulnerable situations.

School closures caused by Covid-19

RETAILERS

Countries dependent on food imports are made especially vulnerable from shipping delays because the local currency is at risk of losing value against the US dollar, reducing the country's purchasing power. Sudden increases in food prices occurring from unpredictable markets directly affects retailers and consumers. China saw a pronounced rise in the cost of food from panic buying. In Italy, the demand for flour and canned food shot up after people began to hoard non-perishables instead of buying fresh food.

COUNTRIES WHERE CURRENCIES PLUNGED AGAINST THE DOLLAR

DOMESTIC PRICE WARNING

Countries where prices of one or more basic food commodity are at abnormally high levels in the main markets (identified by the indicator of price anomalies) could negatively impact access to food at national level. Data as of March 11, 2020

CHANGE IN CONSUMER DEMAND

Italy has been one of the countries most affected by the coronavirus outbreak and experienced a noticeable change in the patterns of product consumption. The data is from the period of February 23, 2020 to March 11, 2020, compared to the same period a year earlier.

CONSUMERS

As the pandemic develops, new patterns of consumer behaviour have emerged as consumers’ priorities change.

This is the final link in the supply chain where supply problems can lead to economic and humanitarian crises. These in turn could develop into conflict or famine and affect other areas of society globally.

An investigation by Nielsen Global Connect identified six levels of behaviour as consumers address concerns surrounding the Covid-19 outbreak. The thresholds indicate early signs of spending patterns, particularly for emergency pantry items and health supplies. This type of pattern is seen in various markets.

KEY CONSUMER BEHAVIOUR PATTERNS

American consumer behaviour as Covid-19 concerns rise

US sales growth compared to previous year

Graphic and content editor Darren Long
Additional web development by Dennis Wong

Sources: UN Food and Agriculture Organization of the United Nations, UNESCO, Agri-Food and Veterinary Authority of Singapore, Brinknews, McKinsey & Company, Locust watch, Our world in data, Deutsche Welle, exchangerates.org.uk, United States Department of Agriculture, International Labour Office, European Foundation for the Improvement of Living and Working Conditions, Eurostat, Harvard Web Publishing, The Nielsen Company, The Association of Convenience Stores (UK), International Maritime Organisation, worldatlas.com, Lockton Companies

Photos:Roy Issa(SCMP) and Reuters

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