COVID-19’s crop crisis: Pandemic poses major risk to Asia’s food supply and trade - expert
According to International Potato Center Asia Regional Director Samarendu Mohanty, said the two crops would be most heavily impacted by the COVID-19 crisis if lockdowns and restrictions are not lifted soon.
“The biggest impact that COVID-19 is having on the world’s agricultural system is that of manpower displacement, especially for migrant workers. The supply chain in Asia is not as mechanized as that in the West, and we are very dependent on manpower for planting, harvesting, food movement and so on,” he told FoodNavigator-Asia.
“Rice is the biggest crop in Asia, and we are very near the normal planting season of end-April to May. The planting season is the time where the most manpower is required, and the lockdowns are causing a huge damper on the labour available.”
He cited examples in Thailand, which saw a large exodus of migrant workers from Myanmar, Cambodia and Laos leave the country when stricter COVID-19 control measures were put in place, as well as in India which also saw a mass exodus of workers from neighbouring countries.
“If the situation lets up by the end of the month, we will still be okay to get in our normal planting. But the monsoon season where the most rice is normally produced is from mid-May to early July, so if we do not get the rice planted by then, we ill see ripple effects start,” said Mohanty.
Some of the likely effects would include food supply shortages and rice prices spike even higher than they were before the crisis hit – and prices had already been high for a while given droughts that had hit the region last year.
“Essentially, we still have two to three months, and have to hope that things pick up soon for all the different countries to keep rice and prices normal,” he added.
As for wheat, the biggest impact at the moment is supposed to be in South Asia, where it is harvesting season, but the impacts are very different from those on rice.
“I would not be too worried about harvesting in South Asia countries like India and Bangladesh as of yet, as these are mostly mechanised so the process is less affected by manpower shortages,” said Mohanty.
“That said, there are other areas along the supply chain which have been heavily impacted such as the loading and unloading of the wheat and the transportation of these downstream, which all require a lot of labour.”
Another major area of concern resulting from the threat to food supply is that of trade restrictions and bans if countries scramble to keep supply for themselves by closing borders and stopping trade, for example rice export bans like those issued by Vietnam.
“Border closures are not the answer. This is a very dangerous way of thinking,” said Mohanty.
“No one country is going to be able to remain insulated from this even by closing borders – it is highly likely to backfire as stocks will run out and prices driven up within the border anyway. Every country in the world needs one another and we are all on the same boat.”
Mohanty also emphasized the importance of making sure food systems are integrated, something he believes has been a key driver for the world’s food economy, while helping keeping prices stable for many years.
“Restricting trade and help to other countries is also dangerous as the scale of this crisis means that all countries are likely to have a ‘long memory’ and much higher appreciation for the need to solve the world’s food crisis in the future,” he said.
“If the impression they get is that no one will help [in a crisis], what they will do is take serious action to just become more independent and basically reverse any agricultural globalization that has taken place over the past few decades.”
The most affected
If the pandemic does not let up, it is expected that the countries most heavily dependent on food imports are the ones that will be affected most – but Mohanty added that the impacts are unlikely to be equal.
“In Asia, we have many food import-dependent countries, but a lot of these are rich like Singapore and Hong Kong, who will be able to buy supply and commodities even if this lasts a while longer,” he said.
“The most problems will be seen for poorer countries that are import-dependent, such as the Philippines or Bangladesh. The problem is compounded by predictions that some half a billion people worldwide are expected to be driven into poverty as a result of this crisis.”
Rice was identified as a particularly cost-sensitive commodity, as it is a necessary staple for many of the poor, not just in Asia but around the world.
“For example, in the Philippines, some 20% of the people spend 25% of their living budget on rice – what happens when supplies fall short?
“Africa is one of the greatest importers of Asia rice, so the biggest impact is also expected for them if there is no supple to reach them or prices skyrocket.”
The role of MNCs
What all of these issues mean for food and beverage companies further down the line is also a shortage of raw material to make processed products, such as wheat for biscuits and bread, or potatoes for making chips.
“Although I don’t expect other high-value commodities such as fruits and vegetables or potatoes to see quite so serious impacts as rice just yet, already the impacts to the supply chain are obvious – take potatoes for example where shipping and the supply chain are experiencing massive changes,” he said.
“For a very long time now, some 50% of the demand for potatoes especially from Europe and the United States has been for food service, but with these lockdowns, the frozen potato demand from this sector to make fries has dropped to zero whereas home-based demand has spiked, so companies are scrambling to shift the entire food supply chain to meet the home-based demand.”
What is most required to mitigate these challenges is help for the farmers, whether for rice, potatoes or any other commodity, and this is where F&B companies can step in to help.
“In these challenging times, the bigger companies would also face bigger challenges as they need large amounts of supply to make or sell their products – for example, PepsiCo uses a lot of potatoes to make their chips and Olam buys a lot of rice from Asia to sell to Africa. So it is the responsibility of these people to make sure that farmers have the necessary input,” said Mohanty.
“What F&B companies can do is to extend the backward linkages of their supply chains to support farmers, especially when it comes to helping with business constraints in terms of loans and credits.
“Seeds are also an important factor here, and companies can help by ensuring that farmers get the necessary seeds required to go into the ground so as to make sure that supply is less impacted.
