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Unlike in 2008, fewer countries opted for restrictions on food exports as a result of the spread of COVID-19. Even for those who did, their restrictions were not outright ones, with countries restricting quantities instead of a complete ban on rice and wheat exports.
Russia, for instance, set temporary quotas on wheat contracts, while Vietnam restricted rice exports for a brief period. Expectedly, this was done to secure the latter’s production for domestic consumption, as Vietnam started offering rice to citizens via rice-dispensing ATMs.
Vietnam is the world’s third largest exporter of rice, both by quantity and by value, according to the UN’s Food and Agriculture Organisation’s (FAO) latest data. Therefore, an ongoing export restriction would have caused a spike in price of rice. That would have been detrimental to rice importing countries, assuming that these countries are able to secure rice imports to begin with.
Price support
Thailand, which is the world’s second largest rice exporter according to FAO data, did not ban its rice exports. In fact, Thailand seemed to be better positioned to export and sell its rice to countries keen on importing it. Thailand has a robust rice farming support mechanism in place, through which the government pays its farmers a set price for their produce.
This is done to protect farmers from market fluctuations, which could risk putting them out of business.
Now, that does not mean that the programme is cost-efficient, neither that it has been effective. However, the main take here is that the country was ready to supply the world with rice when COVID-19 caused all sorts of disruptions in the global supply chain.
COVID-19 may have also presented Thai farmers with an opportunity to sell their produce at market prices, disposing of their accumulating rice stocks.
What is important to note from those two examples is how major exporters have acted differently with regard to COVID-19. First, and if it was not for the varying reactions, the price of rice may have spun out of control, resulting in a higher price like in 2008. If such a scenario was to take place, rice importing countries would have suffered from COVID-19-related economic ramifications in addition to higher rice import bills.
Need to hoard
Secondly, and because of the disruption in the global supply chain for food, countries realised how dependant they have become on certain food imports and on a handful of import sources. Such overdependence was exacerbated not only by the disruption in the supply chain caused by the virus, but also because of whatever bans on food exports that were introduced, even if temporarily.
As traditional food import sources became unavailable, countries that rely on food imports for their food security started looking elsewhere to supplement their food supply. For instance, Singapore started importing eggs from Thailand when imports of eggs from Malaysia became unfeasible because of COVID-19-related border closure.
Remarkably too, diversification in import sources have extended to the mode of transport, with a disruption in flights exposing the risk of relying on air freight for food imports versus receiving food via sea and land ports. In Singapore’s case, eggs from Thailand were airlifted, unlike eggs from Malaysia that are transported via the land border.
Changed emphasis
Whereas the current shift from usual to alternative food import sources may have been improvised and hastily executed, a future shift to alternative import sources will be better planned and executed. COVID-19 has also revived the discussion around domestic production and self-sufficiency, which may now be pursued irrespective of financial and other costs.
This will naturally mean more emphasis on FAO’s Self-Sufficiency Ratio (SSR) as a base point for future food security analyses, weighing domestic production versus a diversification in food import sources. That being said, the search for alternative import sources will necessitate the establishment of new, and perhaps unconventional, trade links that may extend to other segments of the relationship between trading partners.
Needless to say, an overhaul of the global food trade system is taking place because of the disruption caused by COVID-19. Once the crisis abates, countries will be inclined towards self-sufficiency and diversification in their food import sources. Although this seems inevitable, striking a balance between what to produce and what to import from abroad would be nothing short of perplexing.
The last thought that I want to leave you with: How can a country decide between what to produce and what to import?
- Abdulnasser Alshaali is a UAE based economist.
