03 Apr, 2020

Preliminary remarks about COVID-19's impact on the Global Food Supply Chain

by Alessandro Balduzzi

The emergency triggered by the coronavirus outbreak is having a significant influence on our daily life. More and more countries have gradually introduced measures to contain the pandemic, ranging from selected restrictions to total lockdown, from the release of prisoners to the suspension of all links with the rest of the world. 

As to food, all of us have either seen on TV or directly experienced long queues in front of crowded supermarkets. On the one hand, people were afraid of sudden shortages and tried to staple as much food as they could. On the other, in response governments and public authorities have strived to reassure citizens about the capacity of food supplies to bear the increased pressure produced by this exceptional situation.

Still, what will be the impact of coronavirus on the food supply chain in the coming weeks, months or even years? Below we try to make some preliminary remarks. First of all, let’s try to define what the food supply chain is composed of today. All begins with agriculture and farming. When crops and meat are processed, the logistic phase comes up with transportation and storage. The last step is the sale, to public or wholesalers. 

As to now, no supply shock has been registered yet in terms of food availability, although logistic seems heavily affected at this time. It is likely that in the near future the remaining components of the food supply chain are likely to suffer too from some kind of disruption.
Other effects can concern either the supply or the demand side. A production decrease is more than likely – even though no change has been noticed yet – while lower freight rates and lower capacity use of transportation are expected too. 

In geographical terms, agriculture will be affected significantly in Asia and Africa, given its labour-intensive way of functioning in those regions. In the rest of the world, starting from China, the livestock sector is expected to come under an even greater strain in light of the limited access to animal feed and the diminished capacity of slaughterhouses, resulting from logistical constraints and labour shortages. 

The latter are likely to affect transports too, which are already hindered by national restrictions and quarantine measures that limits access to input and output markets as well as to points of sale. Furthermore, blockages to transport routes can cause an increase in food loss and waste (especially as to fresh food).

If we consider the demand side, the diffusion of coronavirus triggered a significant increase of food demand since the very beginning of the crisis. Nevertheless, this kind of demand is generally inelastic and long-term effects on overall consumption are likely to be limited. 
Dietary patterns can of course shift, especially in poorer countries where food demand is more strictly related to income-dynamics. A meaningful change could concern purchasing modalities: fear of contagion and lockdowns have already led to reduced visits to food markets and shops, zeroing almost entirely restaurant traffic. On the other hand, e-commerce deliveries and home consumption have been experiencing great success. Obviously, the most affected countries in this context are those which mostly rely on imports.

In light of the aforementioned changes, what are the measures to adopt in order to counterweight them? Governments are the first actors called to intervene. As to food needs, they should implement policies to meet immediate needs of vulnerable people through emergency food assistance and stronger efforts to protect basic consumption and fight undernourishment and malnutrition. 

In especially vulnerable contexts, it is of utter importance to ensure that food assistance can flow freely. As to now, several countries have implemented social protections programs. For instance, Portugal provides up to €1.097 and at least €438 for 3 to maximum 12 months to self-employed workers, whereas the British government approved a £500 million “hardship fund” to be given to local authorities to help vulnerable people.

Likewise, support to smallholders is also fundamental. Road closures and restrictions to the free movement of people can either give birth to new consumption patterns or curb the habitual flow of seasonal workers, heavily affecting farmers. The Chinese government, for instance, implemented funding programs for agricultural distribution companies in Hubei – where coronavirus originated – as well as measures to expand rural employment income through the resumption of production in medium, small and micro enterprises. 

In order to support both offer and demand, the role played by trade and taxation policies is central. It is therefore important to review the latter according to the impacts of the current pandemic. This also involves improving and facilitating food trade mechanisms and regional integration as well as reducing import tariffs, VAT and other taxes.

In this critical situation, all of us have been asked to change our habits, ranging from the single citizen to governments and international organizations. Hopefully, this period will enable us to find best practices to survive, as lessons learnt to improve our world in the coming years.