March 29, 2020 | By Craig Robinson

Next Generation - Could COVID-19 Inform Another Food Price Crisis? The First Warning Just Appeared

The Chicago Council Global Food and Agriculture Program is pleased to announce a new blog series featuring perspectives from our Next Generation Delegation Alumni on the food security effects of COVID-19. Our first piece is from Craig Robinson, who builds on his previous piece, How Can Diplomacy Prevent Food Price Shocks

On Wednesday 25 March 2020, the Government of Vietnam took a first step in banning its rice exports. In a statement, Prime Minister Nguyen Xuan Phuc advised he had directed the ministries of trade, finance and agriculture to review the country’s rice stocks, with a view to determine if domestic supplies were sufficient during the coronavirus outbreak. In the meantime, exports would not proceed. 

Such a policy approach is not new. The food security literature, and the policies adopted by both developed and developing countries, are characterised by a significant divide between those who advocate for food self-sufficiency and those who advocate for an integrated, agricultural trading system. While a balance is always required between domestic needs and international exports, the impact of such an abrupt change in the agricultural trading system should not be underestimated at this time of market uncertainty. 

In 2007-08, when anxiety around the state of agricultural markets increased particularly rice, countries reacted by implementing export restrictions. The impacts were significant and are neatly captured by in the table below:

From Headey, D. & Fan, S. 2008. Anatomy of a Crisis: The Causes and Consequences of Surging Food Prices. Agricultural Economics, 39:1, 375-391. 

Export restrictions have the potential to drive further instability.  In 2007-08 panic buying became rampant. Bangladesh, Oman, United Arab Emirates and Nigeria imported an extra million metric tons of rice and the Philippines imported an extra 0.77 million metric tons, through a government-to-government deal with Vietnam. Such actions led to an ‘overshooting’ of agricultural commodity prices. The instability only ended when Japan decided to release 200,000 tons of rice to the Philippines in a government-to-government deal. Such actions were a tragedy for the least developed countries, who did not have the required finances to participate in this inflated market. 

There is potential to avoid a costly repeat of this crisis.  In 2011 and under France’s innovative presidency of the G20 a series of initiatives were launched with the objective of improving market transparency and market coordination during times of agricultural market uncertainty. The most notable is the Agricultural Market Information System (AMIS), which was established to improve national and global forecasts through data collection and knowledge sharing of four main crops: wheat, maize, rice and soybeans. AMIS also consists of a Rapid Response Forum, which has the stated objective of promoting early exchange of key information in order to prevent a crisis, and to enable discussions with key stakeholders around appropriate coordinated policy responses. The membership of AMIS is crucial.  It consists of not just G20 members and Spain, but seven additional major exporting and importing countries of agricultural commodities. This includes Egypt, Kazakhstan, Nigeria, the Philippines, Thailand, Turkey and Ukraine. AMIS therefore represents a large share of global production of wheat, maize, rice and soybeans, in the range of 80-90 percent of global production, consumption and trade volumes.  The coordination decisions it can make have a significant impact upon food accessibility, particularly during times of market uncertainty.   

Effective crisis diplomacy, through a coordinated multilateral approach, is crucial to ensure a repeat of the 2007-08 food price crisis is avoided.   

 

 

The views expressed in this article are the authors own and do not necessarily reflect the official policy or position of any other agency, organization, employer or company, including the Chicago Council of Global Affairs.  

About

The Global Food and Agriculture Program aims to inform the development of US policy on global agricultural development and food security by raising awareness and providing resources, information, and policy analysis to the US Administration, Congress, and interested experts and organizations.

The Global Food and Agriculture Program is housed within the Chicago Council on Global Affairs, an independent, nonpartisan organization that provides insight – and influences the public discourse – on critical global issues. The Council on Global Affairs convenes leading global voices and conducts independent research to bring clarity and offer solutions to challenges and opportunities across the globe. The Council is committed to engaging the public and raising global awareness of issues that transcend borders and transform how people, business, and governments engage the world.

Support for the Global Food and Agriculture Program is generously provided by the Bill & Melinda Gates Foundation.

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