The World Trade Organization (WTO) Secretariat published a new information note last month examining the impact of the Covid-19 pandemic on world agricultural trade. The paper notes that agricultural trade has fared better than other sectors, and that initial measures focused on guaranteeing the immediate availability of food have been followed by a second phase of policies seeking to mend broken supply chains and help producers to cope with the "new normal" situation. While overall merchandise trade fell sharply in the first half of 2020, agricultural and food exports increased by 2.5 per cent during the first quarter of the year compared to the same period in 2019, with further increase in March and April. However, the crisis has exerted further downward pressure on food prices, and therefore on producer revenues, added the note. In addition, while world food stocks and production levels for the most widely consumed staples - rice, wheat and maize - are at or near all-time highs, the Covid-19 pandemic's impact on jobs and incomes has increased the number of hungry people worldwide. The paper warned that countries are still fighting the pandemic, and its repercussions for food supply chains are still unfolding. While there is currently no reason why the ongoing health crisis should turn into a food crisis, disruptions to food supply chains constitute a risk, with governments' trade policy choices likely to determine how the situation evolves. The slightly abridged version of the paper excluding graphs is published here.
Trade in food and agricultural products has been more resilient than trade in other products. Trade in agricultural products even increased in March and April 2020 (by 3.3 per cent and 0.6 per cent, respectively) compared to the same period in 2019. Trade in non-agricultural products dropped by 10.2 per cent in March and by 25.7 cent in April 2020 compared to the same time period in 2019.
It is to be noted that the Agreement on Agriculture (AoA), in its Annex 1, defines agricultural products by reference to the Harmonized System of product classification. The definition covers both basic and processed agricultural products, as well as products such as wines, spirits and tobacco, fibres such as cotton, wool and silk, and raw animal skins destined for leather production. Fish and fish products are not included, nor are forestry products.
Trade in agricultural products has been more resilient than trade in other products owing to several factors including, in particular, the relative income inelasticity of demand for food (given that food products are essential for survival) and the fact that most agricultural trade (notably cereals and oilseeds) takes place in bulk marine shipments that require less human interaction and have not been heavily disrupted by pandemic-related transport restrictions.
While total exports increased for many food products, other products saw their exports decrease, with the sharpest drop in exports for non-edible agricultural products (such as raw fur skins, wool, raw hides and skins, vegetable textile fibres, essential oils, live trees and other plants, and flowers). The agricultural products that registered increased exports in March included cereals, some meat products, edible nuts, oilseeds and oleaginous fruits, and fruits (fresh and dried). In April, however, exports of agricultural products dropped for most product groups with the notable exception of oil seeds and oleaginous fruits. The preliminary data for May 20209 seem to confirm the same trend, recording lower levels than in April 2019, with the exception again being oil seeds and oleaginous fruits.
The initial increase in exports for many food products, notably in March 2020, reflects in large part the rise in demand for retail products, representing the shift in consumption patterns away from restaurants and other public eateries and towards people's homes. In addition to initial panic-buying by consumers, many governments have revived or increased stockpiling programmes (increasing demand notably for cereals) or have stepped in to procure unsold produce for distribution to populations in need. In April, total agricultural exports remained at a similar level to that of the previous year; however, exports of several individual product groups decreased as a result of reduced demand triggered by lockdown measures. The food products for which trade performance has suffered the most since the outbreak of Covid-19 are those that are most sensitive to transportation disturbances (particularly those requiring airfreight and containers) and/or those for which demand has fallen as a result of confinement measures and the economic crisis (such as high- value perishable products).
Cotton is monitored closely at the WTO, given its importance to some of the poorest countries in the world. Cotton exports have dropped significantly since the beginning of the year due to declining global consumption amid the impact of Covid-19 on global apparel trade. Projections by the International Cotton Advisory Committee (ICAC) show that the global demand for cotton is likely to decrease by 13 per cent in the 2019-20 marketing season compared to the previous season, reducing world cotton exports to 8.6 million tonnes. According to ICAC, some four million smallholder farmers in Africa are likely to be severely hit by these downward trends, in particular in least-developed countries (LDCs), including the Cotton-4 countries (Benin, Burkina Faso, Chad and Mali), where revenue from cotton accounts for between 8 and 12 per cent of their Gross Domestic Product (GDP). Cotton trade represents up to 40 per cent of their total exports revenue, and the sector employs up to 33 per cent of the national work force.
While most regions saw agricultural exports hold up relatively well, or even increase, exports from Asia fell during the first quarter of 2020, followed by a fall in exports from Europe and North America in April, reflecting, among other factors, the spread of Covid-19. Preliminary data for selected LDCs indicate a bigger drop in exports than in other regions, with the exception of Ethiopia and Myanmar, which saw their exports increase, notably for their key export products (coffee and oilseeds for Ethiopia and vegetables, corn and rice for Myanmar). In contrast, South America saw the highest increase in exports. This positive performance comes mainly from the increase in agricultural exports by Brazil (of 14.2 per cent in March and 30.6 per cent in April compared to same period in 2019), which account for around half of the continent's agricultural exports. Brazil's exports of soybeans, sugar and meat increased significantly during these months compared to the previous year, as a result, notably, of demand from Asia.
Imports of agricultural products during the first quarter of 2020, and particularly in March, increased for virtually all regions (including for LDCs) compared to the same period in 2019. Demand for imports in April contracted compared to the previous year in Europe, North America and South America and some LDCs (e.g. Myanmar, Zambia), but expanded in the rest of the world.
According to the Food and Agriculture Organization of the United Nations (FAO), the food price index was already trending downward in early 2020, even before the Covid-19 crisis put further pressure on prices, and consequently farm revenues. The FAO Food Commodity Price Index indicates that the sharpest fall was in vegetable oil and sugar prices, followed by the prices of meat and dairy products. By contrast, prices for cereals have been relatively stable, as demand has been less affected by the pandemic, and supply chains have been less disrupted due to the fact that cereals are typically shipped in bulk, and bulk shipments have not seen any major disruptions.
In June, the FAO Food Price Index registered its first increase in 2020 (2.4 per cent compared to May), due notably to recoveries in the prices of vegetable oils, sugar and dairy products following a sharp decline in May. Food prices are nevertheless expected to remain at lower levels given the looming economic downturn. Prices for cotton have also followed a downward trend, reflecting decreased demand and other factors affecting supply chain operations, with a Cotlook average price at US$ 0.714 per pound's weight of cotton lint for 2019-20 so far, down from around US$ 0.845 in 2018-19.
MEASURES TAKEN BY GOVERNMENTS: The measures taken by governments to address the effects of the Covid-19 pandemic can be divided into two broad groups: Phase-1 measures that aimed to contain the spread of the virus while guaranteeing food availability to their populations, and Phase-2 measures introduced to mend broken supply chains and help agricultural producers to cope with the "new normal". In many cases, measures from both categories have been in place simultaneously.
Phase 1: Crisis management
When the Covid-19 health crisis broke out, governments reacted with sweeping measures that can be broadly divided into three main categories: (a) Lockdown measures, e.g. business closures, social distancing requirements, movement restrictions and travel bans, border measures and closures; (b) Recognising agriculture, food processing and retailing as essential activities; and (c) Measures to guarantee adequate supplies of food, such as measures to facilitate imports (e.g. tariff reductions, streamlining of border procedures, relaxation of labelling requirements), restrict exports, build or expand stockpiles and distribute food to vulnerable populations.
After a short initial phase of panic buying, the lockdown measures resulted in a drop in demand for many agricultural products due to changes in consumption patterns. Compounded by the direct health impacts of the virus, these measures contributed to a shortage of labour across the food supply chain, affecting agricultural production and harvests, as well as the processing and distribution of food products, sometimes resulting in food loss and waste.
High-value crops, which are typically more labour-intensive and reliant on migrant workers, were particularly affected. It is estimated that more than one-quarter of global farm work is done by migrant workers,10 although this share can vary significantly from one country to another. For example, in Italy, 90 per cent of agricultural workers are seasonal (mainly from Romania), while around 80 per cent of the agricultural labour force in France is foreign. In Australia about 50 per cent of the labour force on vegetable farms and 30 per cent on fruit and nut farms is made up of seasonal and temporary migrant workers. In the United States, temporary migrant workers make up 10 per cent of crop farmworkers. Internal restrictions on movement have also affected countries like India where seasonal farm workers have been unable to travel within the country during lockdown.
To guarantee the availability of food and support agricultural production, many governments around the world classified agriculture, food processing and distribution as essential activities, and moved rapidly to facilitate the entry of seasonal migrant workers. As early as in March/April, in order to maintain food supply chains, certain economies eased entry restrictions such as visa requirements for temporary agricultural workers (e.g. Germany, the United States), extended working visas to temporary and seasonal migrants (e.g. Australia, Italy, New Zealand), granted exemptions from travel restrictions (e.g. Canada) and in some cases provided financial support for these workers (e.g. Canada). China took measures to prevent the termination of migrant workers' contracts in case of illness or containment measures, and implemented measures to support jobs and entrepreneurship in rural areas and in the agricultural sector. Fears nevertheless grew that migrant workers would seek to return to their home countries to avoid contagion risks, and that farms would be able to attract fewer workers from abroad.
Some import-restrictive SPS measures were initially adopted with the main objective of preventing the entry and spread of the virus in importing countries. At first, these mainly restricted animal imports and/or transit from affected areas (some of these measures were subsequently lifted) and increased certification requirements. Since April, though, most notifications and communications submitted relate to measures taken to facilitate trade, for example, by allowing control authorities temporary flexibility to use phytosanitary and/or veterinary certificates electronically. In total, up to mid-July, 23 WTO members (counting the European Union as one) had notified Covid-19-related SPS measures. The Standards and Trade Development Facility is providing assistance to developing countries in this area.
Tariff measures taken in response to the Covid-19 crisis have largely exhibited a liberalising trend aimed at enabling a steady supply of food products. Over 20 economies (including a few non-WTO members), at varying levels of development, adopted temporary tariff reductions or granted duty exemptions or other types of temporary respite to agricultural and food products. These measures were typically adopted for a limited duration, such as from under two months to six months, either as part cross-cutting policies covering all imports, or in conjunction with measures applicable to medical supplies and other critical goods for fighting the pandemic. Agricultural products covered by tariff reductions or exemptions ranged from daily food products (e.g. Qatar, Samoa, South Africa) to main staple foods (e.g. Morocco) or a selection of key products (e.g. Chad, Costa Rica, El Salvador, Eurasian Economic Union member states, Mauritania, Turkey and Uzbekistan). Other trade- opening measures included a temporary exemption of value-added tax (VAT) on all imports (e.g. Kenya), a 30-day postponement of duty payment on all imports (the Kingdom of Saudi Arabia), and a time-limited increase of partial tariff quotas for butter, eggs and potatoes (Liechtenstein and Switzerland). To accelerate customs procedures, special "green lanes" were introduced for agricultural products (e.g. European Union).
A few economies, including some major producers and exporters, also adopted export restrictions or prohibitions (e.g. Cambodia, Egypt, El Salvador, European Union (Romania), Honduras, Kazakhstan, the Kyrgyz Republic, North Macedonia, Myanmar, the Russian Federation, Thailand, Turkey, Ukraine and Viet Nam) for key food staples (e.g. wheat, wheat flour, buckwheat, rice, sunflower seeds and oil, eggs), as well as processed food (e.g. pasta, sugar, animal feed, bran, salt, wine), and some vegetables. Several of these measures have subsequently been removed.
Governments also pursued stockpiling, in several cases with the double objective of making food available to the poor and of helping agricultural producers (by purchasing unsold products and/or guaranteeing a minimum revenue to farmers). Many members chose to revive, enhance or expand purchases under their public stockholding programmes (e.g., Egypt, India, Morocco, Philippines, the Kingdom of Saudi Arabia), and to increase procurement prices (e.g., Turkey).
Phase 2: Mending supply chains and helping agricultural producers
Measures introduced to help farmers to cope with the "new normal" can be broadly divided into three categories: (a) Measures to build resilience; (b) Measures to support producers' revenues; and (c) Measures to support exports and facilitate trade.
As members shift from urgency of containment towards other challenges and policy priorities, many have adopted economic stimulus packages on a large, even unprecedented, scale. The agricultural sector is no exception, with an increasing number of members of all sizes and levels of development announcing new packages of support measures.
Some larger economies were at the forefront of this trend, but many other members are following by introducing fiscal and financial measures to support their agricultural sectors.
The support measures adopted have sought to deal with a sudden drop in demand for agricultural products by assisting producers to dispose of surpluses and reduce food loss and waste through food aid programmes, storage aid, or direct compensation for losses (e.g. Brazil, Canada, the European Union, Japan, Switzerland, the United States). Some support measures aim at facilitating access to credit (e.g. Canada, the European Union, the United States), postponing rural debt repayments (e.g. Brazil), facilitating access to raw materials and other inputs (e.g., China, Japan), improving facilities and introducing hygienic measures, including those to prevent Covid-19 (e.g. Japan) and to cope with the mandatory isolation period for workers arriving from abroad (e.g. Canada), and upgrade supply chain infrastructure (e.g. India).
Among other WTO members, support measures include agricultural input support (e.g. Côte d'Ivoire, Fiji, Paraguay), support to improve the use of technology and production techniques (e.g. Paraguay), cash transfers (e.g. Côte d'Ivoire, Paraguay), an extension of the moratorium on the tax law of agricultural land (e.g. Egypt), expedite approval for loans under a subsidized credit programme (e.g. Honduras), loan guarantees (e.g. Namibia), interest subsidies (e.g. Montenegro); and payments for the contributions of insured agricultural workers (e.g. Montenegro).
A handful of members (e.g. Myanmar, Sri Lanka) adopted measures allowing the government to control import volumes through provisional protective duties or temporary suspension of imports.
A few members have also included measures to support exporters, including of food and agriculture producers, in responding to the Covid-19 crisis, notably through export promotion (e.g. Indonesia, Sri Lanka, the United Kingdom), digitalization of export procedures (e.g. Paraguay) and export financing support. Some members have also introduced logistical and administrative support measures to compensate for higher airfreight costs (e.g. Australia), reduce air cargo tariffs on some exports (e.g. Pakistan), reduce export-related fees and charges (e.g. Jamaica), and assist airlines in enhancing air freight capacity and in restarting cargo transportation of agricultural products (e.g. New Zealand).
Many of these measures were discussed during the meetings of the Committee on Agriculture on 18 June and 28 July 2020, and several have been notified to the WTO.
FOOD SECURITY AND TRADE MEASURES: Cereal stocks are at their highest levels in recent years, according to the FAO. The FAO also revised its forecast for 2020 cereal production up by 3 per cent compared to the record harvest in 2019. In addition, international food prices are relatively low, making food products more affordable.
Despite the stocks and good harvests, it has become more difficult for poor people to access food, a function of the impact of the ongoing economic crisis on people's incomes and purchasing power as well as the disruptions to agricultural trade and supply chains. After years of trending downwards, poverty and hunger are rising. According to the World Food Programme's most recent estimates, 270 million people could be acutely food-insecure by the end of 2020, representing an 82 per cent increase from before the pandemic. In addition, countries in sub-Saharan Africa are also fighting other crises, such as the locust crisis and African swine fever, increasing their vulnerability to hunger.
Trade has a crucial role to play in global food security, by matching plentiful food supplies with increasing food demand. This point has been made by several international organizations and groups of economies since the outbreak of Covid-19. The joint statement by the Directors-General of the WTO, FAO and World Health Organization (WHO) on 31 March 2020 specifically stressed the importance of trade for food security and the livelihoods of millions of people around the world, and called on governments to ensure that any trade-related measures in response to the crisis do not disrupt food supply chains. Many statements have been adopted by different country groups, (e.g. G-20, LDC Group, African Group, Cairns Group members, Ottawa Group, ASEAN), calling for trade flows to remain open, for restraint in the use of export restrictions, and for adopted measures to remain targeted, temporary, proportionate and transparent. Several declarations also stressed the importance of transparency in food-related trade measures and in levels of food production, consumption and stocks, as well as in food prices.
During the special meeting of the Committee on Agriculture dedicated to Covid-19 on 18 June 2020, several concerns were raised in respect of trade-related measures adopted by WTO members. Discussions focussed notably on export restrictions and the newly introduced agricultural support measures. In the case of export restrictions, the emphasis was mainly on the obligation to submit advance notifications of such measures. An appeal was made for members to submit all outstanding notifications, including in cases where restrictions have been revoked. Other concerns expressed related to the growing number of agricultural support measures, with some suggesting that certain measures could actually aggravate the impact of the pandemic. It was noted that, while around 20 members had imposed export restrictions, around 50 members had introduced some form of new domestic support. Members that had engaged in public or private stockpiling of food were also urged to minimize distortions and to abide by their WTO commitments when stored food is released into the market.
CONCLUSIONS: The Covid-19 crisis has had a major impact on the global economy and trade. Countries are still fighting the pandemic, and its repercussions for food supply chains are still unfolding. While agricultural trade has proven more resilient than trade in other goods owing to the essential nature of food products, additional disruptions to supply chains could start to undermine this resilience, with damaging consequences.
There is currently no supply-related reason why the ongoing health crisis should turn into a food crisis. However, disruptions to food supply chains constitute a risk for global food security. Governments' trade policy choices will play a major role in shaping how the situation evolves.
Transparency remains crucial for food security. Incomplete or insufficient information creates uncertainty that, in turn, leads to sub-optimal policy decisions. Sharing timely information on trade- related measures, as well as making information available on production, consumption, stocks and food prices, would help markets function efficiently and contribute to ensuring global food security.