WTO Issues New Report
Regarding Impact of COVID-19 Crisis on Agricultural Trade
·
Agri Trade Shows Rise in Staples but other Segments Fall
The WTO Secretariat has published a new information
note 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 increased
in March and April. However, the crisis has exerted further downward pressure
on food prices, and therefore on producer revenues.
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 warns
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 COVID-19 outbreak and its
rapid spread caught many governments and agricultural producers by surprise,
prompting immediate policy responses by WTO members. Many of the initial
measures were expected to impact negatively on the
agricultural sector. But agriculture has in fact shown
resilience, with a trade performance that has fared better than other sectors.
·
The initial response measures were aimed at addressing members’ most urgent concerns:
containing the virus to save lives, and ensuring food security at home. In
addition to lockdowns, these measures included policies that both facilitated
and restricted agriculture trade: new sanitary and phytosanitary
(SPS) measures and tariff reductions, as well as export restrictions. There was
also an increase in stockpiling. Agricultural trade flows changed
significantly, due notably to a sudden change in consumption patterns triggered
by the measures put in place.
·
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 to help agricultural
producers to cope with the “new normal” situation. While many
governments have gradually relaxed lockdown measures, removed several export
restrictions, and introduced domestic support measures to support the
agricultural sector, the pandemic continues to spread in different parts
of the world and is expected to continue to influence the demand for and supply
of agricultural products.
·
Trade in agricultural products
has been more resilient than overall trade. This reflects the essential nature
of food and the resulting relative income-inelasticity of demand for it, as
well as the fact that most agricultural trade (notably cereals and oilseeds)
takes place in bulk marine shipments that have not been subject to major
disruptions. 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
an increase of 3.3 per cent in March, followed by a 0.6 per cent increase in
April, although the preliminary data for May indicate a small decrease (-1.3
per cent) compared to 2019.
·
This overall picture conceals the
fact that demand for certain agricultural products (e.g. non-food agricultural
products such raw fur skins, wool or flowers) dropped dramatically, while
increasing for others (e.g., staple food, processed fruits and vegetables)
reflecting initial panic buying and increased home-based consumption. In April
2020, exports dropped also for several food products, notably for higher-value
products, such as fresh produce, dairy and meat, which are generally more
dependent on sales to restaurants, schools and the tourism sector than to
households. In addition, high-value perishable products transported by air were
hit harder by the sudden collapse in air passenger
traffic, which diminished air freight capacity and raised costs.
·
Impacts have varied across
regions. Asia saw its agricultural exports decline in March 2020, followed by
Europe and North America in April. But some regions
have seen exports increase compared to the same period in 2019, with the
biggest increases in South America, driven by Asian demand for the region’s
exports of products such as soybeans, sugar and meat.
·
Food prices were already on a
downward trend at the beginning of 2020. The COVID-19 crisis exerted further
downward pressure on prices, and therefore on producer revenues. Although June
saw the first increase in world food prices since the beginning of 2020, prices
are expected to remain at low levels amid the economic
downturn.
·
While world food stocks and
production levels for the most widely consumed staples – rice, wheat and maize
– are at or near all-time highs, and lower prices in principle make food more
affordable, the COVID-19 pandemic’s impact on jobs and incomes has increased
the number of hungry people. 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.
Producing and storing enough food is not sufficient if it does not reach those
in need. By contributing to the availability and affordability of food, trade
remains a crucial part of the solution to countries’ food security concerns –
particularly at a moment when people’s incomes are under pressure. It is
therefore critical to keep trade flows open, and to ensure that food supply
chains stay operational.
The report can be found here.