The Van Trump Report

Will Food Nationalism Disrupt Supply Chains

Grocery shoppers are not the only ones panic buying and hoarding staple food items during the current crises. Some governments are moving that direction to secure their domestic food supplies, and that has some raising the question if this is the start of a wave of food nationalism that could disrupt supply chains and trade flows?

Currently, there are a handful of countries that have already started making restrictions. A list recently released from Reuters includes the following (read the full-report HERE):  

 EURASIA: The Eurasian commission, which unites the customs zone of Russia and Kazakhstan, has decided to restrict exports of sunseeds, buckwheat, rice and rye until June 30 due to the coronavirus. This customs union, which also includes Belarus, Armenia and Kyrgyzstan, will also not be supplying soybeans and some vegetables such as onions outside of the union until June 30. The measure will come into force on April 12, Interfax news agency reported on Thursday.

RUSSIA: The Russian government Thursday Thursday adopted an agriculture ministry proposal to limit grain exports to 7 million metric tons from April through June.

UKRAINE: To defend the local market from excessive demand, Ukraine has banned buckwheat exports until July 1. Ukraine’s biggest grain traders agreed on Monday to an economy ministry proposal to limit wheat exports to 20.2 million tonnes in the 2019/20 season to avoid a rise in domestic bread prices. Bakers and millers in Ukraine, a major global grain exporter, last week asked the government to limit exports of grain and related products to maintain bread prices in the event of the coronavirus spreading.

KAZAKHSTAN: The country will allow exports of 200,000 tonnes of wheat and 70,000 tonnes of flour this month, the country’s agriculture ministry said on Friday. The ministry said Kazakhstan was also introducing quotas on exports of buckwheat, sugar, sunseeds, and certain vegetables such as potatoes and onions instead of earlier announced export bans. The country had banned flour exports last month to ensure steady domestic supply before saying it would replace the ban with quotas for flour and wheat exports.

VIETNAM: The world’s third-largest rice exporter, which temporarily suspended rice export contracts.

CAMBODIA: Some rice exports will be banned to ensure local food security during the coronavirus crisis.

INDIA: Rice traders have stopped signing new export contracts due to labor shortages and logistics disruptions that have also hampered the delivery of existing contracts.

EGYPT: Exports of legumes will be halted for three months to preserve local supply.
From my perspective, we are still in the early stages of the economic fallout from the virus, and no one can be sure of how countries will react as the virus spreads or when we come out on the other side. Trade restrictions created out of fear and leading to protectionism can often take time to reverse and can often cause more harm than good. At the moment, we have no wide-spread global crop failures or other significant supply problems, but who knows as we move forward. 

Weather could ultimately become a huge “wild-card”… What happens if nations start to encounter weather-related production hiccups? 

Another problem that could threaten the world’s food supply is the stay-at-home orders by countries across the world. Even though there are varying levels of enforcement, if agriculture workers are legally unable to harvest crops, it could cause a lapse in food flow. This is definitely a fluid situation that I am keeping my eye on.

Officials are also concerned that frenzied shopping coupled with protectionist policies could eventually lead to much higher food prices, meaning the public, as well as governments, could create a self-perpetuating cycle that ultimately leads to higher prices. As a producer, we would certainly welcome higher prices! Just a lot of things to think about and consider as a producer and trader of agricultural commodities. (Source: The Wall Street Journal, Reuters; TheHill, Bloomberg)

– The Van Trump Report (Kevin Van Trump)

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