· Breakfast staples like eggs, bacon and orange juice are seeing steep price spikes due to the coronavirus outbreak
· Daily-rated farm labor hard-hit by pandemic-related lockdowns as harvesting grinds to a stop
Chocolates, chips and cake.
That’s all Ling Chia, a financial industry worker in London, managed to buy after visiting more than 10 supermarket one recent weekend.
“Supermarkets were cleaned out — only two shelves had food — the ones for chips, chocolates and cakes, so I am well-stocked with them,” said Chia, who is in her 50s. “I have a lot and I mean a lot of chips, chocolates and Victoria sponge cakes.”
While anecdotes like Chia’s are dime-a-dozen in big cities around the world in the earlier weeks of their respective COVID-19 outbreaks, the headline-hogging panic-buying and temporary supply shortages are leading to more severe disruptions to global food supplies that are only now showing up.
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Demand for immunity-boosting foods, such as Vitamin C-rich orange juice, has spiked just as fewer pickers are hitting the orange groves due to the outbreak. Orange juice futures have been one of the best-performing financial instruments in the first quarter of this year, with futures gaining 21% while the Dow Jones Industrial Average and S&P 500 were both down by about 20%.
The only other commodity performing better than OJ has been eggs — the price of a dozen large white eggs has more than tripled to just under $3 since the beginning of the year.
Bacon and sausages have not been spared, with news that Smithfield is closing one of the largest pork processing plants in the US indefinitely as over 200 of its employees have come down with the coronavirus, constituting over half of the active cases in South Dakota.
This plant alone accounts for 4–5% of US pork production and adds to the growing list of other meat processing plants that have shuttered across the industry, pushing the US “perilously close to the edge in terms of our meat supply” as warned by the CEO of Smithfield.
The closure of these processing plants has directed pressure upstream, as livestock farmers find fewer places available for slaughter. North American meat demand has tumbled 30% in the past month as declining restaurant sales outweighed the increase in retail demand. Since March 25, nearby lean hog futures have dropped 35%, and live cattle prices are down 15%.
The evaporation of food service demand as well as a bottleneck in existing processing capacity are similarly behind why milk is literally going down the drain. While more people are cooking and eating at home, the supply chain that is geared towards food service is unable to pivot immediately to consumer needs.
In India, a nationwide lockdown on March 24 has led to a massive labor shortage as millions of daily wage workers were forced to go back to their villages.
This labor shortage has also eaten away at India’s food security as crops lie rotting in the fields. Laborers are unable to get to the fields for harvesting, while whatever is harvested struggles to reach consumers as there are too few truckers still hauling.
While the US and Europe also face a similar situation of migrant labor shortage for their harvests, their economies are less dependent on agriculture than many of the world’s developing countries.
For the world’s poor, labor is their primary asset, and the disruptions spawned by Covid-19 hit precisely the hardest at labor. As such, the International Food Policy Research Institute has warned that the danger of a food crisis for the world’s poor is mounting.
Many developing countries, particularly in Africa, are net importers of food, and the average African spends more than half of their income on food. This makes them particularly vulnerable to disruptions in food supplies just as they are reeling from the impact of swarms of desert locusts ravaging their crops. Already, in Nigeria, rice prices have jumped by more than 30% just in the last four days of March.
At the same time, some countries have announced export bans of certain crops in order to pre-empt potential shortages. Consumer panic and hoarding behavior has distorted the market and amplified the impact of logistics and labor-driven dislocations.
“It’s a wakeup call,” said Ajay Vir Jakhar, chairman of Bharat Krishak Samaj, a group representing farmers in India. “Lots of countries will now start investing in their farming systems where their dependence on food from other nations reduces.”
But if more countries join the ranks of those implementing food export restrictions, in particular major cereal exporters, it may ironically worsen the impact on food security.
This is a classic example of a prisoners’ dilemma.
When governments backpedal on free trade and start imposing artificial restrictions, it eventually leads to a sub-optimal global outcome and hurts the most vulnerable population. At an individual level, when someone chooses to hoard food, it perpetuates similar behavior and also increases potential food wastage down the line.
Madam Koh, a 61-year-old housewife in Singapore, is grappling with a different sort of dilemma.
She has not visited a supermarket or wet market since the country closed non-essential businesses on April 7th and advised people to stay at home. But she may now have to brave the risks to venture outdoors because online deliveries are a hit-or-miss, with hard-to-get delivery slots and items running out of stock.
“My entire family hasn’t had fresh vegetables or fruit in over a week,” she said. “Very bad, not good for health.”