Home Impact producer How supply chains, storage and climate change affected by COVID-19 are driving up food prices

How supply chains, storage and climate change affected by COVID-19 are driving up food prices

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While globally, harvests and crop prospects are expected to be below expectations, demand for food has remained high due to storage by countries, driving prices higher.

Rising transportation costs due to soaring fuel prices are expected to push up the prices of vegetables and fruits in the coming weeks, Delhi traders warned on Wednesday as consumable prices rose further this week.

The warning, although it may seem trite, came days after experts from the International Monetary Fund said food prices are expected to rise by around 25% in 2021 compared to 2020, and that too in a time when food prices have reached multi-year highs in both developing and developed countries (eg, soaring cooking oil prices in India).

According to IMF experts Christian Bogmans, Andrea Pescatori and Ervin Prifti, since their April 2020 low, international food prices have risen by 47.2%, reaching their highest level in May 2021 since 2014.

IMF experts highlighted several factors behind the increase, including how COVID-19[female[feminine the pandemic has disrupted supply chains, rising transport costs due to rising fuel prices (eg India), as well as climate change. Let’s take a look at these one by one.

How? ‘Or’ What COVID-19[female[feminine woes added to food inflation

IMF experts say that at the start of the pandemic, disruptions in the food supply chain, a shift from food services (such as restaurants) to retail grocery and consumer storage (coupled with a strong appreciation of the US dollar) have pushed up consumer food price indexes in many countries.

Consumer food inflation peaked in April 2020, although producer prices for basic commodities, including food and energy, fell sharply due to the disruption in demand for commodities. basic.

Although in early summer 2020, various consumer food prices moderated, lowering food inflation in many countries. As a result, consumer price inflation has slowed globally from around 4% in the first quarter of 2020 to around 2.5% in the second quarter.

As containment measures were subsequently relaxed, the rise in consumer prices accelerated slightly but remained below the level before the pandemic.

However, in August 2020, the food component of the CPI increased at a much faster rate than the overall CPI in all regions of the world. Globally, in August 2020, food prices were on average 5.5% higher than in August 2019. This was largely due to the storage of food by countries as well as by individuals.

COVID-19[female[feminine exposed vulnerabilities in the food system, affecting both production and farm-to-fork supply. These vulnerabilities still persist today.

In addition, together with rising ocean freight rates (rates have increased two to three times in the past 12 months), rising fuel prices (both diesel and gasoline) and a shortage of drivers road (again due to COVID-19[female[feminine ) increase the cost of road transport services.

Higher transportation costs will eventually increase consumer food inflation, experts say.

The recent sharp increase in international food prices has already slowly started to trickle down to domestic consumer prices in some regions, with retailers unable to absorb the rising costs, passing the increases on to consumers.

The impact of these factors is already visible in New Delhi, where the price of vegetables like onion and tomato, and fruits like pomegranate which comes mainly from Maharashtra, is higher this year.

Attributing the rise in prices to rising transportation costs, traders said PTI that if the wholesale prices of a vegetable increase by Rs 5 per kg, that translates into a retail increase of Rs 10 to 12 per kg of that vegetable.

Unlike pomegranate, traders say rising fuel prices haven’t had much of an impact on seasonal fruits like mango, as they are perishable and also come from shorter distances like Haryana. and Uttar Pradesh.

The other side: How climate change is impacting food prices

While it’s easy to blame the rising food inflation on the pandemic and its impact on the global supply chain, according to the IMF, food prices rose before the pandemic. And that’s where climate change comes in.

In the summer of 2018, China was hit by an African swine fever epidemic, wiping out much of the Chinese pig herd, which accounts for more than 50% of the world’s pigs.

This pushed pork prices in China to an all-time high in mid-2019, creating a ripple effect on the prices of pork and other animal proteins in many parts of the world. This was made worse by the introduction of Chinese import tariffs on US pork and soybeans during the US-China trade dispute.

Keeping politics aside, given the relationship between disease and climate change, the latter’s role in increasing food inflation becomes clear.

For those who are still not convinced, let’s take another example. In 2010, the floods in Pakistan not only caused loss of human life, but also resulted in the loss of 2.5 million tons of rice, 7.5 million tons of sugarcane, 0.7 million tons of cotton and 0.3 million tonnes of maize. The flood caused more than $ 16 billion in economic losses. In the same year, a severe heat wave and drought in Russia triggered a grain embargo.

According to a Cornell University study published in the journal Nature “Climate change has cost the world seven years of increased agricultural productivity since the 1960s.” Global agricultural productivity is 21% lower than it could have been without climate change, according to the study.

The loss “is equivalent to pressing the pause button on productivity growth in 2013 and not seeing any improvement since,” said economist Ariel Ortiz-Bobea, who led the study, in a report published on the Cornell University official site.

The effect is significantly more severe (a reduction of around 26 to 34 percent) in warmer regions such as Africa and Latin America and the Caribbean, the study added.

According to a report Mongabay, climate change is one of the main reasons for the depletion of fishing stocks in the Sundarbans, in addition to harmful fishing practices and pollution.

The future does not look bright either if countries do not act now on climate issues.

Recently, a new World Bank report, “Turn Down The Heat,” projected future scenarios in a world 2 degrees and 4 degrees Celsius warmer, and the likely impact on agricultural production.

“Dry years will become drier and wet years will become wetter, which will make the summer monsoon extremely unpredictable. It will cause massive losses in agricultural production,” according to a report by The pioneer of everyday life.

The World Bank report also describes some of the possible impacts of climate change on food resources, such as declining fish stocks (due to declining coral reefs), reduction of available land suitable for crops and ecosystems, reduced crop productivity, especially wheat and maize, and negative yields for fruit and nut trees, as well as disruption of fish and shellfish production as well as fish migrations.

The Sundarbans in India are already facing some of these threats. As a result, fishermen from the region migrated to other coastal areas of the country.

The impact of climate change is also mentioned in the IMF report. According to IMF experts, “the recent La Niña 2020-2021 episode – a global weather event occurring every few years – resulted in dry weather in major food-exporting countries including Argentina, Brazil, Russia , Ukraine and the United States. This has resulted in, in some cases, harvests and crop prospects below expectations. “

But global demand for food has remained high. The latter could be largely due to the storage of food by countries as well as by individual consumers, he said.

What other factors are causing food prices to rise

outraged COVID-19[female[feminine , transport and climate change, IMF economists say that for emerging markets and developing economies like India, an additional risk factor is the depreciation of the currency against the US dollar, possibly due to declining export and tourism income and net capital outflows.

Since most food products are traded in US dollars, countries with weaker currencies have seen their food import bills increase.

With contributions from agencies