As we have oft underlined throughout the year, trade in food and agricultural products has been more resilient than trade in other products during the first part of this year, according to new research by the World Trade Organization (WTO). In a paper entitled “Covid-19 and agriculture: A story of resilience”, the WTO notes that while overall global trade has fallen as a result of the Covid-19 pandemic, agricultural and food exports grew by 2.5% year on year in Q1, reflecting both the essential nature of food and the fact that shipments of bulk agricultural commodities have not been subject to major disruption. Looking more closely at the numbers, it becomes clear that trade in non-edible products, such as raw furskins, wool, and live plants, declined sharply, sometimes by over 50%. Meanwhile, meat, sugar and dairy products were among the biggest gainers. The paper observes that …“Agricultural trade flows changed significantly, due notably to a sudden change in consumption patterns triggered by the measures put in place..” A picture emerges which demonstrates the evolution of this trend tracking the spread of the virus and the resultant introduction of new sanitary and phytosanitary measures, tariff reductions and export restrictions. This can be clearly seen in Agricultural exports from Asia, which fell during Q1, while European and North American exports held firm until April. The WTO observes that …“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,” the WTO says in the report, adding that it is vital that governments ensure that any trade-related measures in response to the crisis do not disrupt food supply chains….“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,”
COVID-19 continues to have a major impact on international trade. The repercussions for food supply chains continues to evolve in response to the crisis.In the words of the WTO , it is “critical to keep trade flows open, and to ensure that food supply chains stay operational”. This view is reflected by many governments who have classified agriculture, food processing and distribution as essential activities in order to guarantee the availability of food and support agricultural production. Given the criticality of food supply, it is perhaps unsurprising that agricultural trade has demonstrated itself to be highly resilient. In fact, supply chains have been remarkably consistent across all commodities, rather it has been the divergence in demand for more cyclical commodities such as energy, relative to foodstuffs that has witnessed the stark contrast. The pandemic has provided for a significant stress test of our trading and trade financing strategies – strategies that have held firm throughout. This in large part driven by many of our the products in which we are focussed on, have been beneficiaries of the fundamental elevation of food security and its availability in government policy. From a supply side perspective there is currently no reason why a health crisis should turn into a food crisis. However, we expect government involvement and choices in relation to supply chain issues and trade policy to play a heightened role for the foreseeable future.
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