Food Security: Countries resort to hoarding over rising prices amid COVID-19

*Economies are trying to protect themselves on concerns that the Coronavirus will disrupt port operations and wreak havoc on global trade ─Bank of America Corporation Analysts

Isola Moses | ConsumerConnect

As early purchases underscore how economies are trying to protect themselves on concerns the disruptive Coronavirus will disrupt port operations and wreak havoc on global trade, agricultural commodity buyers from Cairo to Islamabad have been on a shopping spree since the pandemic upset supply chains.

Jordan  to have built up record wheat reserves while Egypt, the world’s top buyer of the grain, took the unusual step of tapping international markets during its local harvest and has boosted purchases by more than 50% since April, Bloomberg report said.

Likewise, Taiwan has announced that it will boost strategic food stockpiles, while China has been buying to feed its growing hog herd.

Report says the early purchases underscore how countries are trying to protect themselves on concerns the COVID-19 will disrupt port operations and destabilise global trade.

The pandemic has already upset domestic farm-to-fork supply chains that provided just enough inventory to meet demand, with empty store shelves across the world leading consumers to change their shopping habits.

The Bank of America Corporation analysts led by Francsico Blanch, Head of Global Commodities, said: “COVID-19 has forced consumers to shift from just-in-time inventory management to a more conservative approach which was labelled just-in-case.

“The result is that consumers are holding more inventory as a precaution against future supply disruptions.”

A number of factors are adding to a rally in prices for corn, wheat and soybeans. These include floods in China and the country’s increased purchases to meet commitments under its phase one trade deal with the US.

However, Beijing is also keen to heed the lessons of the pandemic and ensure its stockpiles are plentiful enough to withstand supply issues, people familiar with the situation said last month.

In practical terms, a number of countries have taken the following measures to protect themselves just in case of any worsening global trade:

     Country           Action Taken

  1. Jordan              Further adding to wheat stockpiles already at 17 months of supply
  2. Egypt                Purchases through international tenders up 51% since April
  3. Morocco           Allowed duty-free wheat imports for rest of 2020
  4. Pakistan           Currently boosting purchases of wheat and sugar
  5. Taiwan              Announced plans to boost food reserves

Meanwhile, Abdolreza Abbassian, a Senior Economist at the United Nations’ Food and Agriculture Organisation (FAO), stated that some countries decided to bring their food purchases forward to ensure supplies in case the Coronavirus rattles supply chains.

Abbassian disclosed that only a handful really sought to boost strategic reserves, such as Egypt and Pakistan.

But they also had other reasons to do so, including access to foreign currency, the size of domestic supplies and the need to keep domestic prices in check, said he.

Bad harvests in Turkey and Morocco added to their need to boost imports, report said.

Abbassian, in a telephone interview from Rome while referring to early purchases, said: “Many may buy now but could buy less into the New Year because they won’t need it.

“I could see that happening, especially as winter wheat conditions are not that great and if you wait, prices could rise further.”

The report noted that agricultural prices have been on the rise as countries stepped up purchases, adding to demand from China and a drought in the Black Sea region.

That has helped push the Bloomberg Agriculture Subindex, which measures key farm goods futures contracts, up almost 20% since June.

Sugar prices have gained a boost as China replenished stockpiles, said Geovane Consul, Chief Executive Officer of a Brazilian sugar and ethanol joint venture between US agribusiness giant Bunge Limited and British oil major BP Plc.

Meanwhile, as futures contracts on key agriculture products have rallied since June 2020, China could still add more fuel to the fire next year.

The biggest importer of everything from crude oil to iron ore and soybeans, is planning to increase its mammoth state reserves as part of its five-year plan.

Commerzbank AG Analyst Daniel Briesemann,  in a research note, stated: “China would certainly support commodities prices if it made such extensive purchases.”

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