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The Global Economic Doctor
Scott B. MacDonald, Ph.D.
April 14, 2020

The Global Economic Doctor

Life in Times of Coronavirus: Under Pressure Food Supplies

Life in Times of Coronavirus

Under Pressure:  Food Supplies

Summary:  Since the global outbreak of coronavirus in early 2020, there has been a move to stockpile food, increase prices, and in some cases, impose export restrictions. In the U.S., as the numbers of those infected and dying rises and unemployment rapidly rockets upwards, consumer behavior has turned more cautious and food distribution centers are swamped by hungry families. This situation is not helped by the closure of restaurants and concerns over distribution systems and the health of drivers who transport food and other household items. There are also increasing questions over food cultivation and the labor needed to bring crops to harvest. Although it is too early to be sounding the alarm regarding a food security crisis, which could lead to social turmoil, the seeds for such a development are possibly being planted. The risk is the creation of a food crisis when there really isn’t one – yet. This issue is likely to become more significant if the pandemic continues through the summer, dimming hopes of economic revival and raising the specter of food shortages.

Assessing the Food Security Challenge

The food challenge revolves around supplying enough food to feed people during a major pandemic. Stated in another way, what is the balance between the actions being taken to stop the spread of the coronavirus (including the shutting down of large parts of national economies) and the cultivation and distribution of food products (which eventually means a meal on the table). While the closure of restaurants and bars has caused a disruption in longstanding food supply and demand practices, there is a growing need in other parts of society as people lose their jobs, panic-buying takes place and prices rise for some goods that have become scare.

There is a significant challenge for the work forces needed for the cultivation of food crops being able to assemble due to restrictions on labor movement (especially it involves the cross-border movement of workers). In Europe, the move to close national borders was done without much thought given to the seasonal movement of workers from Eastern Europe (Romania, Bulgaria and Poland) or North Africa (Morocco and Tunisia) to Germany, Italy and France.

Travel restrictions have reduced seasonal migration to a trickle just as farmers gear up for the harvest and just as stockpiling of food is rising. Efforts to find local workers, including students and those laid off from hospitality and entertainment, apparently have not been going terribly well.  As Laura Wellesley, research fellow at Chatham House, noted (March 27, 2020): “One of the big concerns is that we will see significant labor shortages along the logistical supply chain. If we see a shortage of migrant workers, then you’re looking at a real supply shortage.”

The following snapshots provide some idea of the key role played by migrant workers in Europe’s food sector:

  • In France 200,000 workers are needed in the next three months to bring in crops such as strawberries in the Loire Valley and asparagus in Alsace (according to the French National Union of Farmers, close to 800,000 are needed for the whole of the harvesting season; usually two-thirds of these workers come from abroad, including Central and Eastern Europe, Tunisia and Morocco;
  • German agriculture usually takes in 300,000 seasonal workers a year from Eastern Europe, a majority from Romania as well as Poland, Ukraine, Bulgaria and Hungary;
  • In the UK, some 70,000 to 80,000 workers arrive annually, many from Romania and Bulgaria to pick fruit and vegetables.

Germany went back on its initial decision that barred seasonal workers, recognizing its need. But that does not resolve the problem as Austria, Hungary and other countries have closed land borders, disrupting overland routes from Eastern Europe.

The U.S. faces the same problems.  U.S. agriculture has already been struggling to meet labor needs. Zippy Duvall, the President of the American Farm Bureau Federation, noted in 2019: “Farmers and ranchers in every state tell me that the shortage of labor is the greatest limiting factor on their farms.”

Duvall also indicated that the H-2A visa program (for seasonal foreign workers) was inadequate, with 2018’s 243,000 H-2A workers filling just a fraction of the more than 2.4 million farm jobs. The U.S. agriculture labor pool has been hurt by aging, the unwillingness of many Americans to be attracted to the sector, and the Trump administration’s push to trim the ranks of undocumented workers. In response to the labor shortage and the threat from coronavirus, the Trump administration, in early March 2020, made an additional 35,000 H-2B visas available (which makes the total available this year to 101,000). There are questions as to whether this will be enough. And as with Europe, how will many of these workers be able transit to the U.S.?

Once crops are cultivated, someone needs to process them as well as get them to the market (including aircraft, ships and harbors), and once at the market destination, someone is needed to unload and make the food available. Although a certain degree of automation is used, human touch remains part of the process. Considering the pressure to impose lock downs on large blocks of populations, the delicate question presents itself – who is going to do the human part of the work in getting food to the consumer’s table?

In early April the issue of the human element became more evident, with reports of a spike in coronavirus and a small number of deaths at meat plants in the United States, including at a JBS SA beef facility in Colorado, a Cargill meat-packing plant in Pennsylvania and a South Dakota Smithfield Foods pork facility.  Although the companies responded with temporary closures and cleanups, workers in some cases have threatened to go on strike unless work conditions are improved. This, of course, has an impact on consumers. As Bloomberg’s Isis Almeida and Vincent Del Giudice noted (April 10, 2020): “While it’s unclear whether the deaths and other cases have anything to do with the workplaces, the news exposes the vulnerability of global supply chains that are needed to keep grocery stores stocked after panic buying left the shelves empty.”

Large food chains (like Kroger, Target and Walmart) are stepping up to keep a steady supply of food for consumers, especially in advanced economies. Indeed, the situation is helped by ecommerce and delivery systems that bring food to the door. However, food delivery implies certain other factors – a steady supply of food, access to a computer, and an ability to pay. For those without access to the Internet at home or hard-pressed on the financial side (with a massive spike in unemployment looming), home delivery is not going to be the answer. Moreover, it still does not resolve the issue of food production and its supply chains.

While the U.S. and much of Europe are capable of feeding themselves, other countries do not have the same luxury. This is especially the case when considering two of the world’s key staple crops, wheat and rice. There are a number of major wheat and rice producers. If they close down their exports, this becomes a major problem. The table below illustrates the key relationships in the global wheat trade. Kazakhstan, a sizable exporter of wheat, in late March suspended exports (from March 22 to April 15) of socially significant food products (wheat, sugar, vegetables and sunflower seeds and oil) to guarantee domestic supply.  Russia also moved to briefly suspend some key exports as did Vietnam with rice in March. Vietnam later resumed rice exports in April.

The issue facing many wheat and rice importing countries is how to do they adjust when a key food supplier is suddenly not available?  Although Russia and Vietnam have resumed food shipments, if exports bans are reinstated for a lengthy period of time, there are concerns over how local populations will be fed. Major food importers like Algeria, Egypt and Indonesia have large populations and fragile medical systems, not a good combination at this juncture. Many governments (including a large number of sub-Saharan Africa) could be left trying to figure out what is the bigger problem – the spread of coronavirus or the lack of food?

One of the major concerns with food security pertains to how failures in feeding populations can result in socio-political turmoil. This has a long history, dating back to ancient periods when crops failed and populations were forced to migrate or die. Other cases involved a government’s failure to maintain the conditions for crop cultivation and distribution of food, leading to famine (a constant theme in Chinese dynastic history). Plagues have also had a similar impact on societies. Indeed, Thucydides notes that the plague which hit Athens in 430 BC led to “a state of unprecedented lawlessness…the catastrophe was so overwhelming that men, not knowing what would happen to them, became indifferent to every rule of religion or law.”

The connection between food security and socio-political stability has hardly gone away. In 2007-2008, severe droughts caused food riots in Africa. In 2010, a Russian wheat export ban resulted in food price inflation and supply problems throughout North Africa and the Middle East. In the latter case, food problems helped push the region into a wave of socio-political disruption that toppled governments in Tunisia, Libya, and Egypt and was felt in the Persian Gulf and Syria. Food has factored into riots and political unrest in other countries as well, including Haiti. Cuba also has major food security challenges, caused by a combination of decades of economic mismanagement, U.S. sanctions, and a heavy dependence on food imports.

The countries most dependent on food imports to feed their populations are generally located in sub-Saharan Africa, with the largest of these being the Democratic Republic of the Congo, Ethiopia and Kenya. Outside of Africa, the ranks of those dependent on food imports include Iraq, Syria and North Korea. One of the major worries in a number of these countries is that central authority is weak, medical systems are fragile and it will not take much to endanger food supplies.

There is some good news. Global rice inventories are close to record high and protein supplies are adequate for now. Moreover, governments and companies have been working hard to guarantee that access to food remains available. In the U.S., the corporate sector has demonstrated a solid commitment to maintaining the flow of food. More help, however, will be needed as the sting of rising unemployment has yet to become manifest in what are likely to be Depression era-like numbers. Food distribution centers are already finding high levels of demand. If nothing else, the large numbers seeking help have caught public attention and are likely to be a factor in further efforts in Washington and other capitals to meet food security challenges head on.

There is another possible scenario that could come to play, which would elevate food security concerns. What would happen if the number of deaths projected by models being used by the U.S. and other governments overestimates the number of deaths and there is a return to some type of normality? That scenario would also have to include a return to work by large numbers of people as well as advances on a preventive vaccine and better treatment protocols. If such a scenario were to unfold, the food security issue would diminish considerably. It would also do much to restore confidence in certain political leaders.

Parting Thoughts

The issue that sits down the road – and concerns many governments including the U.S. – is for how long does this state of events have to be endured. Food exists now; if the coronavirus shutdown stretches out through the summer, will there be shortages of fresh fruit and vegetables?  What about protein?  And that says nothing to the economic carnage facing the restaurant industry. Americans have remained relatively calm for now, as have Europeans. There are not any reports thus far of largescale food riots, including in Emerging Markets. But there is a time factor at work here. A prolonged period of uncertainty over food and pandemic do not make a good combination, either for public health or the economy.  There is a need for better international cooperation in both matters, while many countries will have to make a critical reassessment of their food supply security.

Most of us do not have the option of looking at the world through the perceptual lens of the U.S. baseball player, Yogi Berra, who is attributed with saying: “You better cut the pizza in four pieces because I’m not hungry enough to eat six.” At this stage, most people would be happy just to have one slice of pizza.

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