An increase in food prices following the Covid-19 pandemic has intensified concerns related to global food security. For emerging markets, this has further underlined the importance of regional cooperation and innovative solutions to help overcome the challenges.
The Food Price Index, established by the UN’s Food and Agriculture Organisation (FAO) to track monthly changes in international food prices, rose for the eighth consecutive month in January, primarily as a result of Covid-19.
The index averaged 113.3 points in January, a 4.3 per cent rise against December and its highest level since July 2014.
The FAO Sugar Price Index saw the steepest rise, at 8.1 per cent. Behind this came the Cereal Price Index, at 7.1 per cent. Notably, maize prices grew 11.2 per cent and are now 42.3 per cent above their January 2020 level. This can partly be attributed to high demand in China, which imported record levels of crops last year.
Meanwhile, the Vegetable Oil Price Index rose by 5.8 per cent to its highest level since May 2012. Dairy and meat prices also saw increases of 1.6 and one per cent, respectively.
The FAO also forecast an imminent decline in global cereal stocks, with cereal utilisation for the 2020/21 period projected to reach 2761 million tonnes globally, an increase of 52 million tonnes relative to the previous season.
More broadly, the World Bank recently reported that global food prices rose by nearly 20 per cent in the 12 months from January 2020.
The bank noted that food price inflation has combined with reduced incomes, forcing many households to cut down on both the quantity and the quality of the food they consume.
Threat to food security
Covid-19-related supply chain disruptions and falls in production have brought the question of food security into sharp focus: the UN’s World Food Program (WFP) recently announced it was expecting to aid 138 million people this year, the highest number in its 60 years of operation.
The WFP estimates that by the end of 2020 there were 272 million acutely food insecure people in 79 countries, up from 149 million at the end of 2019.
The FAO’s latest food price figures will thus have served to intensify consternation among many of the world’s emerging economies.
In sub-Saharan Africa, for example, there are fears that an increase in rice prices could lead to shortages, as the region imports some 40 per cent of its rice supplies. This figure is even higher in Kenya, which imports around 600,000 tonnes of the 700,000 tonnes of rice consumed in the country each year.
The increase in the cost of rice is linked to a 25 per cent rise in the price of corn, which is widely used as animal feed. This has caused Asian livestock producers to turn to low-quality rice products as a cheaper alternative, driving up the cost of such products and pricing many African countries – which have traditionally relied on them as primary foodstuffs – out of the market.
Notably, China, the world’s top rice producer, last month imported rice from India for the first time in three decades.
A further factor behind the increase in rice prices has been a drought in Southeast Asia, which caused shipments from Thailand and Vietnam to drop by around 25 per cent last year, relative to 2019.
As well as cereals, the FAO also announced that it expected fisheries and aquaculture to continue experiencing disruption into 2021.
Regional solutions to food security
The coronavirus pandemic has exposed the vulnerability of the world’s food supply chains. From the outset, this galvanised governments in emerging economies to strengthen regional logistics networks.
If such initiatives can be prolonged and expanded upon, such markets will be well placed to offset the worst effects of the shortages documented by the FAO.
A leader in this regard has been the Gulf Cooperation Council (GCC), which in April 2020 implemented an integrated food security network, as well developing a strategic food reserve and making investments in local agriculture.
In Africa, meanwhile, the pandemic has called greater attention to the benefits of regional interconnectedness. In June last year, for example, the African Development Bank launched the Feed Africa Response to Covid-19, a strategic roadmap to safeguard food security and create regional food self-sufficiency. Elsewhere, the pandemic has sped up the adoption of various measures associated with the African Continental Free Trade Area (AfCFTA), among them moves to establish more efficient and agile regional supply chains.
Meanwhile, Latin America has also focused on regional integration as a way to address food security issues. In April last year a declaration was signed by 26 Latin American and Caribbean countries expressing their commitment to safeguarding the agriculture sector in the region.
A turn to tech
Alongside increased regionalisation, the coronavirus pandemic has given rise to the accelerated development and uptake of new technological solutions using artificial intelligence (AI), e-commerce, big data, blockchain and Internet of Things (IoT).
While there are still connectivity hurdles to be overcome in many emerging markets, such technologies hold great potential to make supply chains more efficient and boost agricultural yields.
In China, for instance, where the agricultural industry is dominated by small and medium-sized operations, the pandemic prompted a massive uptake of video streaming, e-commerce and other digital methods that directly connected producers with consumers. Blockchain solutions are also increasingly deployed in the country, particularly when it comes to food traceability.
Meanwhile, AI and IoT sensor technology are seeing widespread uptake around the world in areas such as water management. Powerful AI engines can be used in conjunction with data feeds from satellites or drones to fine-tune irrigation systems, while deep-learning algorithms are becoming increasingly adept at interpreting a range of data.
In Kenya, for example, start-up SunCulture provides farmers with solar-powered irrigation systems that use IoT technology. These have driven a 300 per cent increase in crop yields. In Nigeria, meanwhile, the Risk Sharing System for Agricultural Lending helps farmers achieve better outcomes through the Microsoft FarmBeats platform, a cloud-based system that aggregates agricultural data through the use of sensors and drones.
Elsewhere, August 2020 saw the launch of the Smart Acres vertical farm in the UAE, which uses an IoT-based system to monitor humidity, temperature and nutrients, and needs on average 90 per cent less water than traditional farming techniques.
Just a few years ago, such technology was beyond the reach of most farmers around the world, but the pandemic has massively accelerated its adoption and scaling.
Alongside increased regional integration, if global food insecurity results in a lasting boom in innovative solutions to agricultural supply chain management, this would stand many emerging economies in good stead to withstand future economic shocks.
This opinion piece was produced by the Oxford Business Group.