Context
As global trade falls and supply disruptions persist, a prolonged lockdown will adversely affect food security.
Fears of food crisis and impact of COVID-19 on agriculture
- The COVID-19 pandemic has led to global concerns on the state of agriculture and food security.
- Warning of food crisis: On the one hand, the Food and Agriculture Organization (FAO) has warned of a “food crisis” if countries do not protect vulnerable people from hunger and malnourishment.
- On the other, farmers face a stalemate as they are unable to work on their land, earn remunerative prices and gain access to markets.
We can try to understand the impact of COVID-19 on agriculture with three questions.
- One, does the world have enough food to feed its people?
- Two, is food available at affordable prices?
- Three, how are farmers coping with the lockdown?
Food stocks and prices in the world
- Cereal stock in the world: According to the FAO, as on April 2, 2020, the total stock of cereals in the world was about 861 million tonnes. This translates to a stocks-to-use ratio (SUR) — i.e., the proportion of consumption available as stocks — of 30.7%.
- The FAO considers this “comfortable”. The SURs for wheat, rice and coarse grains were 35.3%, 35.1% and 26.9%, respectively.
- Variation among nations: World stocks are different from national stocks. About 52% of the global wheat stocks is held by China, and about 20% of the global rice stocks is held by India.
- Rice importers may suffer: If the major holders of global stocks decide to turn precautionary and stop exporting, and if the lockdown is prolonged, countries dependent on rice imports will suffer.
- Restriction on wheat export: Kazakhstan, a major wheat exporter, has banned exports. Russia, the largest wheat exporter, is expected to restrict its exports.
- Restriction on rice export: Vietnam, the third-largest rice exporter, has stopped its exports, which will reduce the global rice exports by 15%.
- If India and Thailand too ban exports, the world supply of rice will sharply fall.
- In March 2020, the Philippines and the European Union, major rice importers, had inventories of rice enough to feed their populations for about three months.
- Others, however, had inventories to hold on for about one month only. If the lockdown continues beyond a month, these countries will face food shortages.
Stocks with India and output projections
- India’s foodgrain output is projected to be about 292 MMT in 2019-20.
- Stock with FCI: On March 1, 2020, the total stock of wheat and rice with the Food Corporation of India (FCI) was 77.5 MT.
- Buffer stock norms: The buffer norms for foodgrain stocks — i.e., operational stock plus strategic reserves — is 21.04 MT.
- Similarly, for pulses, India had a stock of 2.25 MT in mid-March 2020.
- In both cases, the rabi harvest is slated to arrive in April 2020, and the situation is expected to ease further.
Price fluctuation of food in the world
- Fall in demand and supply and price fluctuation: There is always an element of uncertainty on how prices will behave if both demand and supply fall together.
- Prices in different markets fluctuate considerably given differences in the extent of production, stocks, arrivals and supply disruptions.
- According to the FAO, the world food price index fell by 4.3% and world cereal price index fell by 1.9% between February and March 2020 due to the weakening demand for food and the sharp fall in maize prices owing to poor demand for biofuels.
- Price rise in Western economies: Retail prices of rice and wheat have been rising in the Western economies in March 2020.
- The major reasons identified are panic buying by households, export restrictions by countries and continuing supply chain disruptions.
- Retail prices of beef and eggs have also been rising.
Demand and price fluctuation in India
- WPI and CPI for food in India were rising from mid-2019 onwards, reflecting a rise in vegetable prices, especially onion prices.
- January and February 2020 saw a moderate fall in these indices, but vegetable prices have remained high.
- If food prices rise due to the lockdown, it will be on top of an already rising price curve.
- However, unlike in the West, food prices in India have not risen after the lockdown.
- While supplies have declined, demand has fallen too. This is because there has been a sharp fall in the consumption of foodgrains and vegetables. Similarly, the consumption of milk has fallen by 10-12%.
The crisis in the harvesting and marketing of the crops
Harvesting and marketing of crops are in crisis across India, because of-
- Disruptions in the procurement of foodgrains by government agencies.
- Disruptions in the collection of harvests from the farms by traders.
- Shortage of workers to harvest the rabi crops.
- Shortage of truck drivers.
- Blockades in the transport of commodities.
- Limited operations of APMC mandis; and
- Shutdowns in the retail markets.
Conclusion
The world and India have adequate food stocks. But as global trade shrinks and supply disruptions persist, a prolonged lockdown will adversely affect food security in many countries. Concurrently, farmers face acute labour shortages, falling farmgate prices and lack of access to input/output markets. It is unclear who is benefiting, but farmers, workers and the poor are at their wits’ end.
