The impact of The Great Lockdown on Food industry

Posted by SGS Digicomply Editorial Team on 4/30/20 3:58 PM

The rapid spread of novel coronavirus, from a regional problem to a pandemic took a matter of months[1]. Therefore, efforts to control and mitigate its impact require a global response.

To date, there is no evidence that food is a source, or route of transmission, of the COVID-19 disease. After our article dedicated to Food Safety and COVID-19, we pursue further with an in-depth analysis of the global health crisis impact on the food production sector and overall agriculture.[2][3][4] The state of emergency measures in force over the globe are disrupting food supply chains, markets, and trades, with reflecting: [5][6]

  •  - Border delays for food containers, resulting in spoilage and increased food waste, especially for perishable goods
  •  - Obstructed movement of seasonal agricultural and food industry workers, that impacts the availability of the local and migrant workforce at the start of the agricultural season
  •  - Shortage of production inputs, such as fertilizers, veterinary medicines, and additives, especially those commonly sourced in areas impacted by COVID-19 and under restriction or slowed down for import and export (e.g. vitamin C, vitamin B, sorbic acid, citric acid, non-nutritive sweeteners are predominantly made and exported from China[7])
  •  - Restriction of tourism, closure of restaurants, canteens, bars, cafés, and suspension of school meals and other out of home eating services has changed the balance of the consumer demand and the way food is bought[8]

According to the FAO, markets have responded adequately to the crisis and disruption has been minimal; the challenges faced involve the logistics of transporting food and lower volumes of fresh fruits and vegetables. Disruption to the food supply chain is to be expected through April and into May. The FAO has also identified developing countries and labor intensive forms of production (agriculture, fisheries/aquaculture) as being at particular risk. Prevention and risk reduction strategies are now of the utmost importance. Indeed, the FAO warns that future measurements must be made carefully and take into account lessons learned from the global food price crisis 2006-2008, and in 2010/2011, as well as during the 2014 Ebola virus outbreak in West Africa.

Restriction of movement impact

The International Organization for Migration reports that approximately 39% of the world population is currently living in countries with complete border closures. A total of 44,397 restrictions were recorded by April 2, 2020. These are mostly connected to workers unable to reach work locations due to the confining measures or not willing to migrate for work for safety reasons.

The illness itself reduces the number of workers, while social-distancing rules also reduce the number of people able to work in one place at the same time, slowing down the speed and volume of activity. These factors resulted in the temporary suspension of operations and shutdown of businesses in response to employee illnesses cases of COVID-19 and/or unsustainable profitability. Some of the largest food producers in the US have preventively shutdown the business for extra cleaning and illness.

Particular problems involve migrant workers facing issues such as a lack of education regarding the risk of contagion, inadequate supply of personal protective equipment and lack of social distancing. These problems are more evident where workers do not benefit from the health care system of the country in which they are working, or where no unemployment benefits are set.[9]

Having recognized the essential contribution to the global food economy of migrant workers, some governments such as those in Europe, the US, Canada and Australia have retracted or redefined March decisions that limit the movement of the labor involved in the harvest, transport, and processing of foodstuffs. However, El Salvador has stopped all air travel in to and out of the country, Panama has forbidden all commercial air travel, and many airlines have cancelled or condensed flights to cut losses, making the movement of migrant workers difficult or impossible. These have led to desperate actions. A farmers’ association in Canada organized airplane transport of migrant workers urgently needed for labor intensive crops, as cucumbers, peppers and broccoli.

Changes in demand and way of buying food

During the financial crisis in 2008, sales went down as incomes reduced and food prices increased as a result of restrictive trade policies, that shocked the balance between demand and domestic supply chains.[10]

In the ongoing COVID-19 outbreak a rapid change in demand is noticeable, from a swift increase at the beginning of the year, to a sharp decline in the second and the third months of 2020. Psychologists explained that this January peak can be attributed to the “panic buying” of essential and non-essential products (food and non-food items, self-care products, etc.) caused by fear of the unknown, the spreading effect that fear has, and exposure to conflicting messages.[11] [12] [13]

The changes in dietary patterns are not unexpected. In particular, a reduction in consumption of meat and other animal protein-based food, and fresh fruits and vegetables, due to the non-scientific based fear that it might be a source of infection, is foreseen. Fear of contagion can also influence the way food is consumed and the frequency of consumption – as evidenced by fewer visits to markets and restaurants, in favor of eating at home and food delivery.

February and March saw a sharp decline in demand trends. According to the Food Price Index a drop in the price of food commodities, such as vegetable oil, sugar, milk powders, etc., was driven by lower demand, which shows a potential correlation to a drop in global oil prices. Cereals prices declined, with exception of rice for which quotations rose for the third consecutive month, as reported by New Food Magazine. At the same time, the meat price index shows a drop in international quotations for ovine and bovine meats, trade which got stuck in logistic bottlenecks, while pig meat quotations rose.

Products claiming immune system boosting properties have been buoyed by the coronavirus crisis. There has been sudden growth in imports of garlic and ginger to the Russian Federation, and spikes in demand for Echinacea and Chicory in the USA, driven by online shopping.

Economic impacts of “The Great Lockdown” on food markets

According to a forecast by the International Monetary Fund (IMF) the global economy is expected to contract by 3% of world GDP (gross domestic product) this year; compared to expectations in January of 3.3% growth. Calling it “The Great Lockdown” the IMF points out that the outcome could be worse than the financial crisis of 2008–09, and warns that the resulting recession could be the worst since the Great Depression. Several important aspects of the global economy have been impacted in this crisis:

 - China’s economy (that contributes 16% of global GDP) is under stress
 - Exchange rates have devalued, especially those in respect of the US dollar
 - Supply chains and demand have been strongly impacted by mobility restrictions
 - Business costs have increased while credit availability tightened under the health-emergency measures

Global food markets will be affected by these changes, especially in the most sensitive sectors of the food supply chain, as well as in logistics distribution and transportation.

The OECD forecast for global economic growth from March, dropped from 2.9% to 2.4%, with the warning that figures could drop to 1.5% if the pandemic is severe and prolonged.

On the other hand, if the pandemic is shown to have a seasonal character and gradually disappears in the second half of 2020, the IMF forecast projects a stabilization of the global economy in 2021, with an increase in GDP of 5.8%, taking into consideration the use of policies to assure the liquidity of markets and support firms and households.

An interesting example of the ways governments have sought to protect domestic systems is the extension of national provisions in Italy, which defend the transparency of food label information indicating the country or provenance of food ingredients to support local food companies that are now struggling to comply with EU regulation 2018/775, due to the temporary closure of packaging companies across Europe during the COVID-19 pandemic. The European Commission recently approved the use of existing labels, in notification 2020/231/I, until the stocks of packaging and labels are completely exhausted.

Supporting legislation for COVID-19 state of emergency

From the outset, in late 2019, the majority of publications related to COVID-19 were informative news updates; very few were official statements. From March, however, the first official documents began to be published.

A great number of measures to contain the spread of the virus are being initiated or are already in force around the globe. Many of these controls and restrictions have resulted in a downturn in agricultural production and trade. In response, and recognizing the necessity of technical and logistic advice, more guidance has been released to support food businesses during the coronavirus disease pandemic. At the same time, temporary derogations on standard requirements have come into force with the aim of adjusting the control system to be more functional in these exceptional circumstances.

Different guidance documents to support the food businesses during the coronavirus disease pandemic were published, such as:

  • The UK’s Food Standards Agency (FSA) instructions for the producers to comply with general GHP, strict control of the employee sickness and practice physical distancing in the working space;
  • Simplification of the import procedure and phytosanitary control in the Russian Federation;
  • Temporary Policy for FSMA, issued by the FDA, on onsite audit requirements supplier verification, etc. including the special provisions for critical infrastructure industries, such as food and beverage industries, assuring that production facilities have access to inputs and workforce, patency of roads for all modes of transportation, ensures prioritization of foodstuffs on the border inspection facilities and continuity waste management and telecommunication services, etc.

While authorities are trying to preserve the consistency of the food chain by implementing new regulations that focus on the crisis conditions, some consumer organizations are highlighting the fact that above all levels of safety must be maintained, and that such derogations might jeopardize consumer rights and food safety. For example, the EU implementing regulation (EU) 2020/466 which entered in force on April 1, 2020, refers to the application of remote communication end electronic forms of official certificates, defining conditions of resourcing other control laboratories besides the official ones, conditions of involving external personnel in official controls activities and other specifications.

A dedicated organization, Foodwatch, expressed concern in a letter to Commissioner Kyriakides, European Commissioner for Health and Food Safety, observing that in its opinion the EU is moving away from tightening the implementation of the EU food law by reducing safety checks and allowing incorrect product labeling, which might jeopardize consumer rights and safety.

Mitigating the impact of COVID-19 on food trade and markets

By now, an impressive number calls to action from food associations, joined organizations and coalitions, have been made with a common goal – to fight the coronavirus pandemic, attain stability, and support the most vulnerable.

On a global scale, on April 8, the FAO introduced the Food and Agriculture Policy Decision Analysis (FAPDA) open-access platform for countries and their policymakers to share and access the latest policy decisions and ideas worldwide, to mitigate the impact of the COVID-19 pandemic on food and agricultural systems. It outlines avoiding export bans, maintaining the food supply and value chain, and support for social protection programs for the most vulnerable. 

Within the framework of the United Nations (UN) Global COVID-19 Humanitarian Response Plan, the FAO has reviewed the potential impacts of the virus and now is seeking USD 110 million to maintain the provision of critical support to the most vulnerable and address the secondary effects of the virus. Four main actions are included in this plan: food production assistance, assuring continuity of the food supply chain and food safety, and creating a global data facility.[14]

WHO, FAO and WTO General directors meeting, held on March 31, 2020, aimed to align measures towards minimizing unintended impacts on international trade, food security and livelihoods. Moreover, in this meeting it was pointed out that food trade restrictions could be associated with uncertainty about food availability, which can further cause instability in demand and food supply, price spikes and price volatility. In order to reduce this uncertainty, it is of highest priority to ensure the undisrupted flow of information in real time, securing rational decisions of the parties of all levels – the producers, traders and consumers.[15]

At the Extraordinary G20 Agriculture Ministers' Meeting of FAO, IFAD, the World Bank, and WFP, a joint statement was issued on April 21, 2020, which refers to the activities of monitoring world supplies and price developments, global coordination of responses on mitigation and recurrence prevention actions.[16]

 

[1] http://www.acofesal.org/detalle.asp?apt=95&id_contenido=2167

[2] https://www.digicomply.com/blog/food-safety-and-covid-19

[3] http://www.fao.org/documents/card/en/c/ca8623en/

[4] https://ec.europa.eu/food/sites/food/files/safety/docs/biosafety_crisis_covid19_qandas_en.pdf

[5] http://www.fao.org/emergencies/appeals/detail/en/c/1270012/

[6] http://www.fao.org/2019-ncov/q-and-a/impact-on-food-and-agriculture/en/

[7] https://www.canr.msu.edu/news/covid-19-health-crisis-and-a-resulting-food-crisis

[8] http://www.fao.org/2019-ncov/resources/policy-briefs/en/

[9] https://www.canr.msu.edu/news/covid-19-health-crisis-and-a-resulting-food-crisis

[10] http://www.fao.org/3/i2330e/i2330e04.pdf

[11] https://www.foodnavigator-usa.com/Article/2020/04/18/WATCH-Recessionary-behaviors-are-just-starting-to-take-hold-but-self-care-spending-is-up-say-IRI-BCG

[12] https://www.bbc.com/worklife/article/20200304-coronavirus-covid-19-update-why-people-are-stockpiling

[13] https://edition.cnn.com/2020/03/09/health/toilet-paper-shortages-novel-coronavirus-trnd/index.html

[14] http://www.fao.org/emergencies/appeals/detail/en/c/1270012/

[15] http://www.fao.org/news/story/en/item/1268719/icode/

[16] http://www.fao.org/news/story/en/item/1272058/icode/

Tags: food safety, coronavirus, impact on agriculture, supporting legislation, Mitigating the impacts of COVID-19, global food markets

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