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ANALYSIS: Food price rollercoaster turns upward, spurring inflation fears

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As the world economy grinds to a halt, through city and state lockdowns to prevent the spread of Covid-19, the issue of food security is starting to perturb some analysts.

 

Individuals across the world are stocking up and it’s not just hand sanitisers but basic foodstuffs such as flour.

 

The UN’s Food and Agriculture Organization (FAO) is not yet panicking over global supplies but it has sounded a warning.

 

Abdolreza Abbasssian, a senior economist with the FAO, tells Reuters that "all you needs is panic buying from big importers such as millers or governments to create a crisis...

 

"What if bulk buyers think they can’t get wheat or rice shipments in May or June? That is what could lead to a global food supply crisis."

 

Wheat and rice futures soar

 

The global benchmark in Chicago for wheat went up by 6% last week, the biggest weekly gain in nine months, and in Thailand - the world’s biggest exporter of rice - the price of rice has climbed to the highest since August 2013.

 

In the US, demand for pulses such as lentils is up by 40%. Consumers everywhere are stocking up with foodstuffs that have a long shelf-life. This is just one of the ripple-effects of enforced social isolation.

 

The FAO says there should not be any problems with global food supply. Its concern is rather a "behavioural change".

 

Ample global stocks but markets respond to perceptions

 

According to the US Department of Agriculture (USDA), the global wheat stocks at the end of the current, 2019-20 crop marketing year, in June, global wheat stocks are likely to rise to 287.14m tonnes, from 277.57m tonnes a year ago.

 

The International Grains Council (IGC) said at the end of February that world wheat production for 2020-21 will be an all-time record high of 769m tonnes, 6m tonnes up year-on-year.

 

World rice stocks will increase by an estimated 7m tonnes, to 182.3m tonnes, this year There are ample stocks of other foodstuffs, such as vegoils, too.

 

Food in the right place at the right time

 

Responses to the Covid-19 virus are causing logistical problems however, such that getting basic foodstuffs to their processors is being sporadically disrupted.

 

Finding enough trucks and drivers in France, for example, has been reported as causing factory and port hold-ups.

 

Some European Union countries have imposed movement restrictions, making border crossings problematic and thus disrupting supply chains.

 

Getting food to the right place at the right time is becoming a concern.

 

Planning for a return to the status quo ante bellum is, for many, impossible right now. The behavioural change could be long-lasting, if consumers adjust to not going out to dine or to entertainment venues.

 

While the price of some crop staples - such as cotton (hammered down on textile production demand destruction) and corn (beaten down by the collapsed crude oil price) - are being badly hit by Covid-19, those directly related to food are benefiting.

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