"Dig for victory" exhorted UK posters during the Second World War.
Governments everywhere have called the fight against the Covid-19 pandemic a ’war’. Medical staff are now "front-line" workers. Farmers stand next to them.
Disruption to global food trade is already happening. Vietnam has reportedly suspended its rice exports, which normally account for 15% of global supply. India, the world’s biggest rice exporter, is now set on a three-week ’lockdown’ which is disrupting logistics. Will Thailand follow suit?
Benchmark rice prices in Thailand have now reached their highest since August 2013 at $492.50 a tonne, which is still far below the $1,000 a tonne reached in 2008. Against that, global rice stocks are estimated to be above 180m tonnes this year.
Kazakhstan has suspended (until at least 15 April) exports of wheat flour, sunflower oil, buckwheat and some vegetables. Russia has suspended until the end of March exports of processed grains. Its vegetable oil union has called for a restriction in sunflower seed exports.
Ukraine’s 12.5% protein wheat price has gone up by $7 a tonne since the start of the week on higher demand.
After years of calm, 2020 could produce price spikes
After years of low inflation, 2019 saw food prices rise, thanks to African swine fever (which pushed up meat prices), and sporadic localised droughts that hit some crops.
While fuel demand has evaporated as people are forced to stay home and isolate themselves, demand for all kinds of foodstuffs - even dried yeast supplies have dried up in the US as more people bake their own bread - is soaring.
Much of the ’supermarket-stripping’ is front-loading demand; it is difficult to sort out how much of the additional demand is inspired by fear, or how long that fear might last.
Cash injections by governments will make their way into markets
The cry is for ’action now’, which really means ’results now’, but there are time lags between announcements of stimulus and their impact.
In the US, for example the Commodity Credit Corporation or CDC (set up in 1933 during the Great Depression) will benefit by $14 billion from the Covid-29 $2 trillion stimulus bill.
This bumps up the total bill for 2020 to $44bn. Livestock farmers and ’speciality crop’ producers will benefit, but not today.
Currency weakness in emerging markets could stem import demand
Stock-building is not just happening at the individual level. Iraq has said it wants to import 1m tonnes of wheat and 250,000 tonnes of rice to build up its strategic stocks.
Currency weakness among emerging economies could cap countries’ panic-fuelled demand.
Mexico’s peso and Russia’s rouble have both slid by 15-20% against the US dollar this month, and the South African rand and Brazil’s real have also stumbled, by some 11%.