Impact of COVID-19 Epidemic on the International Food Supply Chain and Counterme

Fangyao YUAN, Ping YANG*, Feng XU, Tongkai HAN

1. Shandong Institute of Agricultural Sustainable Development / Key Laboratory of East China Urban Agriculture, Ministry of Agriculture, Jinan 250100, China; 2. Shandong Seed Industry Group Co., Ltd., Jinan 250100, China

Abstract The COVID-19 epidemic has exerted an impact on the global food supply chain, and also has contributed to the tendency of food hoarding and short supply; strong food demand has led to a rapid rise in international food prices, which has put enormous pressure on China’s food import, and domestic food price showed a rise trend accordingly. In order to ensure sufficient and stable supply of China’s food market, it is necessary to adhere to the food security strategy of "food self-sufficiency" for a long term. In the spring agricultural production, Shandong Province has taken effective measures to stabilize food production and achieved good results. It has not been greatly affected by the COVID-19 epidemic; however, under the continuous spread of foreign epidemics, we must adhere to the dual hard core operation of epidemic prevention and production, and explore the establishment of technical specifications for agricultural production under normal conditions for epidemic prevention and control to ensure the food security.

Key words COVID-19 epidemic, Food supply chain, Food price, Food security

1 Introduction

Although the COVID-19 epidemic has been effectively controlled within China, the epidemic continues to spread in foreign countries. Major food exporters countries have restricted food exports to ensure their own food consumption, which caused a certain panic. The World Health Organization (WHO), the Food and Agriculture Organization of the United Nations (FAO) and the World Trade Organization (WTO) issued a joint statement calling on countries to take measures to contain the epidemic while minimizing the impact of the epidemic on the food supply chain to prevent this public health crisis from triggering a food crisis, leading to interruption of food supply or high food prices. The joint statement indicated that up to now, the COVID-19 epidemic has not exerted an impact on food security, but there may be a risk of supply disruption in food-deficit areas, and this risk may prompt policy makers to adopt trade restrictions, leading to serious chaos in the world food market, which in turn triggered price surge and violent fluctuation. The statement also pointed out that it is required to guarantee the normal operation of the food market, and people need to work together to minimize the damage to the food supply chain caused by the COVID-19 epidemic. In this context, studying and judging the impact of the COVID-19 epidemic on the international food price and analyzing China’s food import situation are of great significance for China to take early preventive measures to respond to possible sudden crises in the food supply chain and guarantee the food security[1-5].

2 Many countries stopping exporting food or agricultural products due to the spread of the COVID-19 epidemic

With the global spread of COVID-19, six countries have announced bans on the export of food or certain agricultural products, including Vietnam, Thailand, Kazakhstan, Egypt, Serbia and Cambodia. The COVID-19 epidemic in the world’s major food exporters and a series of recent statements have also cast a shadow on the global food market. As an important global food producer and exporter, the United States has accounted for about 10% of the world’s food exports in recent years, but it is difficult to predict its food exports this year. On March 24, 2020, India, the world’s largest rice exporter, announced that it started "closing the country". Russia, the world’s largest wheat exporter, also recently revealed that it does not rule out the possibility of implementing an export ban. The global spread of COVID-19 caused labor shortages and disruptions in the food supply chain, and may affect food security in some countries and regions. The FAO recently stated: "It has been found that the food has encountered multiple challenges in many aspects, such as food logistics and livestock breeding. The epidemic would cause the food crisis to deteriorate in April and May. We risk a looming food crisis unless measures are taken fast to protect the most vulnerable, keep global food supply chains alive and mitigate the pandemic’s impacts across the food system".

3 New trend and demand analysis of recent international food prices

Due to the impact of the spread of the East African locust plague, global food supplies will get tight in 2020, and the global spread of COVID-19 epidemic has made people tend to hoard food, and strong demand and tight supply have contributed to the surge of international food prices. Take rice as an example. In February, the FAO All Rice Price Index rose by 1.4%, the price of rice in the United States rose by 4.8%; the price of rice in Vietnam, the main producer in Asia, rose by 3.3%, and the price of rice in India rose by 0.6%, showing strong growth of rice price[1]. According to the analysis of the world’s major grain exporters, the expected changes in the export prices of major grains are as follows.

3.1 Wheat priceMore than 70% of the world’s wheat exports come from Europe and North America, among which Russia, Canada and the United States account for 50% of the world’s exports. At present, the wheat price in Russia has reached an unprecedented high level. As of March 20, 2020, the price of wheat for foods in Russia has reached an unprecedented high. In just one week, the average price of third-class and fourth-class wheat has risen from 12 250 to 13 275 Rb/t. According to data from the Russian National Union of Grain Producers, the grain price in the Russian market continued to rise from March 23 to 27. To curb the increase in food prices, the Russian Ministry of Agriculture proposed at the end of March to lower the temporary export quota for wheat: exports should not exceed 7 million t before June 30. The quota was specified for before the end of June, but Russia ran out of the quota before April 26 and stopped wheat exports. And the export ban would be effective till July 1, 2020[2]. The sown area of wheat in the United States in 2020 is lower than the level of 2019, and supply would also be tight, so the world wheat price would rise soon.

3.2 Rice priceAsia is the largest export source of rice, and its export volume accounts for about 80% of the global share. Due to strong demand in Malaysia and the Philippines and tighter supply in 2020, the price of indica rice in Vietnam has witnessed the highest rise. Affected by the locust plague in East Africa, the increase in demand for rice has also led to the continued rise of rice prices in Pakistan. The strong procurement by local governments in India has also continued to support the rise in rice prices. In summary, the international rice price is showing a strong rise trend.

3.3 Maize priceMore than 80% of maize export comes from North America, South America and Europe. After the rapid spread of the COVID-19 in the world, North America and Europe became the severely afflicted areas, the agricultural product market also failed to escape, and the US maize futures prices fell. However, the first phase agreement of the Sino-US Trade Agreement announced on February 18, 2020 proposes that from March 2, the Customs Tariff Commission of the State Council would accept applications for tariff-free imports of US maize. Therefore, after the epidemic was brought under control, China would purchase large volume of maize from the US, and the maize price may rise again by then.

4 Impact of changes in international food prices on domestic food prices

4.1 Current international disasters and epidemic factors promoting fluctuations in domestic food pricesIn 2020, the domestic food price fluctuations appeared earlier. In February, prices rose by 0.7% year-on-year, an increase of 0.5%; a month-on-month increase of 0.4%, an increase of 0.5%. Main reasons for the rise of food prices: the delayed start of production in the production process leads to insufficient supply; the transportation control in the transportation process leads to an increase in logistics costs; in terms of demand, due to the impact of residents’ panic, there have been behaviors of rushing to buy and hoard food, which also contributes to the price rise. The global spread of the COVID-19 epidemic has intensified the fluctuations in domestic staple food prices, and the stock prices of important grain companies showed unusual fluctuation. By the close of April 1, the stock price of Jinjian Cereals Industry showed a 6-day limit-up in the past 8 trading days; in the past 5 trading days, the stock price of Zhongnongfa Seed Industry Group showed a 3-day limit-up, the stock price of Hainan Jingliang Holdings showed a 3-day limit-up, and the stock price of Huifa Foods also showed a 2-day limit-up[3-4]. By March 30, domestic soybean futures prices rose by 4.46%, japonica rice futures prices rose 4.02%, late indica futures prices rose 3.68%, imported soybean futures prices rose 2.32%, maize and soybean meal prices also rose by varying degrees. The rise of domestic food prices is mainly caused by the current COVID-19 epidemic, not by structural problems. In 2019, the grain yield of China was 663.84 million t, an increase of 0.9% over 2018. The main types of food are maize, rice, and wheat, accounting for about 93% of the total yield; soybeans and tubers only account for about 7%. China annually imports more than 100 million t of grain, mainly soybeans and coarse grains. The imports of rice and wheat are generally 2 million t and 4 million t, respectively, accounting for only 1% and 2% of total domestic consumption. China has already established a relatively complete grain reserve control system and emergency response mechanism. Data show that China’s total grain yield has stabilized at more than 650 million t for five consecutive years, the self-sufficiency rate of major grains has remained above 95%, and the stock of major rations is sufficient[5-6]. The three major staple grains (rice, wheat, and maize) have high stocks and sufficient supply, low dependence on the international market, so there is a solid foundation for stable prices[7-9].

In terms of the degree of foreign dependence of different grain types, China has the highest degree of dependence on imported soybeans. Both the volume and amount of imported soybeans are around 90%. In 2019, more than 90 million t of soybeans were imported; maize is the second with great fluctuations; the dependence of wheat and rice is low. The total world grain supply in 2019-2020 is expected to be 3.467 billion t, the total demand is 2.671 billion t, and the ending stock is 797 million t. The general trend of global food production is improving, and stocks are sufficient. The factor that really triggers the rise of food prices and threatens the food security is the availability of food. The epidemic is likely to hit the world’s food supply chain, manifested by labor shortages in the production, processing and transportation of agricultural products, logistics disruption, increase in export tariffs or ban of food exports by food exporting countries, and the imitation of such policies, resulting in a wider range of self-hoarding and panic expectations have disrupted world food trade relations[5]. Since March 2020, the average price of soybeans in China has also risen from 3 500 yuan/t to nearly 3 900 yuan/t; in the context of global spread of the COVID-19, the imported soybean prices may rise in a short term. China has opened up a variety of soybean import channels. Besides, there are certain reserves of domestic soybeans, which can mitigate the impact of rising soybean prices[10-12]. From the world supply and demand of major foods in 2018 (Table 1) and China’s supply and demand of major foods (Table 2), we can generally analyze and judge the degree of dependence of China’s food supply on the international market[3].

Table 1 World supply and demand of major grain in 2018 (104 t, %)

Table 2 China’s major grain supply in 2018 (104 t, %)

4.2 Changes in domestic food prices due to the supply of the source of importsIn terms of the source of imports, China mainly imports food from North America, South America, Asia and Europe. From Table 3, we can see the source of China’s major foods imports and the proportion of their volume and amount in 2016-2019.

Table 3 Statistical results of main sources (top three) of China’s major foods (%)

4.2.1Soybean. China mainly imports soybeans from Brazil and the United States, and imports a certain from Argentina. In 2018, due to the Sino-US trade friction, China’s soybean imports from Brazil and the United States became 75.07% and 18.09% respectively. In 2019, Brazil became China’s largest soybean importer. As the recent rains in Brazil have affected the harvest and export of soybeans, the surge of the number of COVID-19 cases in the United States, and the resume of production and operation of China’s feed, veterinary drugs, and slaughter industries, some problems appeared in the spot supply of soybeans in some regions of China.

4.2.2Rough rice and rice. Asia has always been the main source of China’s rough rice and rice imports. In Asian countries, Vietnam, Thailand, Cambodia, and Pakistan have all strengthened their export controls or rice quotations have risen. The annual rice export of Vietnam is about 7 million t, accounting for 16% of global trade and 1.4% of global yield; Vietnam’s rice accounts for 46% of China’s imports. The stock-to-sales ratio of rice in Vietnam is only about 6%. Under the COVID-19 epidemic situation, it is Vietnam’s self-protection behavior to ban rice export. This ban will obviously affect the rice supply of the Philippines and Indonesia; because China imported rice only accounts for 1% of total consumption, so its impact is very limited. From a global perspective, the global rice price index has risen by 1.4% in February, and the price is still rising strongly. Domestic rice stocks are relatively large, so the pressure of domestic price increases is very limited[3-5].

4.2.3Wheat. China mainly imports wheat from Australia, the United States, and Canada, and also imports a certain amount from France and Kazakhstan. So far, the COVID-19 epidemic has triggered panic purchases of wheat flour. At the same time, the decline in winter wheat production in the United States this year has provided certain support to the upward price of wheat.

4.2.4Maize. Ukraine is China’s most important source of maize imports, with a small amount of imports from the United States, Russia, and Laos. Due to the epidemic and weather conditions, Ukrainian maize yield in 2020 will be reduced by 10.3%. In terms of domestic demand, due to the African swine fever in 2019, domestic demand for maize was not high. In 2020, the demand for maize may increase, leading to price rise.

5 Measures and effects taken by Shandong Province to stabilize the grain production

In summary, China’s grain supply sources mainly include domestic grain production, grain imports, and grain reserves. The rise of international food prices caused by the locust plague and the COVID-19 epidemic would exert a certain impact on China’s food supply. For some countries that are not self-sufficient in food and rely on food imports, if the global epidemic cannot be controlled in a short period of time, they are likely to suffer food shortages. In addition, some speculation factors will also bring unstable prospects to food prices. China always adheres to the food security strategy of "food self-sufficiency" for a long term. Food imports account for a small proportion of the overall food supply chain. The annual import demand for other foods except soybeans is low. Although global food prices are on the rise, China’s food market has sufficient and stable supply. However, although China’s total food supply is abundant, the situation of food security should not be blindly optimistic. We must continue to solidly build the foundation of food production capacity. Due to the large stock of individual varieties, some places are not very enthusiastic about agriculture and grain production. All areas should have the awareness of unexpected development and risk awareness, carefully implement the national strategy of food security featuring self-sufficiency based on domestic grain production, guaranteed food production capacity, moderate imports, and technological support, to ensure the strategic bottom line of basic self-sufficiency of grain and absolute grain security, and stabilize the grain sown area and yield[13-17].

Shandong is a major grain producing province, with the grain yield of 53.57 million t in 2019, second only to Heilongjiang and Henan, ranking third in the whole country. Under the impact of the COVID-19 epidemic, Shandong’s task of ensuring food security has become particularly prominent. The Shandong Provincial Party Committee and the Provincial Government have attached great importance to this and taken a series of effective measures to stabilize food production, and have made remarkable achievements.

5.1 Strengthening leadership and carrying out spring agricultural production in an orderly mannerThe Shandong Provincial Party Committee and the Provincial Government have held many meetings to make specific arrangements for the overall planning of epidemic prevention and control in rural areas and the spring agricultural production for the whole province. (i) Promoting spring ploughing and planting in an orderly manner. At the beginning of April, 2020, the spring planting area of Shandong Province exceeded 2 million ha, including 933 000 ha of early spring vegetables and 153 000 ha of other spring crops, the spring planting is progressing smoothly. The condition and growth of winter wheat seedlings are generally good, the population is reasonable, and the individual is strong, which lay a good foundation for a bumper summer grain harvest. All areas have carried out the management of spring wheat fields, the area of watering, fertilization, suppression, hoeing, and prevention and control of diseases, pests and weeding has reached 1.264 million ha. (ii) Strengthening the dispatch of agricultural materials. In this year, the spring planting of Shandong Province needs about 163 000 t of various seeds, 2.65 million t of chemical fertilizers (converted to pure amount), 11 000 t of pesticides (converted to 100%), 112 000 t of agricultural film and 1.5 million sets of various agricultural machinery. All areas have strengthened dispatching, and various production materials have sufficient reserves and can meet the needs of spring production. (iii) Strengthening technical guidance. Shandong Province has formulated technical guidance on wheat field management in a timely manner, and the provincial agricultural department organized 8 work teams and 4 industry expert teams to go to each city to guide spring agricultural production. Besides, it adopts a combination of online and offline methods to organize agricultural scientific and technical personnel across the province to carry out production technical services. Since February, 2020, a total of 139 000 person-times of agricultural technicians at all levels have participated in on-site guidance, and 57 000 person-times have used online media to provide technical services; more than 2.4 million farmers have received technical services.

5.2 Providing point-to-point assistance and guiding agricultural leading enterprise to resume work and production first

Most agricultural leading enterprises connect primary agricultural production and consumption, and speeding up the resumption of work and production is of great significance to the promotion of production and normal operation of planting industry. In order to guide and promote the orderly resumption of work and production of agricultural enterprises, agricultural departments at all levels have strengthened the fixed-point contact mechanism with leading enterprises and large-scale breeding farms, established "one-to-one" fixed-point guarantee services for key agricultural enterprises, to coordinate and solve related problems encountered in the resumption of work and production. According to statistics from the Department of Agriculture and Rural Affairs of Shandong Province, by March 3, there were 8 289 agricultural leading industrialization enterprises above the municipal level in the province, of which 7 156 had resumed work, with a resumption rate of 86.3%. Among the 1 818 feed enterprises that are under key monitoring, 1 568 have resumed work and production, with a resumption rate of 86% and a productivity resumption rate of 95%.

5.3 Providing guidance on epidemic prevention, and coordinating agricultural production with rural epidemic prevention and controlShandong Province makes full use of the role of new agricultural business entities in the prevention and control of COVID-19 in rural areas, and actively does a good job in volunteer service, group prevention and control, and stable production and supply by mobilizing various forces in the rural areas. Besides, it actively guides all areas to clean up the villages, and pay attention to the treatment of feces in rural toilets under the circumstance of avoiding people gathering. In addition, it guides rural people to do courtyard sanitation, and guide farmers to clean up manure and sewage generated by breeding industry in a timely manner to reduce the spread of zoonotic diseases; publish epidemic prevention and control information through various communication conditions such as websites, Weibo, 12316, 12396 information platforms, and disseminate epidemic prevention knowledge and agricultural production knowledge among rural residents[18-21].

6 Prospects and recommendations

The COVID-19 epidemic has been basically controlled in China, and the grain production and other agricultural industries in Shandong Province have not been severely affected. For many years, grain production in various parts of Shandong has been operating at a high level, and both the stock and production have been well guaranteed[9]. This epidemic has little impact on spring planting and grain production in Shandong Province. Taking Qingdao as an example, its wheat production has been maintained at more than 3 million t for many years without large fluctuation. However, the COVID-19 epidemic is spreading rapidly around the world. It is not yet possible to accurately predict the direction of the epidemic, and it is impossible to determine the timetable for the end of the epidemic. Therefore, we still need to make a long-term plan for "preventing the coronavirus from spreading within the province or beyond", and carefully do the epidemic prevention in the agricultural production and circulation process, to ensure food security in the whole province. In the first place, it is recommended to adhere to the dual hard-core operation of epidemic prevention and production, explore normalized and precise measures for epidemic prevention in agricultural production, form technical specifications for agricultural production under epidemic prevention conditions, respond to adverse agricultural production conditions affected by the epidemic, and guide agricultural production across the province. In the second place, it is recommended to strengthen the implementation of supporting policies, such as implementing the national benefits of agricultural policies such as incentive funds for large grain-producing counties and the minimum purchase price of wheat, so as to stabilize farmers’ willingness to plant grain and ensure stable grain production. In the third place, it is recommended to do a good job in ensuring the supply of agricultural materials and socialized services, promote the application of information technology, guide farmers in field management, and ensure a good summer grain harvest.