How open trade saved us from a global food crisis

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It’s hard to get through the day right now without someone blasting you with the latest warning about one international food crisis or another and the fragility of globalization. In addition to the widespread perception in the US that food prices are too high and that this is Joe Biden’s fault – prompting his would-be successor Kamala Harris to launch a staunchly vague campaign against rising prices – there are well-publicized problems in supply chains for tea. , coffee, chocolate and olive oil.

Now, no one can deny that climate change is a serious medium-term threat to agricultural production and yields, and that governments are doing a woefully poor job of combating it. But overall, global markets for food staples have performed amazingly well in recent years, overcoming the shock of the Ukraine invasion.

Much attention is paid to high-income consumers and first-world issues, such as food manufacturers stealthily discounting chocolate bars in response to higher cocoa prices. Variable rainfall and high temperatures can be dire news for sub-Saharan African cocoa farmers selling to the European market, of course. But this is not a general crisis for the globalization of food.

Price increases on these products for consumers in rich countries at the end of the supply chain are minor inconveniences. Coffee, tea, cocoa and chocolate together account for less than 1% of the UK consumer price basket, for example. Strong increases in the prices of these products last year did not prevent overall UK consumer price inflation from falling – as it did in the US, where food consumer price inflation is now below the headline rate.

Prices of staple foods, which matter most for low-income countries, have been thankfully under control. A rise in wheat prices in February 2022 due to the threat to grain and fertilizer exports from the Black Sea was reversed five months later. Global cereal prices, as measured by the Food and Agriculture Organization’s index, are below their level at the end of 2020.

Steve Wiggins, senior research fellow at UK-headquartered think tank ODI, says: “Every time prices go up, we’re told by people who don’t know anything about commodities that global food markets are broken and that things will never be. same again.” In fact, he says, by the time of the invasion, prices were already near the top of a traditional commodity cycle that began in mid-2020. After the short-lived impact of Ukraine dissipated, global supply increased and the phase of decrease It’s an old cliché, but it’s true: production meets demand, and the best cure for high prices is high prices.

Critically, not only did production recover, but the world trading system continued to function. Russia’s hope in 2022 to create famine abroad to force its enemies to back down and lift sanctions has failed miserably. As the World Bank points out, apart from exporting Ukrainian grain through EU countries, West African countries previously dependent on Black Sea wheat have been able to source elsewhere, including southern hemisphere growers such as Argentina.

Fears that governments would raise prices by blocking exports, as some did in the global food crisis of 2007-2008, also did not last long, with one or two exceptions, such as India, which restricted sales of some types of rice. The International Food Policy Research Institute says such restrictions currently cover only 8% of calories traded, half the rate in April 2022.

Together with producers, the food trade has also adapted to disruptions in international transport. As with container ships, bulk carriers transiting the Suez Canal are routinely routed to the southern tip of Africa, and trading companies have also learned to deal with the disruptions of the Panama Canal, both without increasing cost prohibitive.

Wiggins points out that far from having shocks delivered by dysfunctional global markets, countries with current food supply problems are generally those that are geographically isolated or have internal problems. Food security issues focus on landlocked countries in sub-Saharan Africa, dependent on local production that are susceptible to drought, and countries where production and imports are affected by conflict (Yemen, Sudan, Somalia).

In Egypt, the world’s largest wheat importer, the government risked public unrest in June by quadrupling subsidized bread prices. But this mainly reflects domestic macroeconomic problems – a cash-strapped administration and local currency prices pushed up by the rising Egyptian pound against the dollar – not a lack of available traded wheat.

The current state of world food production and consumption is not an indictment of “neoliberalism”, although it is true that we have a long way to go to correct markets to internalize the external costs of carbon emissions. Agriculture is often distorted by protectionism and subsidies at the local level, but open global trade has provided levels of food security unmatched in human history. Markets have allowed the world to endure a whole series of shocks. They will be an essential part of the efforts to survive other new ones in the future.

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