(Bloomberg Businessweek) -- There is no good reason for the Covid-19 pandemic to cause food shortages, at least of wheat, rice, or other staples. The virus isn’t foodborne. Plenty of food continues to be produced, processed, and delivered despite illnesses and lockdowns, and the world’s appetite hasn’t abruptly increased.
There is, however, one bad reason for shortages: hoarding. If some people needlessly buy too much food or sell too little of their production out of concern that there won’t be enough, others will lose out. Look at what’s happened with toilet paper supplies in parts of the U.S.
In other words, the fear of a shortage can be a self-fulfilling prophecy, to use a term coined by the sociologist Robert Merton in 1948. Hoarding is rational if you expect others to do it. A cartoon in the 1940s, during wartime rationing, showed a man caught trying to buy more cans of food than he was entitled to. The caption: “I’m not hoarding, I’m just stocking up before the hoarders get here.”
This is a tricky subject to write about—just raising the possibility of hoarding-caused shortages could trigger panic buying. So let me say it again: There is no good reason for the Covid-19 pandemic to cause food shortages. There’s plenty of food. The reason to bring up the subject is to point out a few trouble spots in the global food supply chain—including some incipient hoarding—so that small problems don’t cascade into big ones, as Bloomberg Opinion columnist Clara Ferreira Marques wrote on March 31.
Bloomberg News was early to zero in on this issue, reporting on March 24: “Kazakhstan, one of the world’s biggest shippers of wheat flour, banned exports of that product along with others, including carrots, sugar, and potatoes. Vietnam temporarily suspended new rice export contracts. Serbia has stopped the flow of its sunflower oil and other goods, while Russia is leaving the door open to shipment bans and said it’s assessing the situation weekly.” Other nations, from Cambodia to Ukraine, have also throttled food exports, writes Cullen Hendrix, a senior researcher at the Peterson Institute for International Economics, in a March 30 blog post.
Kazakhstan’s export ban was particularly ill-considered. The nation produces far more wheat flour than it can consume. By banning exports, even temporarily, it harms its own farmers as well as foreign customers. And it damages its reputation for reliability, which will become a problem when it needs to negotiate long-term supply contracts in the future. The Kazakh Agriculture Ministry changed course on March 30, announcing it would replace the ban with quotas on exports of wheat and flour.
Peer pressure is one of the few tools that nations have to discourage other nations from hoarding. “There is no global supply shortage at this time, and such measures are completely unjustified,” European Union Trade Commissioner Phil Hogan told his counterparts in the Group of 20 nations in a conference call on March 30. The ministers promised to keep trading with one another despite the pandemic and vowed to “guard against profiteering and unjustified price increases.”
In the same vein, a March 27 blog post by researchers at the International Food Policy Research Institute was headlined “COVID-19: Trade Restrictions Are Worst Possible Response to Safeguard Food Security.” The four authors warned of a repeat of 2008, when poor harvests, exacerbated by hoarding, caused shortages and contributed to a “serious price crisis.” One of them, David Laborde, a senior research fellow, has created an online Food Export Restrictions Tracker.
Cargill, the U.S.-based food giant, said in a statement that “a standstill of any new protectionist measures and a rollback of existing barriers to trade would benefit farmers, ranchers, and consumers alike.”
There’s no sign of panic buying so far in wheat, corn, soybeans, hogs, or cattle, according to data from commodity exchanges. The one agricultural commodity whose price has edged up is rice, a dietary staple across much of Asia. The wholesale price of rough rice rose on March 30 on the Chicago Board of Trade, to 14.1¢ per pound, from 13¢ at the start of the year. It’s still way below the 24¢ a pound it reached in April 2008.
Reliable information about the adequacy of supplies is another tool, in addition to peer pressure, to discourage hoarding, says Maximo Torero Cullen, chief economist at the United Nations-affiliated Food and Agriculture Organization in Rome. He’s been getting out the word that stocks of staple commodities are high and harvests have been good.
Granted, there is more of a supply risk with perishable, high-value commodities such as fresh fruit and vegetables, largely because they require more labor to harvest, process, and package. Orders to workers to stay at home or thin out at job sites could cause bigger interruptions for such foods, Torero says. On the positive side, there’s less incentive to hoard them because they spoil. (That didn’t stop some panicky American shoppers from filling their carts with gallons of milk that will surely go to waste.)
While social distancing is necessary to break the chain of viral transmission, it must not be so extreme as to break the chain of food supply, says Thanawat Tiensin, chairperson of the Committee on World Food Security, a UN organization based in Rome that coordinates the food-security efforts of governments, the private sector, and nongovernmental organizations. Most governments have already made adjustments. In the Philippines, farming and fishing have been allowed to continue despite a lockdown on the main island of Luzon, and companies involved in food production and distribution may operate with as much as 50% of their workforce.
Government stockpiles of food can put a lid on the hoarding instinct by assuring consumers that there’s no chance of going without. Swiss shoppers have stayed calm despite a serious outbreak of Covid-19 because the nation maintains three to six months’ supply of critical commodities, according to the Financial Times. But stockpiles can be problematic in a poorly governed country, where they can be mismanaged or subject to corruption, says a report by Nanyang Technological University in Singapore.
To be sure, Covid-19 could cause the world’s poorest to go hungry for reasons having nothing to do with hoarding—and everything to do with poverty. In India, which is under lockdown by order of Prime Minister Narendra Modi, migrants from rural areas who live hand to mouth in the best of times have lost work in the big cities. For many, the only hope is to return to their villages, as they’re doing in droves. “Whatever little our parents have, they will keep us alive—we have to go no matter what,” a woman named Neha Kashyap told Bloomberg News for an article published on March 30. With her husband and three children, she was walking toward a village about 530 kilometers (330 miles) away, hoping for a bus to pick them up. “Let me tell you one thing: More people will die of hunger than from this disease.”
In the U.S. and other rich nations, in contrast, dying of the disease is a much bigger threat than dying of starvation. There will be adequate food, even if some prices are higher and some items become temporarily unavailable. Governments can make things better by identifying and opening bottlenecks in the supply chain. Some of these may be caused by overly broad stay-at-home orders, says Michael Puma, director of the Center for Climate Systems Research at Columbia University’s Earth Institute.
One thing Covid-19 has made clear is how finely tuned food supply chains are. The demand for most products, from oranges to toilet paper, is quite steady and predictable, so supermarkets order just enough to meet the demand. When there’s a demand spike, such as the current one, the shelves go bare quickly, says Rachel Croson, a supply chain expert who’s the new chief academic officer for the University of Minnesota system. Food shortages emerge, she says, when people “seek to guarantee availability in a world where that guarantee isn’t really available. They order and order and order.” We’ve all seen the result of that.
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