While Russia’s invasion of Ukraine helped to skyrocket global agricultural prices, some Asian governments restricted the export of products they considered essential to national food security.
For Indonesia, it was cooking oil. For India, wheat. And for Malaysia, chickens.
The bans have a political logic: Leaders don’t want to be blamed for allowing commodities to be sold overseas to the detriment of low-income consumers at home.
But the bans risk hurting farmers and producers, and one concern is that the current cycle of protectionism could lead to restrictions on other food exports, including rice, a staple for more than half of world population. That concern was amplified last month, when a Thai official said the country was considering a rice price pact with Vietnam, another major rice exporter, to help the two nations strengthen their “power negotiation”.
“That’s the problem with this thing: once someone starts closing a border, other countries think, ‘Oh, maybe we need to close our borders too’, and the whole flow of food s stop,” said Richard Skinner, a Singaporean. food safety specialist for the accounting firm PwC.
“And when the flow of food stops,” he added, “it actually makes the original problem worse.”
The effects of the bans are already being felt by consumers. In Singapore, the government has urged residents to switch to alternative meats and frozen chicken in response to the ban in neighboring Malaysia. But that was cold comfort for the owners of Ah Five Hainanese Chicken Rice, a hawker stall that sells Malaysian chicken.
For now, the stall owners have raised prices and expanded to other dishes, but they have a ‘shaky feeling’ about the near future, one said, Natalie Lee.
“Switching to a new menu also means entering a new market that we are unsure of,” Ms Lee, 30, said in a Facebook post.
The global food supply has been disrupted not only by the war in Ukraine, but also by the coronavirus pandemic, recent episodes of extreme weather conditions and rising energy and fertilizer prices. In the Asia-Pacific region, these pressures threaten hundreds of millions of poor people who spend a high percentage of their income on staples like rice and wheat.
In April, Indonesia, the world’s largest producer of palm oil, suspended exports of the crop in an attempt to mitigate rising cooking oil prices at home. World vegetable oil prices had surged after the war, causing Ukraine’s sunflower oil exports to collapse. The Indonesian government rescinded its ban less than a month later.
Understanding the supply chain crisis
India last month banned wheat exports, with few exceptions, following an extraordinary heat wave that severely damaged the national wheat crop. The Commerce Ministry said the ban was necessary because a spike in crop prices, “resulting from many factors”, was threatening India’s food security.
This month, Malaysia suspended chicken exports, much of which is destined for Singapore. Officials said last month it was an effort to give domestic prices and farmers’ costs of production – which had been pushed up by higher corn and soybean prices – a chance. to stabilize.
“The government’s priority is our own people,” Prime Minister Ismail Sabri Yaakob of Malaysia said at the time.
Such export bans sometimes help reduce domestic prices of the products in question, analysts say. They may also make political sense for leaders concerned about the public backlash from price spikes that pinch the budgets of low-income city dwellers.
But bans also have obvious downsides, and it’s unclear whether they help in the long run. An obvious risk is that export bans by countries that rely heavily on food imports could prompt neighbors to retaliate, analysts say. Another is that a country that imposes an export ban could prevent domestic farmers from accessing lucrative export markets.
India’s wheat ban, for example, was welcomed by urban consumers as a way to rein in rising food prices, but was unpopular with farmers who lost the opportunity to profit more from record prices. wheat, according to a recent analysis by Cullen S. Hendrix. , professor of international studies at the University of Denver.
In Indonesia, President Joko Widodo is almost certainly aware that the price of cooking oil has featured prominently in public surveys of his performance, said Bhima Yudhistira Adinegara, director of the Center for Economic and Legal Studies, a think tank in the capital, Jakarta. . Its export ban therefore made sense for “political reasons”.
“The government has to do something or it will be seen as dysfunctional,” he said.
Still, the ban was widely seen as misguided and ineffective, and it did not calm prices, as Mr Joko’s government had promised.
How the Supply Chain Crisis Unfolded
The pandemic triggered the problem. The highly complex and interconnected global supply chain is in upheaval. Much of the crisis can be traced to the Covid-19 outbreak, which triggered an economic slowdown, mass layoffs and a halt in production. Here’s what happened next:
Eceu Titi, 50, a street vendor in Jakarta, said the price of cooking oil in her neighborhood was around 14,000 Indonesian rupiah, or about 96 cents per liter before the entry into force of the export ban, and that it has since nearly doubled, even though the ban ended last month.
As a result, Ms Eceu has raised the prices of her deep-fried snacks and she is trying to make the same amount of oil last longer in her fryer, she said. But when some customers complained about her recent price increase, she agreed to reinstate her old price for them, at a loss.
“I don’t have the heart to insist on selling at the new price,” she said. “We are in the same boat, and they are my regulars.”
Today, the main concern is that food export restrictions from the region are increasing and spilling over to other commodities, including rice, the food stock of the world’s poor. Some say the current situation echoes 2008, a year when some of the world’s biggest rice exporters, including India and Vietnam, restricted their exports, causing consumers to panic and prices to soar.
This crisis, which followed spikes in wheat, corn and other major agricultural products, was not caused by a poor rice harvest or even a grain shortage. Yet for a few weeks this raised fears of civil unrest. At one point, President Gloria Macapagal Arroyo of the Philippines, Asia’s largest rice importer at the time, deployed armed soldiers to oversee government rice sales.
Peter Timmer, professor emeritus of development studies at Harvard University who helped the US government respond to the 2008 crisis, said he fears the current shortages of wheat and corn will push the India and Vietnam to resume their restrictions on rice.
Last month, a Thai government spokesman, Thanakorn Wangboonkongchana, told Reuters that Thailand and Vietnam “aim to raise rice prices, raise farmers’ incomes and increase their bargaining power” on the market. world rice market. Vietnam Food Association chairman Nguyen Ngoc Nam told the news agency that the two countries would meet in June but were not aiming to control prices.
Whatever happens, Mr. Timmer said, it is clear that the current pressures on food supply chains, which include energy and fertilizer shortages, are already much more complex than they appear. were 14 years ago.
“But what is common to the situation in 2008 is that we can make this really complicated and difficult situation much worse if countries start erecting trade barriers,” he said.
Muktita Suhartono contributed report.