Global food supply chain falls at risk of trade tensions

Trade disruptions to risk food security for world’s majority: With around 80% of the global population living in countries where food imports outweigh exports, many nations could now be at risk of food supply disruptions amid escalating trade tensions, according to a recent Economist report.

Global food trade systems are interconnected for a good reason, with most of the world relying on a delicate web of supply chains to supply basic staples, stabilize costs, and solidify year-round access. At its best, a steady supply chain prevents shortages and price spikes in times of internal crisis, whether due to conflict, climate events, or economic turbulence.

But, it also leaves us vulnerable: The US-China trade war (2018-20) during Trump’s first term serves as a prime example of vulernability, where retaliatory tariffs on American soybeans led to a sharp drop in exports and an estimated $27 billion in losses for the US agriculture sector. In turn, big importers like China turned to African suppliers, causing shortages and increased prices for local populations, according to the report.

Remember the Ukraine-Russia war impact? Ukraine and Russia were responsible for almost 30% of global wheat and barley exports prior to Russia’s 2022 aggression. Import-reliant countries with limited domestic supplies — including Egypt, Lebanon, Indonesia, Bangladesh, and Pakistan — felt the brunt of the impact when shipments were halted overnight and wheat prices rose to their highest since 2008 in the first month of war.

Egypt was uniquely impacted, with Russia and Ukraine together accounting for up to 80% of its wheat supply and a third of its inbound tourism market. In the first week of war, the price of unsubsidized bread in the Greater Cairo area rose by as much as 50% w-o-w, with a five-pack of balady bread selling for up to EGP 7.50 in Cairo, up from EGP 5 the week prior.

That’s not all: Egypt relied on the two nations for other staple imports, including sunflower oil, of which it imported around 54% from Ukraine in 2020. Russia’s ongoing war on Ukraine sent a slew of commodity prices surging, including wheat, natural gas, and sunflower oil. The two eastern European countries together account for nearly 80% of the world’s sunflower oil supply.

Other countries stepped in: Egypt inked a contract to buy 180k tons of wheat from India in June 2022, while Australia, Brazil, and the EU also stepped in to provide alternative supplies to countries reliant on Russian and Ukrainian wheat.

The lesson? Countries should strive to diversify their suppliers to reduce disruptions and heighten their potential bargaining power, the report suggests. This could be through shorter supply chains and expanded cross-border trade to uphold direct supplies in case of trade bottleneck disruptions — such as the diversion of vessels from the Red Sea.

Reconfiguring trade rules to secure food flows, including exempting critical farm goods from tariffs and export bans, could stabilize supplies even when tensions escalate.