IFPRI BLOG: Issue Post
COVID-19 is disrupting economies around the world, but will it cause a food crisis? IFPRI Director General Jo Swinnen says it depends whether you are rich or poor. Jo synthesizes insights from several blog posts in this series to make the case that governments must emphasize policies and programs that target the immediate needs of their poorest citizens.—John McDermott, series co-editor and Director, CGIAR Research Program on Agriculture for Nutrition and Health (A4NH).
Based on model predictions, early empirical evidence, and lessons from previous crises, the answer to the “will COVID-19 lead to a food crisis” question is probably: Yes and no. There is no single, global answer; the risk of food crisis depends on the level of economic development. So if you are rich the answer may well be no, but if you are poor, the answer is more likely to be yes.
The poor will be disproportionately impacted by COVID-19 because:
- The global economic recession will have larger effects on poor people’s income and therefore on their food security and nutrition.
- Among productive assets, COVID-19 will affect mostly labor, poor people’s principal asset.
- COVID-19 will cause more disruptions in private sector value chains in poor countries.
- COVID-19 will cause disruptions in public sector programs on food, nutrition, health, and poverty, which are more important for poor people.
- Poor countries have lower economic capacities to compensate for declining incomes.
Economic models predict that under current conditions—relatively high food stocks, good harvests, low oil prices, and declining demand—global food prices are not going to rise. Logistical problems in harvesting and transport will put upward pressure on food prices in some areas of the world. Paradoxically, the most important cause of rising food prices may be hoarding behavior by consumers and governments rather than market conditions. Despite several expert reports and economic advice not to repeat the same errors made during the 2007-08 food crisis, many governments have introduced trade constraints for foods (see IFPRI’s Food Export Restrictions Tracker.) Yet even absent a major rise in food prices, the food security situation of poor people is likely to decline significantly around the world.
Falling incomes and food and nutrition security
The global recession, caused by lockdowns and other restrictions on business activity to control COVID-19, will lead to reductions in food consumption and in nutrition status—especially among the poor. Whether through rising food prices, falling incomes, or both, people will have less real income to pay for their food and will adjust accordingly. This effect plays stronger the less income one has, meaning more hardship for the poor. Global models predict that for every percentage point of global economic slowdown, the number of people living in poverty would increase by 2-3%, or by about 14-23 million worldwide. However, health and economic impacts may be much more pronounced in developing, rather than developed, countries with associated greater implications for poverty and hunger.
An early study by Rozelle et al (2020) confirms these effects for rural households in China. Separated from their income sources as COVID-19 travel restrictions prevented them from working in urban wage jobs, workers suffered massive income losses totaling more than $100 billion. These families cut back significantly on nutrition. The majority of villagers are reducing spending on food, buying more grains and staples in bulk at low cost instead of more expensive goods like meat and produce.
COVID-19 impacts the poorest particularly hard because it directly affects their most important, sometimes only, productive asset: Labor, especially physical labor. Richer people typically have a portfolio of productive assets, such as capital and land, and their labor is typically of a different quality: Even while locked down inside a townhouse or a city apartment, they can work via computer over the internet, spending their productive hours on email and Zoom. This is not the case for poor people with low skills whose only source of income is likely to be leaving home to do manual work.
Poor people who have to travel for work are the hardest-hit by COVID-19 restrictions. Studies show large negative effects for migrant workers in several categories: Rural-urban (as in China—see Rozelle et al. (2020)), international (as in Egypt—see Breisinger et al (2020)) or rural-rural (as in India, where landless workers travel to work in seasonal jobs such as harvesting).
Disruption of private value chains
Harvesting may be disrupted because of a lack of workers; planting because of a lack of seed or fertilizer; transport because of reduced transport facilities; market exchange because of lockdowns or social distancing. What we are witnessing is a disruption of the food system similar to what happened during 1990s-era transition processes when supply chains collapsed. Those experiences showed that impacts were strongly heterogeneous, depending on the nature of the commodity, the resource-intensity of the systems, and the level of economic development.
But in the 1990s, the key production factor affected was capital—see Rozelle and Swinnen (2004). Today, as already noted, the disruption is mostly related to labor constraints. As a consequence, capital-intensive food value chains (mostly in rich countries, or in richer parts of poor countries) are much less affected than labor-intensive value chains (mostly in poor countries). Reardon et al (2020) point out that the impacts will be greatest in informal-sector small and medium-sized enterprises, which are labor-intensive with high densities of workers in small spaces. Modern retail and food service firms face fewer problems. Again, these differences are affecting food security among the poor disproportionately.
Disruptions in public sector programs
COVID-19 will cause disruptions in public sector programs on food, nutrition, health, and poverty that poor people depend on. For instance, India’s national lockdown regulations implied closing of schools. This means that school feeding programs—one of the country’s largest safety nets—have been suspended. Other safety nets are also affected, including nutrition programs in community courtyard sessions for pregnant women and lactating mothers. Key health programs, such as child immunization, have been disrupted as well. And of course, public food relief programs face the risk of exposing more people to the virus by attracting large crowds at distribution points.
Limited government capacity to compensate
While many developed countries have responded to the economic fallout from COVID-19 by ramping up spending and using monetary policies, options for developing countries may be more limited. Developing countries will need to prioritize, focusing their responses on health, essential goods and services, the domestic financial circuit in local currency, and the foreign currency market linked to international trade and external debt. Such a focused approach can help finance public spending on programs like cash transfers and safety nets for the poor and vulnerable, and public investments to keep firms operating. At the same time, the international community also has a crucial role to play in supporting countries in their policy responses, including with international organizations like the World Bank, the United Nations and International Monetary Fund, as well as the multilateral development banks.
In summary, several compounding factors make that COVID-19 is likely to cause another major food crisis among the poor. To avoid a food crisis, governments will need to implement policies and programs that target those most impacted and help address the negative impacts.
Johan Swinnen is Director General of IFPRI. This post also appears on the Global Alliance for Improved Nutrition (GAIN) Nutrition Connect blog. The analysis and opinions expressed in this piece are solely those of the author.
Find other IFPRI COVID-19 blog series here.