While the Russian invasion of Ukraine helped push global agricultural prices to sky-high levels, some Asian governments restricted exports of products they considered essential to domestic 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 basic goods to be sold abroad at the expense of low-income consumers at home.
But the ban threatens to harm farmers and producers, and one of the concerns is that the current cycle of protectionism could lead to restrictions on other food exports, including rice, a primary food for more than half of the world’s population. Those concerns were heightened last month, when an official from Thailand said the country is considering a rice price pact with Vietnam, another major rice exporter, to help the two countries increase their “negotiating power”.
“That’s the problem with this stuff: As soon as someone starts closing a border, other countries think, ‘Oh, maybe we should close our borders too,’ and the whole food flow stops,” said Richard Skinner, a Singapore-based food security specialist for accounting firm PwC.
“And when the food flow stops,” he added, “that actually exacerbates the initial problem.”
The effects of the ban are already being felt by consumers. In Singapore, the government urged residents to switch to alternative meat and frozen chicken in response to the ban in neighboring Malaysia. But that was little consolation to the owners of Ah Five Hainanese Chicken Rice, a stall selling Malaysian chicken.
For now, the stall’s owners have increased their prices and expanded to include other dishes, but they have a “shaky feeling” about the foreseeable future, one of them, Natalie Lee, said.
“Switching to a new menu also means entering a new market that we are unsure of,” said Ms. Lee, 30, in a Facebook post.
Global food supplies have been disrupted not only by the war in Ukraine, but also by the coronavirus pandemic, recent bouts of extreme weather and rising energy and fertilizer prices. In the Asia-Pacific region, that pressure threatens hundreds of millions of poor people who spend a high percentage of their income on commodities like rice and wheat.
In April, Indonesia, the world’s largest producer of palm oil, suspended exports of the crop to try to alleviate rising cooking oil prices domestically. Vegetable oil prices rose worldwide after the war pushed Ukrainian sunflower oil exports to the crater. The Indonesian government revoked the ban less than a month later.
Understand the supply chain crisis
Last month, India banned wheat exports, with few exceptions, in the wake of an extraordinary heat wave that severely damaged the domestic wheat crop. The Commerce Ministry said the ban was necessary because a spike in the price of the crop, “arising from many factors”, threatened India’s food security.
This month, Malaysia has stopped exporting chickens, much of which goes to Singapore. Officials last month said it was an attempt to give farmers’ domestic prices and production costs – which had been pushed up by the price hikes of corn and soybeans – a chance to stabilize.
“The government’s priority is our own people,” Malaysian Prime Minister Ismail Sabri Yaakob said at the time.
Such export bans sometimes help lower domestic prices of the commodities in question, analysts say. They may also make political sense for leaders concerned about the public backlash from price hikes straining the budgets of low-income urban dwellers.
But the bans also have obvious drawbacks, and it’s not clear whether they help in the long run. One obvious risk is that export bans by countries heavily dependent on food imports could prompt neighbors to retaliate, analysts say. Another is that a country that imposes an export ban could block domestic farmers from accessing lucrative export markets.
For example, India’s wheat ban was welcomed by urban consumers as a check on rising food prices, but was unpopular with farmers who lost the opportunity to take further advantage of record high wheat prices, according to a recent analysis by Cullen S. Hendrix, a professor in international studies at the University of Denver.
In Indonesia, President Joko Widodo is almost certainly aware that the price of cooking oil features prominently in public inquiries into its achievements, said Bhima Yudhistira Adinegara, the director of the Center of Economic and Law Studies, a think tank in the capital Jakarta. . † His 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 failed to calm prices as Mr Joko’s government had promised.
How the supply chain crisis unfolded
The pandemic caused the problem. The highly complex and interconnected global supply chain is in turmoil. Much of the crisis has been traced to the Covid-19 outbreak, which led to an economic slowdown, mass layoffs and a shutdown of production. This is what happened next:
Eceu Titi, 50, a street vendor in Jakarta, said the price of cooking oil in her neighborhood was about 14,000 Indonesian rupiah or about 96 cents a liter before the export ban went into effect, and has nearly doubled since then. even though the ban ended last month.
As a result, Ms Eceu has increased the prices of her fried snacks and is trying to extend the shelf life of the same amount of oil in her deep-fat fryer, she said. But when some customers complained about her recent price increase, she agreed to restore her old price to them, at a loss.
“I don’t have the heart to insist on selling at the new price,” she said. “We are in this together and they are my regular customers.”
A primary concern now is that food export restrictions in the region will multiply and spill over into other commodities, including rice, the food supply of the world’s poor. Some say the current situation has echoes of 2008, a year when some of the world’s largest rice exporters, including India and Vietnam, curtailed their exports, causing consumers to panic and prices soaring.
That crisis, which followed spikes in wheat, maize and other key agricultural commodities, was not caused by a failed rice crop or even a grain shortage. Still, it raised fears of civil unrest for several weeks. At one point, President Gloria Macapagal Arroyo of the Philippines, Asia’s largest rice importer at the time, said, armed soldiers to oversee the government’s rice sales.
Peter Timmer, emeritus professor of development studies at Harvard University who helped the United States government respond to the 2008 crisis, said he was concerned that current shortages of wheat and maize would prompt India and Vietnam to reopen their rice restrictions. to lift.
Last month, a spokesman for the Thai government, Thanakorn Wangboonkongchana, told Reuters that Thailand and Vietnam are “striving to increase rice prices, increase farmers’ incomes and increase bargaining power” in the global rice market. Vietnam Food Association chairman Nguyen Ngoc Nam told the news agency that the two countries would meet in June but was not set on controlling prices.
Whatever happens, said Mr Timmer, it is clear that the current pressures on food supply chains, including energy and fertilizer shortages, are already much more complex than they were 14 years ago.
“But what the 2008 situation has in common is that we can make this really complicated, difficult situation much, much worse if countries start to build barriers to trade,” he said.
Muktita Suhartono reporting contributed.