Countries have started hoarding food, threatening global trade while Jeff Bezos, the world’s richest man, is seeking money from public for his staff’s relief fund. The richest man has faced backlash.

A Bloomberg report said on March 25, 2020:

Some governments are moving to secure domestic food supplies during the conoravirus pandemic.

Kazakhstan, one of the world’s biggest shippers of wheat flour, banned exports of that product along with others including carrots, sugar and potatoes. Serbia has stopped the flow of its sunflower oil and other goods.

Russia is leaving the door open to shipment bans and said it’s assessing the situation weekly.

To be perfectly clear, there have been just a handful of moves and no sure signs that much more is on the horizon. Still, what has been happening has raised a question: Is this the start of a wave of food nationalism that will further disrupt supply chains and trade flows?

“We’re starting to see this happening already – and all we can see is that the lockdown is going to get worse,” said Tim Benton, research director in emerging risks at think tank Chatham House in London.

Though food supplies are ample, logistical hurdles are making it harder to get products where they need to be as the coronavirus unleashes unprecedented measures, panic buying and the threat of labor crunches.

Consumers across the globe are still loading their pantries – and the economic fallout from the virus is just starting. The specter of more trade restrictions is stirring memories of how protectionism can often end up causing more harm than good. That adage rings especially true now as the moves would be driven by anxiety and not made in response to crop failures or other supply problems.

As it is, many governments have employed extreme measures, setting curfews and limits on crowds or even on people venturing out for anything but to acquire essentials. That could spill over to food policy, said Ann Berg, an independent consultant and veteran agricultural trader who started her career at Louis Dreyfus Co. in 1974.

“You could see wartime rationing, price controls and domestic stockpiling,” she said.

Some nations are adding to their strategic reserves. China, the biggest rice grower and consumer, pledged to buy more than ever before from its domestic harvest, even though the government already holds massive stockpiles of rice and wheat, enough for one year of consumption.

Key wheat importers including Algeria and Turkey have also issued new tenders, and Morocco said a suspension on wheat-import duties would last through mid-June.

As governments take nationalistic approaches, they risk disrupting an international system that has become increasingly interconnected in recent decades.

Kazakhstan had already stopped exports of other food staples, like buckwheat and onions, before the move this week to cut off wheat-flour shipments. That latest action was a much bigger step, with the potential to affect companies around the world that rely on the supplies to make bread.

For some commodities, a handful of countries, or even fewer, make up the bulk of exportable supplies. Disruptions to those shipments would have major global ramifications. Take, for example, Russia, which has emerged as the world’s top wheat exporter and a key supplier to North Africa.

“If governments are not working collectively and cooperatively to ensure there is a global supply, if they’re just putting their nations first, you can end up in a situation where things get worse,” said Benton of Chatham House.

He warned that frenzied shopping coupled with protectionist policies could eventually lead to higher food prices – a cycle that could end up perpetuating itself.

“If you’re panic buying on the market for next year’s harvest, then prices will go up, and as prices go up, policy makers will panic more,” he said.

And higher grocery bills can have major ramifications. Bread costs have a long history of kick-starting unrest and political instability. During the food price spikes of 2011 and 2008, there were food riots in more than 30 nations across Africa, Asia and the Middle East.

“Without the food supply, societies just totally break,” Benton said.

Unlike previous periods of rampant food inflation, global inventories of staple crops like corn, wheat, soybeans and rice are plentiful, said Dan Kowalski, vice president of research at CoBank, a $145 billion lender to the agriculture industry, adding he does not expect “dramatic” gains for prices now.

While the spikes of the last decade were initially caused by climate problems for crops, policies exacerbated the consequences. In 2010, Russia experienced a record heat wave that damaged the wheat crop. The government responded by banning exports to make sure domestic consumers had enough.

The United Nations’ measure of global food prices reached a record high by February 2011.

“Given the problem that we are facing now, it’s not the moment to put these types of policies into place,” said Maximo Torero, chief economist at the UN’s Food and Agriculture Organization. “On the contrary, it’s the moment to cooperate and coordinate.”

Of course, the few bans in place may not last, and signs of a return to normal could prevent countries from taking drastic measures. Once consumers start to see more products on shelves, they may stop hoarding, in turn allowing governments to back off. X5 Retail, Russia’s biggest grocer, said demand for staple foods is starting to stabilize. In the U.S., major stores like Walmart Inc. have cut store hours to allow workers to restock.

In the meantime, some food prices have already started going up because of the spike in buying.

Wheat futures in Chicago, the global benchmark, have climbed more than 6% in March as consumers buy up flour. U.S. wholesale beef has shot up to the highest since 2015, and egg prices are higher.

At the same time, the U.S. dollar is surging against a host of emerging-market currencies. That reduces purchasing power for countries that ship in commodities, which are usually priced in greenbacks.

In the end, whenever there is a disruption for whatever reason, Berg said, “it’s the least-developed countries with weak currencies that get hurt the most.”

Coronavirus and global food systems

Eliza Erskine reports:

Food supply and demand is a global network that relies on expectations now disrupted by coronavirus.

Reporting in the Telegraph has found a connection between disease outbreaks and food insecurity brought on by trade disruptions. Particularly among vulnerable populations, including the elderly and the poor, food security is delicate and can be easily upended by a virus outbreak.

When Ebola hit Liberia, Sierra Leone and Guinea, rice prices in Africa increased by 30%. Food prices in China have remained stable, but scientists are looking at downstream effects that could impact food processing plants and spring planting seasons.

The Yakima Valley of Washington, where hundreds of millions of apples are exported from, is already expecting to see economic impacts from the coronavirus. The industry expects demand for fruit crops to be down due to lower grocery store traffic in the coming weeks, as well as disrupted international marketing trips. Keith Hu, international program director for Northwest Cherry Growers, said of the expected changes, “Getting products to Asia will be difficult,” he said. “Getting consumers to the store will continue to be difficult if it continues to be like this.”

Kevin Chen, Chair Professor of Zhejiang University, Senior Research Fellow of International Food Policy Research Institute (IFPRI) East and Central Asia Office, recommended that policymakers monitor food prices closely, restore operations of regional supply chains in China, increased financial support and corresponding policies, global cooperation over food trade and protection of vulnerable groups and migrant workers.

China saw higher food prices in January 2020 than January 2019, due to the effects of coronavirus quarantine, food purchasing and the spread of infection.

Global economy crashes on mass business shutdowns

Another Bloomberg report said March 24, 2020:

The global economy is taking a battering not seen in decades, the outcome of severe restrictions on businesses and households by governments desperately trying to contain a pandemic.

With factories, stores and restaurants shut, aircraft grounded and travel restricted, the monthly Purchasing Managers Indexes from IHS Markit laid out the scale of the challenge.

The U.S. measure for manufacturing and services dropped 9.1 points to 40.5, marking the steepest drop in data back to October 2009. The euro-area measure fell to the lowest since the series began in 1998, as did the gauges for the U.K. and Australia. Japan’s composite index slid to the weakest since 2011, while measures for Germany and France also plunged.

“The near term economic outlook is terrible,” said Stephen King, senior economic adviser at HSBC Holdings Plc. “There should be no surprise about these numbers given what is going on and that they confirm what we knew from China earlier.”

The PMI may not even capture the full extent of the downturn because of the way the hit to supply chains is distorting the results. IMF Managing Director Kristalina Georgieva warned Monday that the global economy is facing a slump “at least as bad as during the global financial crisis or worse.”

In U.K., separate figures added to the bleak picture. The Confederation of British Industry said manufacturers’ orders books fell sharply, and companies anticipate a drop in output in the coming months.

Investor concern has sparked a panicked selloff in equity markets. The MSCI World Index is down about 32% this year so far.

The airline industry is among the worst hit, and companies including Germany’s Deutsche Lufthansa have been forced to ground thousands of planes. Countless jobs are at risk because of closures, while manufacturing has also been disrupted by national lockdowns.

Warnings about the depth of the slump having been coming almost daily.

At the weekend, Morgan Stanley said that U.S. gross domestic product could fall at an annual rate of 30% in the second quarter, driving up unemployment to average 12.8%. Federal Reserve policy maker James Bullard offered an even worse prediction that the jobless rate could rise to 30%.

Bloomberg Economics says the global economy will shrink almost 2% year-on-year in the first half, with the euro-area suffering the worst back to back quarterly contractions in its history. While a pickup is expected later this year, “a lot needs to go right” for that to happen, according to Tom Orlik, BE chief economist.

Just hours before the euro-area PMI, Goldman Sachs Group Inc. said the region’s economy could shrink more than 11% quarter-on-quarter in the three months through June.

The fear now is of surging job losses as businesses close their doors and economies grind to a halt.

Millions of Americans are being dismissed and filing for unemployment insurance. The IHS Markit employment gauges for both services and manufacturing contracted in March.

“Jobs are already being slashed at a pace not witnessed since the global financial crisis in 2009 as firms either close or reduce capacity amid widespread cost-cutting,” said Chris Williamson, chief business economist at IHS Markit.

Fury as world’s richest man Jeff Bezos asks public to donate to Amazon relief fund

Danielle Zoellner reported in The Independent on March 24, 2020:

Amazon CEO Jeff Bezos faces backlash after publicizing a relief fund the public can donate to for his contract employees working during the Covid-19 pandemic.

The Amazon Relief Fund was created with $25m from the e-commerce company to assist its “employees and partners”, specifically those who are responsible for the necessary task of delivering all the products consumers order across the US.

It’s focused on “supporting our US-based Delivery Associates employed by Delivery Service Providers, our Amazon Flex Delivery Partners, and Associates working for Integrity Staffing, Adecco Staffing, and RES Staffing, and drivers and support team members of line haul partners under financial distress due to a Covid-19 diagnosis or quarantine.”

Besides the company contributing $25m to the fund, it also allows the public to donate if they deem it important. “While we aren’t expecting anyone to do so, you can make a voluntary donation to the fund if you desire to do so,” Amazon wrote on its fund’s website.

Amazon tweaked the wording to the above after initially encouraging people to donate via text, according to Popular Information.

But asking for public donations has still caught some backlash online.

“How is your company worth over a TRILLION dollars and you want the public to donate to an employee relief fund?! As if Amazon can’t pay their employees themselves,” one frustrated consumer wrote on Twitter.

Amazon is worth $1tn, and Mr Bezos is worth an estimated $114bn. In 2018, the company reported an income of $11bn but paid $0 into federal taxes.

As the pandemic continues and more consumers turn to the e-commerce site to stock up on necessary essentials, the company is anticipated to post an even larger income this year. But it is still asking consumers to contribute to its fund if they would like.

The Independent contacted Amazon for a comment about asking consumers to contribute to its fund.

Amazon announced that during the pandemic it would be hiring an additional 100,000 employees to help address the surge in demand for its services. It also increased pay by $2 per hour and doubled pay when working overtime for employees on the frontlines.

Initially, the company decided it would only pay full-time employees sick leave during the pandemic. Up to two weeks of sick leave would be provided to “all Amazon employees diagnosed with Covid-19 or placed into quarantine.”

Employees in places like Chicago and Sacramento then put pressure on the company to extend its policy to cover part-time workers in the warehouses. On Monday, Amazon agreed it would extend its sick leave policy to those who work 20 hours or more.

People who are not covered for paid sick leave are encouraged to apply for Amazon’s relief fund.


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