Covid -19 Pandemic Impact on Agribusiness

Covid -19 Pandemic Impact on Agribusiness
Covid -19 Pandemic Impact on Agribusiness

Covid -19 Pandemic Impact on Agribusiness

Agribusiness is doing business with agricultural products.  Agribusiness is a term that bridges Agriculture and Business. Covid -19 Pandemic Impact on Agribusiness is a very important aspect of any countries economy. Agribusiness includes all business entities that buy from or sell to farmers. The transaction can include a product, a commodity, or a service and involves products such as feed, crop, fertilizer facilities, electricity, machinery, etc. Agricultural goods, such as food and fiber, etc. Facilitative services, such as loans, marketing of insurance, storage, manufacturing, transport, packaging, distribution, etc.

So far, there have been no substantial disruptions in the food supply since the start of the pandemic. However, logistical obstacles within supply chains, such as cross-border and domestic movement limitations, as well as labor issues, may cause food supply interruptions, especially if they are in place for an extended period of time. Fresh fruit and vegetables, meat, fish, milk, and flowers, all of which are high-value and perishable, are expected to be particularly affected. In a number of nations, the health crisis has already resulted in job losses in sub-sectors such as floriculture (Reuters,2020).

There may be further work quality reductions and job losses in the sector, particularly at the bottom of the supply chain. Women and youth are more likely to be affected, as they are more vulnerable in terms of socioeconomic status.

Farmers may be unable to access markets as a result of transportation restrictions, resulting in food waste. Farmers in many nations are now unable to sell their produce in local markets or temporarily shuttered schools, restaurants, taverns, hotels, and other recreational enterprises.

Impact on high-yielding, labor-intensive crops:

Due to labor shortages and temporary production halts, the pandemic might have a major impact on labor-intensive crop production and processing. For example, due to border closures that prohibit hundreds of thousands of seasonal workers from reaching fields that rely on their labor during the harvest season, Europe’s agricultural sector is experiencing severe labor shortages. The sector’s impact is projected to be long-term. France, Germany, Italy, Spain, and Poland, among other key European agricultural producers, are particularly vulnerable. Over a fifth of the food produced in Italy is dependent on approximately 370,000 regular seasonal migrant workers, according to Coldiretti, an Italian farmer’s association. Around 100,000 farmworkers may be unable to enter Italy this year, with the number in France perhaps treble. In Germany, where 286,000 seasonal migrant workers are employed in fruit, vegetable, and wine production each year, the government is examining a variety of options for mobilizing enough workers for the harvest, including direct flights for farm workers and the issuance of temporary work permits for asylum seekers. The European Commission released practical recommendations on April 2, 2020. urging member states to make cross-border travel easier for seasonal workers in vital occupations, such as those in the food sector, while putting in place the necessary measures to prevent the pandemic from spreading further.

Impact on the lives of millions of plantation workers who work in export-oriented industries:

The pandemic might also have a severely detrimental impact on the livelihoods of millions of plantation workers in developing countries who work in export-oriented, labor-intensive agriculture. For example, the recent temporary suspension of one of the world’s largest tea auctions in Mombasa, Kenya, where tea from several eastern African countries is auctioned, might have disastrous consequences for local, national, and regional economies if it continues. The immediate impact will be felt at numerous nodes of the supply chain, such as factories, warehouses, and transporters, as well as farms, which may be compelled to halt production and lay off pluckers, who are frequently among the most disadvantaged workers and extremely vulnerable to economic reversal. Tea provides livelihoods for 600,000 small-scale farmers and wage employees in Kenya, while it is Malawi’s second-largest formal employer behind the government, employing 52,000 people. (International Labour Organization, Sectoral Brief 2020). Consumer panic purchasing and food stockpiling, as well as national trade-related policy reactions to the epidemic, particularly any export restrictions, may cause price spikes and increased volatility, upsetting international markets. (IFRI,2020)

Impact on Food security:

The disruption of food networks and their implications on food security is of acute concern (Torero, 2020). Almost all countries’ food distribution systems have been severely interrupted, wreaking havoc on the neediest. There has been widespread media coverage of sudden decreases in food security as a result of:

  • loss of income from workers who are fully or partially furloughed, affecting their ability to purchase food;
  • stay-at-home orders and restricted physical access to food markets and/or indigenous food gathering activities;
  • closure or diminished capacity of institutions that support food social safety nets, such as food banks and school feeding programs; and
  • market disruptions, such as a stock market crash.

Impact on the labor market:

The availability of labor in the agri-food business is a second major issue. Many localities have had labor restrictions imposed as a result of quarantine measures and the loss of workforce owing to COVID-19 deaths and significant illness. Significant limits on international labor movements and worker programs, which are important to agricultural output in some sectors or have created bottlenecks, have been imposed. Anecdotally, this appears to be particularly severe in horticulture, livestock production systems, and processing, as well as the planting and harvesting of labor-intensive crops. Because the timing of labor requirements for seasonally produced foods is often inflexible, resolving labor shortages and designing safe working conditions for workers and the community is critical in order to secure future growing seasons and avoid disastrous consequences for future food security and supply. (Stephens and colleagues, 2020)

Impact on Agro Supply Chain:

Examine supply chains to see if there are any changes to add redundancy to reduce the effect of manufacturing delays or shipment delays. Anyone might want to reconsider supply chain logistics terms, such as whether exclusive supply arrangements should be reconsidered. Firms should consider storing extra supplies or inputs and collaborating with other businesses that may want the same supplies or inputs to see if they can get first dibs on a larger order or share a limited quantity of inputs. (Barbeau et. al, 2020).

Impact on agricultural farm income:

Agricultural prices are projected to fall as a result of the pandemic, putting downward pressure on farm revenues. Under the positive and downside scenarios, agricultural revenues are expected to be 8.8% and 10.4% below baseline in 2020-21, respectively. This revenue decline is predicted to continue throughout the medium future, with agricultural revenues in 2029 forecast to be 7.3 percent and 8.8 percent lower than the baseline in these scenarios, respectively. Lower prices and, as a result, lower agricultural revenues could lead to further protectionist measures and government support, further lowering international prices. (According to the OECD, 2020)

Impact on Exports of Agricultural products:

The COVID-19 outbreak wreaked havoc on the agriculture industry (OECD, 2020[7]). Lockdowns and restrictions on people’s mobility slowed the movement of products both locally and internationally. The availability of labor at ports to unload ships and undertake a range of trade operations, such as physical inspections, testing, and certifications, was also curtailed as a result of the lockdowns. At the same time, numerous countries revised their protocols for determining port access, resulting in port closures and increased documentation and quarantine requirements. Furthermore, some countries imposed temporary export restrictions, severely reducing international trade. Lockdowns and mobility restrictions have been lifted in some countries as of this writing, but they are expected to be (re-)introduced in nations where the virus has begun to (re-)emerge.

Global agricultural exports are expected to shrink by about 1% in USD value terms in 2020-21 as a result of these disruptions and the decline in demand under both scenarios compared to the baseline. These global averages obscure disparities between countries, with some seeing greater drops in agricultural exports than others. Agricultural trade is predicted to begin up again and increase at comparable rates as before the COVID-19 epidemic from 2022 onwards, although it is not likely to fully recover to baseline levels, similar to the GDP recovery path. Under the positive and downside scenarios, world agricultural exports are expected to be roughly USD 3 billion and USD 4 billion (in constant 2004-06 values) below baseline levels by 2029, respectively. (According to the OECD, 2020). Actually, Covid -19 Pandemic Impact on Agribusiness can not be denied. 

Impact on Grants and Research Programs

Although it is difficult to forecast what the government will do on a day-to-day basis while focusing on the pandemic’s recovery, they have stated that they will invest in research and grant programs to safeguard, improve, and expand the agriculture and food processing businesses. Say, for example, The Canadian Agricultural Partnership (CAP) and Saskatchewan’s Agriculture Development Fund (ADF) are two initiatives that are expected to continue in their current form. New initiatives, such as Alberta’s recently announced Results Driven Agriculture Research (RDAR) program for agricultural research, are also expected. During these times of uncertainty, don’t overlook these grants because they provide a way to get money (Barbeau et. al, 2020).

Impact on Banking associated with Agribusiness

Lenders are aware of the predicament and, perhaps, will be open to creative solutions. They have a vested interest in the success of any agribusiness company. Say, for example, some small company customers can request a six-month payment delay on loans, lines of credit, and Mastercards, as well as additional operating capital. If anyone works with a bank or credit union, speak with them directly to devise a strategy for the company’s needs.

For example, if your negotiations with your lender or creditor aren’t going well, Agriculture and Agri-Food Canada’s Farm Debt Mediation Service can help. It offers financial counseling and mediation to people who are having trouble meeting their financial responsibilities. (Barbeau et al.2020). Banking and financial institutions are aware of Covid -19 Pandemic Impact on Agribusiness.

Price effects on Agriculture:

As previously stated, the COVID-19 pandemic is expected to reduce worldwide demand for agricultural commodities by causing an economic downturn and an increase in unemployment. Because production decisions (such as agricultural sowing) were made before the commencement of the COVID-19 pandemic, supply-side responses to lower demand will be delayed. This will result in a relative excess of agricultural commodities, causing agricultural prices to fall in the short run. As a result, agricultural commodity stocks are projected to rise, causing commodity prices to fall further until consumer demand returns to normal levels. (According to the OECD, 2020). The findings of the scenarios also show how the FAO Food Price Index (FPI), a weighted average of world prices for cereals, vegetable oils, sugar, dairy, and meat, is predicted to change over time under the baseline, upside, and downside scenarios over the period 2000-29 ( OECD, 2020). So, Covid -19 Pandemic Impact on Agribusiness as well as agriculture is a vital aspect. 

Agricultural commodity prices are expected to fall by more than 10% below baseline in 2020-21 under the COVID-19 scenarios. Because the model predicts that the effect is evenly dispersed across the year rather than monthly or staged by countries, the expected fall is more dramatic than that seen in the first half of 2020. The greatest impact on pricing will be seen in 2022, as the macroeconomic impact on food demand is projected to be delayed. Commodity prices are predicted to gradually improve after 2022, but they will not return to baseline levels. Price recovery will be incomplete, as global GDP is not expected to recover fully in the long future.(According to the OECD, 2020).

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References:

Reuters, “No bed of roses: East Africa’s female flower workers lose jobs as coronavirus hits exports”, 11 April 2020; Martinplaut, “Tens of thousands of African jobs at risk as Europe dumps flowers during the Coronavirus crisis”, 22 March 2020.

International Food Policy Institute, “COVID-19: Trade restrictions are a worst possible response to safeguard food security”, 27 March 2020

Torero M. Without food, there can be no exit from the pandemic. Countries must join forces to avert a global food crisis from COVID-19. Nature. 2020;580:588–589. doi: 10.1038/d41586-020-01181-3.

Stephens, E. C., Martin, G., van Wijk, M., Timsina, J., & Snow, V. (2020). Editorial: Impacts of COVID-19 on agricultural and food systems worldwide and on progress to the sustainable development goals. Agricultural systems183, 102873. https://doi.org/10.1016/j.agsy.2020.102873

 (Paul D. Barbeau Richard Jones and Julia Loney ,2020)The Impact Of COVID-19 On Agribusiness – Business And Legal Considerations – Coronavirus (COVID-19) – Canada (mondaq.com)

(OECD,2020). The impact of COVID-19 on agricultural markets and GHG emissions .

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Md. Masudul Hassan
CEO & Chairman of this Portal. Md. Masudul Hassan is an Assistant Professor and Coordinator of a Reputed University in Bangladesh. Member of Agrilinks is part of the U.S. Government's Feed the Future initiative. He Performed Numerous Research Regarding Agribusiness.