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Datawatch

Pandemic travel ban triggers spike in global food prices

Shortage of labor for harvests causes key index to surge to six-year high

Farms in advanced economies have been relying on foreign labor. (Source photo by Reuters) 

TOKYO -- Food prices are rising around the world due to the pandemic as laborers cannot migrate to other countries for harvest seasons. Employment in the agriculture sector declined 5.4% year-on-year in the July-September 2020 period, marking the biggest plunge in history. Climate change has also had an impact on maturing crops, with the two factors leading the international price index for food to reach a six-year high.

According to the Food and Agriculture Organization, the international food price index stood at 113.3 in January, the highest level since July 2014. This was an 11% increase over the same month last year and the sixth consecutive month of year-on-year increases. Grain prices rose 24% to the highest level in six years and eight months. Sugar rose 8% and dairy products rose 7%.

One of the reasons is climate change, including heavy rainfall in Southeast Asia and dry weather in South America, affecting agricultural production.

The pandemic has also made it difficult for workers to migrate abroad. According to the International Labor Organization and Organization for Economic Cooperation and Development, foreign workers in agriculture amount to 17 million people. This is more than the domestic agricultural population in the advanced economies of 13 million.

But because of the pandemic, employment in agriculture decreased 490,000 in the July-September 2020 period compared to the same time last year in Japan, the U.S. and Europe. This figure is larger than the decline seen in the manufacturing sector, at 3.4%, and the service sector, which has fallen 4%.

In France, about 80% of workers in the agriculture sector are said to be immigrants, leading to a severe labor shortage. As of late January, 101 countries were still suspending entry to people from some or all other regions of the world, according to Oxford University, making it difficult for farmers to bring in much-needed foreign labor.

According to the U.S. Department of Agriculture's February supply and demand report, the world's corn production forecast for the marketing year 2020/21 is 1,134.05 million tons. This was revised downward by 4.4% from the forecast made last May.

Furthermore, an increase in demand has added upward pressure to food price inflation. International Trade Center statistics show trade in food products amounted to $1.6 trillion in 2019, a 50% increase over the past 10 years. Population growth in emerging economies has made the world more hungry for food. China also has been an aggressive buyer of food.

Also, advanced economies are becoming more dependent on food imports due to globalization, exaggerating the situation. The import values for food entering Japan, the U.S. and Europe almost tripled in 2017 over the figures for 2001.

According to data from the ILO, among 68 countries, food inflation was higher than the overall inflation rate in 62 countries in June 2020. This is the highest number for the past 10 years.

The recovery track that the world economy has started to make from the pandemic is currently buttressed by robust movement in the automobile sector and the chip industry. But rising food prices could damage consumption and set the recovery back.

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