Share
Subscribe to our insights
- The COVID-19 pandemic is having a huge impact on global food chains, with transport and border restrictions impacting the flow of products, few options for physical distancing in production or processing factories, and stricter travel and immigration constraining the availability of trained harvesters.
- As part of our engagement focus this year on sustainable food, we will engage companies across the food chain to understand the challenges they face, and encourage them to make the protection of worker wellbeing an immediate and ongoing priority.
The impact of COVID-19 on the global food chain has been dramatic. Queues at food retailers, short supply of key goods and the difficulties of shopping whilst physical distancing have impacted a vast swathe of the global population. In production – specifically in meat processing plants – the lack of distancing options or virus-appropriate protection gear has seen many workers fall ill and plants closing. Meanwhile, with the commercial supply chain coming to a halt, we have also seen a rise in food waste.
Risk Disclaimer
The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.
How has food supply been impacted?
- Harvest disruption: It is harvest season in many regions of the northern hemisphere. This theoretically secures food availability locally for the duration of the season. Agriculture hugely relies on cheap but experienced and flexible labourers. With borders closed, low-wage labour – for example from Central and Eastern Europe, or South America (also largely in lockdown) for their richer neighbours – has become scarce. Despite quickly developed exemptions, such as specific visa programmes, many farmers fear large parts of their crops going to waste.
- Production disruption: Production has been completely halted in various sites across the world due to virus outbreaks among staff and difficulties implementing physical distancing. Examples include pork processing and meat packaging plants, such as those owned by US producers Smithfield and Tyson. For others, production might be halted over a lack of ingredients – for instance, a UK food producer we engaged on their COVID-19 response is relying on spices from India, which has now stopped all airline traffic.
- Transport and trade disruptions: Some ports are not operating as usual, and shipping may be delayed or cancelled. Freight trains or lorries may not cross borders, and some countries have stopped all flights to limit the spread of the virus.
- Export restrictions: Even if transport is still allowed, export restrictions might disrupt delivery. Turkey, responsible for one third of the global lemon supply, has limited export of the product. Russia, Ukraine and Romania are among those halting grain exports. While currently these restrictions are still exceptions, their impact is still being felt. The reduction in grain exports is impacting livestock farmers, with some already struggling to find enough feed for their herds.1.
- Switch from commercial to retail demand: Patterns of food consumption have changed dramatically as people eat at home rather than at work or in restaurants, meaning that food demand has suddenly switched from commercial to retail. But retail and commercial supply chains fundamentally differ in terms of the quantities, sizes, formats of delivery and packaging, as well as ordering mechanisms – meaning that excess demand in retail could not be matched with excess supply in commercial, leading to loss of income and food waste.
End hunger, achieve food security and improved nutrition and promote sustainable agriculture.
In some agricultural regions, droughts and plagues of locusts add further complexity.
Engagement angle
One of our engagement priorities for 2020 is around ‘sustainable food systems’. In scope of this equity and fixed income engagement are retailers, traders and food producers. The pandemic has made this focus even more relevant.
Investor responsibility & conclusion
The task of ensuring food security and business continuity is a complex one, with challenges including protecting workers, shifting supply chains from commercial to retail, and financially supporting farmers and related industry actors.
Investor engagement can only be one small part of the solution but given the scale of the issue it is important to do what we can. Working with other investors, we seek to highlight examples of best practice and share these more widely, as well as pressing companies with poor standards to step up to their wider responsibilities.
