News

The easing of maize and wheat export prices is helping to mitigate rising freight and insurance costs associated with shipping disruptions for importers. Conversely, farmers have adapted to reduced profit margins by transitioning to alternative crops. As a result, winter wheat plantings for harvest in 2024 decreased in Ukraine (areas under Government control), and the United States. Spring plantings might make up the decline in some countries. Similarly, there is a likelihood of a shift away from maize toward soybeans, made more attractive by increasing crude oil prices which improve prospects for biofuels demand. Although overall crop conditions at the end of March do not raise alarm, market-driven adjustments to planting areas could impact sentiment on the global markets should significant weather events occur during the rest of the season.

From the United Kingdom to India, from Spain to the borders of Ukraine, farmers across the world have been taking to the streets. While the specific triggers might differ, the protests seem to be driven by similar fears and frustrations, with possible repercussions for global food security.

In Argentina, demonstrators requested lower taxes and more favourable exchange rates for agricultural exports. In India, demands included minimum support prices to protect against price fluctuations. In Europe, farmers protested against an end of tax rebates on agricultural diesel (Germany); the suspension of trade restrictions for imports from Ukraine causing unfair competition for local farmers (Poland); and overly strict quality and environmental standards in the European Union and related bureaucracy (France); to name but a few.

Agricultural and trade policies that frame and support farmers’ activities embrace multiple objectives. Over time, these policies have evolved away from focusing solely on supporting agricultural output to encompass more and more complex objectives such as mitigating climate change, protecting the environment, and preserving landscapes and biodiversity. Farmers may perceive the conditioning of agricultural support on progress towards these broader objectives as jeopardizing their competitiveness in international markets.

By definition, agriculture remains dependent on the vagaries of weather. In view of the challenges facing the planet, the need for the agrifood sector to transform is evident. According to recent estimates of the International Panel on Climate Change, agriculture contributes about 20 percent to global greenhouse gas emissions and accounts for about 70 percent of global freshwater use. Already, climate change is believed to have resulted in an increased frequency, intensity and duration of heat-related events and droughts as well as heavy precipitation and floods that have each adversely impacted agricultural yields and production.

The current protests underscore the challenges in agrifood system transformation, at the nexus of food security, farming livelihoods and climate change issues. How governments respond to them could potentially have profound consequences for global food security. Imposing additional barriers to imports in a quest to protect domestic producers, for example, would risk negatively impacting not only domestic but also global availability – and consequently also prices – of agricultural products.

Since its inception, AMIS has advocated for well-functioning, open agricultural markets. The attributes of these markets may well be at stake if the policy environment cannot be aligned to the needs of farmers and communicated effectively to agricultural producers around the world.

Several chokepoints have recently been affecting global food trade. Attention initially focused on disruptions of seaborne trade from Ukraine, especially following the end of the Black Sea Grain Initiative in July 2023. However, with the implementation of a “humanitarian corridor”, these flows have largely been restored. Somewhat less in the public focus, disruptions on several inland waterways also challenged transportation and logistics in major agricultural exporting countries, including the Rhine in Germany, the Mississippi River in the United States of America and the Tapajos River in Brazil.

Low water levels resulting from extreme drought, and exacerbated by the ongoing El Niño event, also capped the size and the number of vessels in the Panama Canal locks. Reductions were first introduced in July 2023, and in January 2024 reached nearly 40 percent of volumes compared to last year, leading to extended waiting time and diversions, especially of tankers and dry cargo. Unlike container traffic, bulk shipments cannot book a passing slot or unload intermodal containers by rail. The route via the Panama Canal shortens transit, among others, for the transport of grains, oilseeds and cotton from the US Gulf coast to destinations in Asia, as well as horticulture products from Chile and Peru to Europe and destinations along the US East coast.

Elsewhere, attacks on commercial vessels in and around the Bab el-Mandeb (pictured above) between Yemen and the Horn of Africa have been constraining traffic since late 2023. The route connects the Indian Ocean with the Mediterranean Sea via the Red Sea and the Suez Canal. It accounts for slightly over ten percent of global maritime trade volume, with energy products (mostly crude oil and Liquified Petroleum Gas), being most significant. While earlier attacks appeared to have been directed at container vessels, in January 2024 also a dry bulk carrier and an oil tanker were hit.

Several shipping companies have responded by rerouting maritime traffic via the Cape of Good Hope, also to avoid increasing insurance costs for passing the Strait. Estimates suggest that the number of vessels clearing the Suez Canal has declined by over 40 percent in the past two months. Apart from constraining one of the main sources of foreign currency for Egypt, the events in the Red Sea have already impacted global value chains, especially for sectors that rely on just-in-time delivery systems.

For agricultural commodities, the passage is particularly important for exports of grains and oilseeds from the EU, the Russian Federation and Ukraine to destinations in Asia and east Africa, while rice and other commodities travel eastwards from Asia. Fertilizer trade, including potash from the Russian Federation to Asia, also transits through the Red Sea.

Quotations for Asia-Europe containerized shipping – typically used for rice – have increased by up to six times, depending on the timing, while the benchmark Shanghai Containerized Freight Index has doubled between mid-December 2023 and mid-January 2024. For dry bulk (e.g. grains, oilseeds as well as some fertilizers), broad effects have not yet been observed, although longer shipping routes will likely increase freight costs, mostly depending on the evolution of crude oil prices. There is also a concern about the impact of longer shipping routes on perishable products and live animals, especially those heading to Near East markets.

At a macro level, the Red Sea disruptions could lower competitiveness of Black Sea and other European origins to destinations in Asia, while producers on the American continent might benefit. In several countries higher shipping costs will likely also impact food import bills and subsequently retail prices. The extent to which these will translate into higher consumer prices will depend on whether FOB (and farmgate) prices can absorb some of the increases in shipping costs.

As for crude oil prices, higher energy costs could have spillover effects on agriculture due to the sector’s high energy intensity, including for Nitrogen fertilizer production. The cumulative effect of these disruptions could translate into extended cargo travel distances, escalating trade costs, and a surge in greenhouse gas emissions.

Bangladesh officially joined AMIS on 1 October 2023 and is now fully integrated in all of the AMIS products and publications. From February 2024 onwards, the country will be covered in the monthly AMIS Market Monitor reports while current supply and demand estimates can be found in the AMIS Market Database.

Bangladesh was officially welcomed to AMIS during the November 2023 meeting of the Global Food Market Information Group. In his statement to fellow country representatives, Paritosh Hajra, Joint Secretary of the Bangladesh Ministry of Agriculture, emphasized that AMIS constitutes "an excellent source of […] information, knowledge, and policy guidelines", which will help transform Bangladesh's agri-food system through "better data collection and better decision making”.

Bangladesh is the world's third largest producer of rice, accounting for some 7 percent of global outputs. Thanks to the country's inclusion, AMIS participants now represent more than 85 percent of total rice production, which will further strengthen the initiative’s capacity to monitor global food security.

In view of escalating geopolitical conflicts, economic slowdowns, and the growing climate crisis, the Agricultural Market Information System (AMIS) plays a crucial role in enhancing transparency and policy coordination in international food markets, Maximo Torero, Chief Economist of the Food and Agriculture Organization of the United Nations (FAO), said speaking during an expert panel at the 2024 Global Forum for Food and Agriculture (GFFA) in Berlin.

Torero explained how the high level of concentration in cereal markets makes the agrifood system vulnerable to external shocks. A disruption in any of the key exporting countries will have a direct consequence on prices and volatility. Torero also emphasized the importance of logistics in assuring the smooth movement of cereals and agricultural inputs around the world. Any shock can result in immediate price fluctuations in global cereal markets.

AMIS, he said, has played a pivotal role in reducing information asymmetry, a crucial factor in preventing trade policy restrictions, market volatility, and potentially excessive speculation. By providing comprehensive information on supply and demand dynamics, AMIS has enabled market participants to make better informed decisions during periods of market uncertainty.

He also acknowledged the challenges faced by AMIS, particularly in obtaining regular and reliable information from its participating countries. To this end, he called on these countries to actively engage and support the initiative, and highlighted the need to find alternative ways to address data gaps.