Food protectionism threatens to spill over into richer economies

Food protectionism is on the rise in the developing world as governments try to safeguard local supplies, and the effects are threatening to spill over into richer economies.

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Countries are restricting exports in order to cope with high prices that have been exacerbated by the war in Ukraine. Malaysia just announced a ban on chicken exports, which has resulted in confusion in Singapore, which gets a third of its supplies from there. India has moved to curbing wheat and sugar shipments, Indonesia has limited palm oil sales and some other nations have issued grain quotas.

The poorest countries are most vulnerable to surging food prices and shortages, but wealthier economies aren't immune. In April, almost 10 million Britons cut back on food due to a cost-of-living crisis. The US restaurants are shrinking the size of their portions, while France has pledged to issue food vouchers to some households.

Sonia Akter, an assistant professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore, said that lower-income households in the UK and the US are struggling to feed themselves. She said that rising prices will disproportionately affect poor people who spend a large share of their income on food.

A United Nations gauge of world food prices has jumped more than 70% since mid- 2020 and is close to a new record after the invasion of Ukraine choked off crop exports and rattled supply chains. More food protectionism could cause consumer purchasing power to fall and cause headaches for central banks trying to curb inflation while maintaining growth.

Sonal Varma, chief economist for India and Asia ex-Japan at Nomura Holdings Inc., said the risks are skewed toward more food protectionionism in Asia.

Since the start of the war in Ukraine, around 30 countries have taken measures to restrict food exports, with agricultural protectionionism at the highest level since the food price crisis in 2007 and 2008, according to Sabrin Chowdhury, head of commodities at Fitch Solutions.

She said that in 2022 protectionionism will continue and will increase in the coming months, increasing food security risks for the world's most vulnerable.

That is setting the stage for some of the most important staples to become more expensive. Benchmark wheat futures have increased 56% this year, palm oil has gone up 38%, while the UN gauge of dairy prices prices is up 14%.

Export restrictions aren't bad news for importing countries. David Adamson, a senior lecturer at the Centre for Global Food and Resources at the University of Adelaide, said that they penalize farmers in the producing nations by stopping them from taking advantage of high international prices.

Protectionism is the worst thing to do for food security as it prevents the markets from working to smooth things out, he said.

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