While the impacts of COVID-19 on the consumer food industry have already been felt via restaurant shutdowns and reduced grocery store hours, a recent article published by the International Food Policy Research Institute predicts that developing countries will soon also face food shortages and price inflation as a result of the virus.
According to the article, a majority of residents in Asia and Africa rely on small- and medium-scale food enterprises (SMEs) to satisfy their food needs. As the virus continues to necessitate the enactment of strict lockdowns, these enterprises will be unable to continue producing food due to their inability to meet new public health guidelines.
As supply dwindles, consumers can expect to pay more for less following a sharp increase in food prices.
As supply from SMEs (S-curve) shifts from S to S’, consumers (D-curve) will be forced to pay the resulting increased price (vertical axis) of p’. Many will not be able to afford this price. Image courtesy of Encyclopaedia Britannica: https://www.britannica.com./topic/supply-and-demand
Though the article does predict a short term increase in unemployment for these enterprises, it doesn’t recognize the long term consequences of shifting consumer preferences following a decrease in supply. Since consumers’ demand for food is stagnant, they will be forced to find other means of consumption if SMEs prove insolvent. The luckiest will be able to turn to large-scale enterprises, supply chains ending in supermarkets familiar to the Western consumer. Others will choose between starvation, poverty (if they accept inflated SME prices), and theft.
Unfortunately, no plausible solution comes without dire consequences, but failure to address the supply chain issue will leave entire countries in turmoil.
Governments of developing countries must either subsidize SMEs by providing materials necessary to produce food safely or ask for support from large-scale enterprises to avoid eventual famine. While the latter will further cement the monopoly these enterprises hold on the world food system, the severity of the consequences following adherence to the status-quo demands immediate action, and these large firms may be the best equipped to provide it.