Lost Worlds
Related Articles
Food importers from Africa to Asia are scrambling to pay their bills as a surge in the U.S. currency drives up prices even further for countries already facing a historic global food crisis.
In Ghana, importers warn of shortages ahead of Christmas. Thousands of containers laden with food have piled up at ports in Pakistan recently, while private bakers in Egypt have hiked bread prices after some flour mills ran out of wheat because it was stuck at customs.
Around the world, countries dependent on food imports are grappling with a destructive combination of high interest rates, a rising dollar and high commodity prices, eroding their power to pay for goods whose price is generally denominated in dollars. Dwindling foreign exchange reserves in many cases have reduced access to dollars, and banks are slow to release payments.
“They can’t afford it, they can’t pay for these products,” said Alex Sanfeliu, global trade manager for crops giant Cargill Inc. “It’s happening in many parts of the world.”
The problem is not new to many countries – and is not limited to agricultural products – but reduced purchasing power and shortages of dollars are increasing tensions in global food systems after the invasion of Ukraine by Russia.
The International Monetary Fund has warned of a disaster at least as serious as the 2007-2008 food emergency, US Treasury Secretary Janet Yellen has called for more food aid for the most vulnerable, while the World Food Program says the world is facing the biggest food crisis in modern history.
On the ground, many importers struggle with rising costs, shrinking capital, and difficulty obtaining dollars to ensure their shipments clear customs on time. This means that shipments remain stuck in ports or may even be diverted to other destinations.
“There has always been historical pressure on these payments, but right now it’s an unbearable pressure,” said Ted Georgeconsultant specializing in Africa and commodity markets.
In Ghana, where the cedi has lost around 44% this year against the dollar – making it the world’s second worst performing currency – there are already worries about pre-Christmas supplies.
“We think there is going to be a shortage of some food items,” said Samson Asaki Awingobit, executive secretary of the Ghana Importers and Exporters Association, which includes grain, flour and rice buyers. “The dollar is swallowing our cedi and we are in dire straits.”
Certainly, some countries may be cushioned by their purchases in other currencies such as the euro, while energy-exporting countries will benefit from overseas revenues. Global food costs have also fallen for six straight months, giving consumers hope for relief.
But the soaring dollar threatens to erode some of that advantage, according to Monika Tothova, an economist at the UN’s Food and Agriculture Organization, who estimates that this year’s global food import bill at a record high.
The situation is still fragile. Concerns are growing again over supplies from the Black Sea region as the war in Ukraine escalates and questions arise over the future of the deal to ship grain from Ukrainian ports . Weather shocks have fueled volatility in recent months, stocks are low and soaring fertilizer and energy prices are driving up food production costs.
As the Federal Reserve continues to tighten monetary policy, the dollar’s strength against emerging and developing market currencies will add to inflation and debt pressures, the IMF said in its global outlook this week.
In flood-ravaged Pakistan, government measures to prevent the outflow of foreign currency led to containers containing foodstuffs like chickpeas and other pulses piling up at ports last month, sending prices skyrocketing , according to Muzzammil Rauf Chappal, chairman of the Grain Association of Pakistan.
The situation calmed down after the appointment of the new Minister of Finance who undertook to clear pending transactions for businesses that have been delayed due to a shortage of dollars in its interbank market.
“The situation was quite dangerous,” said Chappal, whose company is the country’s largest private-sector wheat importer. “We expected the country to face a severe grain crisis.”
In Egypt, one of the world’s top wheat importers, shortages have hit private sector mills that supply flour for bread that is not part of the country’s subsidy program.
According to the Grain Industry Chamber, around 80% of millers have run out of wheat and have gone out of business, as some 700,000 tonnes of grain remain stuck in ports across the country since the beginning of last month. The Ministry of Supply said on Wednesday it would supply wheat and flour to private sector mills and pasta factories.
Cargill’s Sanfeliu said he expects global wheat trade flows to decline by 6% over the next few months, with corn and soybean meal flows declining by 3%, as developing countries struggle to pay for food and feed.
In Bangladesh, trading conglomerate Meghna Group of Industries may have to cut the amount of wheat it planned to import before war broke out amid at least a 20% rise in wheat import costs due to the appreciation of the dollar, said Taslim Shahriar, director of the company. Purchasing Manager.
“Currency fluctuations create huge losses for the business,” Shahriar said. “We’ve never seen this before.”
–With help from Arun Devnath, Abdel Latif Wahba, Asantha Sirimanne, Tarso Veloso Ribeiro, Souhail Karam, Katarina Hoije, Ama Tanoh and Eddie Spence.
Sign up for the Makeshift Features mailing list so you don’t miss our biggest features, exclusive interviews and surveys.
