Global effect

from OFI May 2020

by Quartz Business Media

ted by COVIDdisrup

OILS & FATS INTERNATIONAL

VOL 36 NO 4 MAY 2020

EDITORIAL: Editor: Serena Lim serenalim@quartzltd.com +44 (0)1737 855066

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Global e ect

As we went to press in mid-May, with global COVID-19 cases hitti ng more than 3M and deaths over 200,000, it is clear that the ongoing pandemic has touched every aspect of the oils and fats market, with no sign of a quick recovery.

Having enough healthy employees to keep faciliti es operati onal and products moving has been one key concern. However, logisti cs are also expected to be impacted, with safety and quaranti ne procedures likely to aff ect the global shipping of oilseeds, oils and food commoditi es (see page 12).

As drivers stay off the roads due to lockdowns and movement restricti ons, petrol and diesel demand and prices have crashed, with blended ethanol and biodiesel following suit. Roughly half the US ethanol industry, for example, is now shut (see page 10). While some producti on has shift ed to meet the alcohol demand for disinfectants and hand saniti sers, the shift does not compensate for the drop in fuel ethanol demand.

Meanwhile, restaurants and hotels remain closed, impacti ng demand for vegetable oils. The market has seen palm oil demand from the hotel, restaurant and catering sector in India – the world’s largest edible oil consumer – falling by as much as 40% (see p6), while seasonal Ramadan demand for the world’s top traded vegetable oil has also slumped.

Internati onal cooperati on is needed to ensure that COVID-19 is contained and the supply and trade of food commoditi es conti nues to fl ow. However, the danger is that protecti onism will kick in instead. Some countries have already banned exports of food commoditi es, including edible oils and oilseeds, to protect domesti c supplies (see p4).

At a 21 April virtual meeti ng, G20 agriculture and food ministers said worldwide food supplies were adequate and vowed not to allow current emergency measures wreak havoc on the global supply chain.

Any emergency measures should be “targeted, proporti onate, transparent and temporary,” the G20 said, adding that any acti ons should not create unnecessary trade barriers or disrupt global food supply chains. The emergency measures also should be consistent with World Trade Organizati on (WTO) rules, the G20 said.

While the reported number of COVID-19 cases and deaths have been highest so far in the world’s most developed countries, a bigger threat looms in developing nati ons with weaker health systems which are highly dependent on imports, notably Africa, where the worst locust outbreak in decades has already ravaged food crops.

“We must ensure that our response to COVID-19 does not unintenti onally create unwarranted shortages of essenti al items and exacerbate hunger and malnutriti on,” the United Nati ons, World Health Organizati on and WTO said in a joint statement on 1 April.

COVID-19 has shown us how interconnected our world is today. Economists are predicti ng that the impact of the measures taken to contain the virus will lead to the worst global downturn since at least the Great Depression of the 1930s. Millions may end up in economic hardship or poverty.

“It is at ti mes like these that more, not less, internati onal cooperati on is essenti al,” the three global organisati ons said.