COVID-19 has exposed our vulnerabilities in both health and economic terms and made us all feel less safe. For many people, this is pushing them to the edge of their resilience. For people leading privileged lives in richer countries, it has highlighted how connected we are to all parts of the world. For all, it has raised questions about sustainability and food safety in the food supply chain. CASA brought together four experts in this area to discuss this topic and its implications for investors.
Covid-19 is likely to have originated in the ‘wet’ food markets in China where live animals are sold. It is a zoonotic disease, which means it is transferred from animals to humans. Although it is not a foodborne disease, it has arisen because of the way that humans interact with animals. There are important lessons here about trade in animals, particularly wild ones, and we can hope that COVID-19 will result in these banned practices being better policed and eliminated. There may also be an acceleration of the trend towards meat-free diets in some parts of the world.
In addition, the crisis offers crucial lessons for companies and investors about understanding the wider landscape in which food is produced, rather than focusing on a single commodity. Unsustainable food production that creates pressure on forests and other biodiversity can make the system more vulnerable not just to pandemics but also to other shocks such as climate change.
And although COVID-19 itself is not a foodborne disease, the pandemic has also triggered a wider awareness which experts think will drive a deeper consideration of food safety in the supply chain.
The World Health Organisation notes that every year around 500,000 people die from foodborne diseases and around a quarter of those are children under 5. The World Bank has estimated that foodborne illnesses cost low and middle-income countries more than US$100 billion a year in lost productivity and medical expenses. Protecting consumers and producers from these impacts would therefore have an enormously positive effect.
But an ill-considered knee-jerk response to food safety standards could affect small farmers and entrepreneurs in a variety of ways. Understanding these potential implications requires an assessment of the pattern of supply and demand in poorer countries and in particular the balance between production for domestic and export markets.
A relatively small proportion of poor countries have been able to become big players in export markets. For those, an increased focus on food safety may drive an increased focus on certification to ensure traceability, food safety, worker health and safety and good environmental practices. This can play an important part in giving confidence to large global brands and their consumers, as well as to investors.
The domestic markets are obviously critical both for food security and for producer livelihoods and therefore to a sustainable global food system, but large parts of them are ignored and under-invested. This is particularly true of the small and medium-sized enterprises which buy food from small farmers, process it and sell it to retailers. The people creating businesses in this ‘hidden middle’ create market opportunities for producers and value for consumers. These entrepreneurs tend to be young, creating efficiencies through their use of technology, and are often women.
These businesses provide an alternative to the supermarkets in poorer countries, selling to retailers and kiosks in local markets that are more accessible to low-income families without their own transport or refrigeration. The pandemic and its aftermath have emphasised the central role they play in a sustainable food system. Food safety in these supply chains can be supported with appropriate standards that can be tightened over time. There are risks and challenges for investors but, given the importance of this growing domestic market, there are opportunities both for supporting successful businesses and promoting positive outcomes.
Investors therefore have a range of difference roles in response to this question of sustainability and food safety in the wake of the covid-19 pandemic: ensuring that they take a holistic view of the landscape and context of their agricultural investments; supporting existing exporters in achieving and demonstrating standards that reassure consumers; and more actively exploring ways to invest in the vibrant ‘hidden middle’ where standards can be introduced and strengthened.