Global food flows at a time when trade in goods and movement of people have been significantly disrupted. In this commentary, head of investor relations Nick Tapp reviews food supply chains in light of current uncertainties.

1. Introduction

We are used to fully stocked supermarket shelves and a seemingly endless choice of food service outlets – eating anything, anytime and anywhere. From time to time aspects of food or diet gave us pause for thought, food miles, obesity and highly processed food, vegan diets and the GHG effects of food choices to pick a few. However, those aspects tended, for many, to be overwhelmed by the backdrop of plenty, excess even. Cheap and convenient have remained the principal drivers of food purchases.

Covid-19 then swept through the supermarkets, emptying shelves and, elsewhere, closing bars and restaurants. Food sufficiency became a concern and earned some small space in the political spotlight. The food supply chain, however, is well organised and was well supplied as a matter of course (even more so in the UK, where fears of a no-deal Brexit had kept ambient goods rather more fully stocked than in a completely “just in time world”).

In being so well organised, the retailers took some of the immediate heat away from the politicians. As we move forward, larger questions of long-term food sufficiency and security, and the possible fragility of complex global supply chains are being called into question, not least the harvesting of seasonal crops with a labour force now caught on the wrong side of closed borders (or even locked down within borders). Prices of some commodities spiked with concern about possible trade disruption and food availability, while falling short-term demand (in specific local supply chains) has seen a fall in farm-gate prices for other produce.

From there the usual question was raised, “Does it make sense to send food around the world?” The quick and easy political response is to “buy local” and “grow more here”.

At a time when trade in goods and movement of people has been significantly disrupted, this commentary will look at global food flows, and address the question: “Is Cross Border Trade Necessary for Food Security?”

2. Global Flows and Resilience

International (cross border) trade in agricultural products doubled between 1965 and 2005.1 Over the same period food insecurity has reduced very substantially; the share of the world’s population with insufficient food supply fell from 52 per cent in 1965 to 3 per cent in 2005.2 These gains have been won largely through increased trade rather than through an increase in self-sufficiency.3 Today, just under a quarter of all food (by calories) for direct human consumption crosses a border to reach the end consumer.4

Every country in the world is both an importer and an exporter of some foodstuffs. Nobody (not even North Korea) is perfectly self-sufficient, neither importing nor exporting anything. That would be a perilous situation, as a single failed harvest would bring starvation (as failed harvests did so often in the past). A variable supply can only be matched to a reasonably consistent demand with movement (trade) and no longer just local trade.

Figure 1: Global Meat Trade (2018)

Source:, Chatham House

Around one third of all countries are net exporters of food5 (and their exportable surplus tends to be growing), while the other two thirds of countries are net importers (and their dependence on imports is growing).6 The only region, which has moved from importer to exporter in the past 50 years is the Former Soviet Union and the satellite states of Eastern Europe, now net exporters. Very simply, net exporting countries enjoy more land, often with more available water, and with smaller populations per unit of productive land.

Figure 2: Percentage of Net Food Imports in Domestic Food Supply in Total Calories

Source: FAO Global Perspective Studies, using 2011 food balance sheets from FAO, 2016

All food commodities trade internationally, from major food staples to minor ingredients. Few countries are net importers of everything. Countries which are net importers of food still export those products for which they enjoy something of a competitive advantage, either regionally or globally. The UK, a net food importer of food, is a net exporter of oats (exporting USD$94m worth of oats in 2018)7. And China, now well established as a net importer, exports USD$8bn of mushrooms and truffles.8

For net importing countries, many of which have limited domestic land and water resources, cross border trade is an essential component of food security. For those countries, a wide range of trading partners represents a risk management, diversification strategy against local crop failure and food shortage. One quarter of the wheat produced in the world trades across a border.

Figure 3: Global Wheat Trade (2018)

Source: Chatham House

In the current COVID-19 crisis, while supermarket shelves may be empty on occasion, the food supply chain and international food trade has proved resilient. With many industries obliged to stop abruptly, farming, food processing and food distribution are essential and in all countries have continued trading, including across borders (although there have been some reductions in air-freight capacity). As a result food exporting countries, such as New Zealand, have seen exports maintained at the same levels as previous years, despite trade in many other categories of goods falling sharply. The New Zealand Prime Minister included the following comments in an article she wrote for the New Zealand Farmers Weekly this week:

“The overall value of goods exports for the year to date continues to run a little below 2019 figures but above 2018 figures. To provide a snapshot of how our goods exports are holding up, compared to a year ago, for the week ended March 18, total goods exports were up a little, 3.7%, compared to the same week in 2019.”

The disruption in food markets seen to date tends to be in those supply chains feeding into the food service sector, shut down in many countries (note that in the US over 50% of meals are consumed outside the home, exacerbating this disruption)9. The reallocation of produce to additional retail sales has picked up some of the slack, but not all, hence the variable price responses. Potatoes grown to be turned into chips for fast-food have fewer destinations; milk is no longer needed in coffee shops closed for the lockdown and yet wholesale prices for dairy commodities on the Global Dairy Trade index have just ticked up.

3. Illustrations from history

Trade in foodstuffs is not new; it is as old as any form of trade. Almost any ancient shipwreck in the Mediterranean contains evidence of olives and olive oil and grain. The Black Sea region of the Ukraine earned its reputation in the 19th century as an exporter of exceptional quality grain that was surplus to local needs. Much of the European imperial expansion of the same period was to feed the rapidly industrialising cities from “new” farmland in the north American prairies and the southern hemisphere.

Ancient Rome, and then Byzantium, relied on imported grain from Egypt and North Africa; the Arab conquests of the early 7th century cut off Constantinople from its grain supply, and did much to weaken the Byzantine empire. North Africa is no longer the granary of an empire, but a significant net importer of food – ancient trade flows have reversed.

In the absence of food trade, the Scots would find themselves limited to a diet of mutton, salmon (in season only), turnips, swedes and a few raspberries, all washed down with copious quantities of whisky. The climate is harsh for much of the country, the soils poor, acidic, and generally unproductive. I am sure that the Scots were only too pleased when an Englishman first offered to exchange an exotic brassica (cauliflower) for a small glass of uisge beatha.

Trade in food allows the market to fill a gap and to redistribute a larger harvest. A shortage here is met by a surplus there. How many people died as a result of the great north German drought of 2018? None, and only the farmers and gardeners even noticed that it had not rained. The food supply chain from Europe and the wider world filled the shelves. Had shoppers in Hamburg been obliged to “buy local”, they would have had a thin old time of it. “Buying local” has a cosy, nostalgic ring; it can be visualised as a horny handed son of the soil working long hours with a few acres, a couple of apple trees and a small herd of cows, to bring “homegrown” food to our doorstep. However, it is not a feasible way to feed the vast mass of the population (strange that this may seem to those who are members of that small segment who can and do afford to pay twice or three times as much for non-commodity “local” food).

4. Resource and economic efficiency

Trade in food allows a better (never perfect) allocation of resources to agriculture. Few countries are large enough with a wide enough range of growing conditions to grow enough (or even some) of everything. Crops will tend grow better if presented with the right environment, producing higher yields, often of superior quality. In the right climatic conditions the output per unit of input (fertiliser, labour, fuel) is usually greater – meaning a better and more effective use of resources, and therefore a lower environmental footprint. If you grow more than 50t/ha of apples per hectare, you can almost certainly accept a lower price per apple than your less fortunate apple-growing competitor in a less supportive climate growing 30t/ha. The UK sits close to the climatic limit for growing apples with yields only just high enough to be commercial; competition comes from places which can produce many more per hectare, and afford the cost of transport to market.

Figure 4: Apple Yields by Country

Source: FAO Stat

Cost of transport and distance to market also enter the equation. Grain is expensive to move per tonne (per calorie), while protein has a negligible cost, relative to value (see the table below).

Source: Deloitte Access Economics

On the other side of economic and resource efficiency sit tariffs and cross border restrictions to trade. A remote, high yielding, resource efficient crop can still out-compete the less advantaged local to the point where the local farmer objects. Why should he put in all the hours, and find that a pretty Italian apple is outselling those on his trees outside the window? Politicians are elected locally, and thus have a vested interest in “pork barrel” politics. Slap a tariff on the import so it can no longer compete so readily, and, at the same time, try to fan some support with “local quality” etc. so the consumer, who is now paying more for their apple doesn’t notice. Trade keeps prices lower in most circumstances.

Source: European Commission

5. Political stability

And, of course, we come to politics, both domestic politics and geo-politics, food as a tool for good and as a weapon, food as a means of preserving rural life and landscapes, and food as a form of cultural identity.

An adequately-fed population (at reasonable cost) is a significant pre-requisite for political stability – hungry people shoot politicians if they can. Food sufficiency is the basis for wider security, and food sufficiency is more likely to be provided by trade in food than by over-reliance on domestic production.

Rising food prices were enough to tip already unstable regimes across North Africa into change and then chaos in the 2011 “Arab spring”, still unresolved in Syria. Egypt imports $5bn of wheat, much from the Black Sea region, to ensure that the lack of domestic grain production (and hunger) does not become the only political topic – and this is while Egypt exports $241m of potatoes grown in the Nile Delta every year.12

Figure 5: Destination of Egypt’s Potato Exports

Source: Chatham House

Figure 6: The Origin of Egypt’s Wheat Imports

Source: Chatham House

Farming and food production inevitably have cultural components, built around those foods which can be produced locally, cheeses in France, cold meats and sausages in Germany, roast beef in England. Farming, with historic practices often superseded by technical advances, has created the landscapes with which we are familiar. An efficient trade in calories can be perceived as a threat to cultural identity, and faces push back from some quarters. The landscape is part of the national consciousness, to be preserved, not sacrificed to pure efficiency. As the UK unties links with Europe, we see the development of policies focused as much on delivery of environmental services from farmland alongside food production – but regardless of the policy food will still be required from somewhere.

6. Case study: New Zealand and China

And so, to New Zealand, a huge net exporter of a food – 4.5m people living in an ideal climate for a range of crops, producing enough food for over 40 million people13 and increasing. Originally producing food for a global British empire, New Zealand was obliged to reinvent itself as a food trading nation, when Britain joined the EU in 1973. Tariff barriers to protect European (and British) farmers were raised and the long distance “home” market was denied. In 1961 over 97% of dairy produce from New Zealand went to the UK; today it is less than 0.5%.

Farm subsidies, always a wasteful resource distraction, were removed, and New Zealand became completely market focused; growing quality products competitively to meet market demand. The result was a huge pivot to Asia, with relative proximity, demography and economic growth driving the change – see the graphic below to show the global spread of trade in just horticultural products from New Zealand. China at approximately $1 billion is the largest but by no means the only customer for New Zealand fruit, veg and wine. Approximately $1 billion of these products goes to each of the US, Europe, Australia and the rest of Asia; so that China, while still NZ’s most significant export destination, has less than a 25% market share.

Figure 7: New Zealand Horticultural Exports (2016)

Source: Statistics New Zealand

New Zealand’s “pivot to Asia” has also brought benefits for Kiwi sheep farmers. Surging demand for premium, grass-fed meat from Asia has created customers to rival the Brits. European retailers can no longer discount New Zealand vs. local lamb. NZ (and Australian) farm gate prices have finally “caught-up” with those paid to their northern hemisphere competitors (see graph below).

Figure 8: Global Farmgate Lamb Prices


In 2000, China was 10 years into its economic miracle. A key tenet for the Chinese Communist Party remained to feed the population from domestic resources – food security is party policy. Growing grain, mostly wheat and rice to ensure food sufficiency, was essential. However, that policy has been increasingly undermined by the economic success story. Rising incomes lead to dietary change, with more total calories consumed, and increased consumption of animal protein as a share of calories (see the graph below), and increased demand for higher quality fruit and vegetables. At the same time, new cities were replacing farmland with pavement. Already the largest producer and consumer of many foodstuffs, China is becoming a net importer of food, product by product, and when China becomes an importer, it is a market moving event.

Figure 9: China Calorie Consumption

Source: FAO stat

New Zealand was well positioned to take advantage of the needs of their giant northern neighbour for dairy, red meat, fresh fruit and wine. Part of the Chinese economic miracle has been built on high quality New Zealand dairy products, lamb and kiwifruit.

New Zealanders are well aware of the strong demand from China for New Zealand farm and forestry products. The chart below shows the strong growth in Chinese demand for New Zealand milk powder, noting the increase in demand after the signing of the free trade agreement between the two countries in 2008.

Figure 10: Exports of New Zealand Milk and Milk Powder to China

Source:, Chatham House

This will continue; increasing Chinese demand is expected to account for nearly half of the growth in global food demand by 2050: supporting a positive outlook for the New Zealand agricultural industry.

China represents the most valuable destination for New Zealand dairy products, meat and timber. In return China is among the most significant suppliers to New Zealand of electrical and mechanical machinery and textiles. The graph below captures the strength of the New Zealand – China trade relationship, and the growth of trade in both directions. China cannot produce enough food to feed its people and relies on trade with New Zealand (among other countries) to ensure it has enough. New Zealand on the other hand relies on China for the production of textiles and machinery, for which the domestic market is too small to sustain production at scale.

Figure 11: NZ China Trade Relationship (year end June)

Source: NZ Stats

7. Conclusions on cross border food security
  • Local food supply is rarely matched to local demand.
  • Trade in food brings both parties the benefits of specialisation. Including resource efficiency and, often, environmental improvements as crops are grown in the most suitable climate.
  • Growth in food trade in the past 6 decades has enhanced global food sufficiency, and substantially reduced the number of people in food poverty. Fewer than 3% of world population are food insecure, a result of increased trade, not of increased local self-sufficiency.
  • Global food security rests on international trade in food – with 25% of food already crossing borders. If this were to be disrupted, food prices could be expected to rise sharply.
  • Food trade and food supply chains, while occasionally locally challenged, are proving resilient in the current crisis.
  • It is too early to know whether farming financial returns will increase in the current crisis but (other than tough challenges faced by farms growing for locked-down food service customers) there has been no sign, thus far, of farm gate returns falling.
  • Once again, farmland is proving to be a strong defensive, non-correlated asset class.
Future research from Craigmore

As mentioned in our March Commentary the coronavirus is driving major change in economies, as supplies of non-essential services are withdrawn, and money is printed to provide incomes to the furloughed staff of those industries. This Commentary has sought to add an international dimension to this analysis, by making the case for the on-going importance of cross border trade to help nations nourish their populations. We are confident this will continue. In future Craigmore Commentaries we will analyse what we think will have an even larger economic impact than the coronavirus itself – the “policy response” to the coronavirus economic shock.

Most of us failed to appreciate, after 2009, that the policy response to the sub-prime crisis, viz. government fiscal and monetary support, especially quantitative easing, would change the equilibrium of many asset markets – doubling the valuations (halving the yields) of many classes of leverageable real estate. Farmland, at least in New Zealand, has not typically been purchased by those benefiting from this new leverage and values have not significantly changed in the past 10 years (it was largely “left behind” by those changes). For more on this please see our Quantitative Easing in Reverse commentary.14 In future commentaries Craigmore will analyse whether possible blockages in agri-food supply chains may lift the prices of some foodstuffs and whether the next 10 years will be the time for farmland “as an asset class” to regain some of that lost ground.

Nick Tapp

1. Porkka, M, et al; From Food Insufficiency towards Trade Dependency: A Historical Analysis of Global Food Availability; 2013.
2. Bailey, Rob and Wellesley, Laura, (2017); ‘Chokepoints and Vulnerabilities in Global Food Supply’.
3. Ibid
4. D’Odorico et al. (2014); ‘Feeding humanity through global food trade’.
5. Ng, Francis and Aksoy, M A; Who are the net food importing countries?; World Bank; 2008.
6. Porkka, M, et al; From Food Insufficiency towards Trade Dependency: A Historical Analysis of Global Food Availability; 2013.
7.; Chatham House.
8. Ibid.
9. Saksena, M J, et al; America’s Eating Habits: Food Away from Home; USDA 2018.
10. Freight costs shown are Australian for 2019. Source: Deloitte Access Economics; Impact of Freight Costs on Australian Farms; May 2019.
12.; Chatham House.
13. NZ Herald; New Zealand Trade and Enterprise.

Published: 17 April 2020