Effect of Dependence on Food Imports on Social Status of Population in Context of COVID-19 Pandemic

The UN Secretary General noted that the Corona Virus pandemic will have serious socio-economic consequences. Recently, the Director General of the Food and Agriculture Organization of the United Nations (FAO), Qu Dungyu, urged G20 leaders to take steps to ensure that global food systems function properly, especially food security for the poorest and most vulnerable populations during the COVID-19 pandemic.

He recalled the crisis of 2007-2008, saying that the uncertainty existing at that time led to a wave of export restrictions on the part of some countries, while others began aggressively importing food products. Mr. Qu said this is due to excessive price volatility, which is detrimental to low-income countries experiencing food shortages.

We can say that this trend already exists. Some countries, in order to enhance the food security of the population of their countries, are trying to increase food supplies. For example, neighboring Russia and Kazakhstan have already decided to limit wheat exports this year.

According to the Ministry of Agriculture of Russia, from April 1 to June 30, the export of grain - wheat, rye, barley and corn - will be limited to 7 million tons. Restrictions on wheat exports by the region’s largest grain exporters could pose a serious problem for import-dependent countries like Azerbaijan.

I must note that prices for food wheat in Russia rose sharply. In many countries preparing for quarantine due to the Corona Virus pandemic, customers almost emptied store shelves, preferring to buy more flour and flour products - pasta, noodles and other products. Importers, stepping up their activities due to the hype, decided to increase grain reserves in emergency situations, fearing the closure of borders.

The excitement around flour products in countries has led to an unprecedented increase in prices for grain products in world markets. On March 20, in Russia, within one week, the price of 1 ton of wheat of the 3rd and 4th grade increased from 12,250 rubles to 13,275 rubles. According to the Union of Russian Grain Producers, price increases continued until the end of March.

It should also be noted that even before the pandemic was announced, global food prices were growing. Over the past two years, the value of wheat imported into Azerbaijan has increased by more than 20 percent.

While the import value of 1 ton of wheat imported into the country in 2017 amounted to $ 178.2, in 2019 it rose to $ 214.8. Azerbaijan imports food wheat mainly from Russia and a small part from Kazakhstan. In 2019, 1,584.9 thousand tons of food wheat was imported for $ 340.5 million.

Azerbaijan is one of the largest consumers of bread (150 kg) per capita in the world. The rapid growth of the country's population naturally increases the demand for food, as well as for raw materials produced by industry for agriculture. However, despite the annual increase in wheat production, we see an increase in imports of the same product. As can be seen from Table 1, during the year about 70 percent of the wheat used for food is imported.

Table 1. Stocks and use of wheat, thousand tons                              

 20102015201620182019
Production1 272.31 639.81 799.81 991.62172.5
Imports1 330.01 353.01 599.51 080.91 584.9
To produce food1 848.32 075.92 198.72 211.32 300.3

The decisions of Russia and Kazakhstan on limiting wheat exports and raising prices in these countries should make the Azerbaijani government think seriously. It turns out that Azerbaijan will no longer be able to buy wheat from these countries in the same volume and at the same price. Decreasing volumes of food wheat imports into the country and rising prices will have a serious impact on the domestic market, because 69.5% of the wheat used for baking bread is imported.

One of the most important principles of food security is to satisfy demand through domestic production, and the other is the availability of food for all. Unfortunately, Azerbaijan is not able to satisfy its demand for any food products through domestic production.

Thus, according to the food norm of the World Health Organization (WHO), the norm of meat per capita is 78 kilograms per year, while in Azerbaijan 33 kilograms per capita are produced per year, that is, only 42% of the demand is satisfied. And together with imported meat and meat products, only 51% of the total demand is satisfied.

Even without taking into account international standards for food standards established by WHO, the country's self-sufficiency in a number of products is low. Thus, self-sufficiency in consumed food wheat is 30.5%, and dependence on imports is 69.5%. The dependence on import of vegetable oils is 100%, rice - 82.6%, pasta - 75%, tea - 61.7%, sugar and butter - more than 30%. The situation for other products is presented in Table 2.

Table 2. Food production, imports, and import dependency in 2018

ProductProduction (tons)Imports (tons)Consumption (tons)Dependence on imports (%)
Wheat in 2019 (thsd. tons)2 172.51 584.92 280.369.5
Potatoes898 914158 272721 43521.9
Vegetables1 521 93136 7941 109 0213.3
Fruits and berries1 010 816138 078728 64118.9
Milk and dairy products2 080 437330 8532 358 91114
Meat and meat products326 02468 874390 53117.6
Eggs, thsd. pieces1 676 21318 5371 507 2051.2
Fish61 87913 14872 79918
Cheese50 0817 50857 24713.1
Rice11 97549 82660 27582.6
Flour1 603 13373 223720 55310.1
Macaroni4 23011 20414 93075
Salt64 41016 22447 07034.4
Vegetable oils71 143150 534148 517100
Butter23 6389 75932 04630.4
Sugar200 98393 290248 76937.5
Tea9 32312 97821 03261.7

The trouble is that over the past few months, prices for food imported by Azerbaijan have risen significantly. So, according to the data provided by the State Customs Committee, our calculations showed that in January-February 2020, the import value of meat and meat products increased by 30 percent compared to the same period last year, and the import value of milk increased by 15 percent (Table 3) . The cost of importing fruits and vegetables, vegetable and animal fats and oils, tea and other products was also higher than in the previous year.

Table 3. The cost of 1 ton of imported products in January-February 2019-2020, US dollars

ProductsImport value in 2019  Import value in 2020Difference for the year
Meat and meat products13791793+ 414
Milk12861484+ 201
Butter51294950-179
Fruits and vegetables518528+10
Fats and oils789913+124
Tea37463834+88

Thus, the level of self-sufficiency in basic food products in the country is low. The country satisfies the demand for vegetable oil, tea, food wheat, rice and other products mainly through imports. Prices for imported food products rose sharply even before the pandemic was announced in the world.

The UN FAO says the Corona Virus pandemic will disrupt global food supplies and lead to higher food prices. In this case, countries such as Azerbaijan, which cannot ensure food security, may experience food shortages and soaring food prices.

Rising prices will be a serious blow to the poor and destitute. On the other hand, rising prices will exacerbate poverty, as Azerbaijan is one of the countries with a low per capita income. We can say that consumer spending of the majority of the population is at the level of real income.

It should also be noted that in 2019, 45.8% of consumer spending in the retail network was spent on food.

The government should strengthen social security mechanisms to ensure food availability for the population. As an example, I would like to note that Argentina, which, like Azerbaijan, is a country with a low per capita income, along with a serious quarantine regime in connection with the Corona Virus pandemic, has taken several steps to strengthen social protection of citizens and provide assistance to the poor.

Although Argentina is on the verge of default for the third year in a row and has almost no opportunity to find funds to determine the budget deficit, many measures have been taken in the country, including additional compensation for doctors and the abolition of taxes for small businesses, and additional assistance has been provide to low-income citizens, pensioners, as well as those receiving social benefits.

As in other countries, the Azerbaijani government should pay more attention to the social protection of low-income families and the unemployed. I believe that the government in the face of rising food prices should strengthen the social protection of the poor, as well as prevent a decrease in their purchasing power.

 

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