Global grain food trade remains robust

The structure of the international trading system has undergone fundamental changes, with a recent shift from global approaches to more restricted or geographically limited trading regimes. Despite these changes, the agricultural sector has demonstrated an astonishing capacity to adapt to evolving national and global policies, allowing it to thrive.

The exponential growth of agricultural trade over the last 25 years demonstrates that restrictive trade interventions such as tariffs, quotas, taxes and bans have been largely ineffective: In most cases, they proved temporary phenomena that were eventually countered by supply chain adjustments and arbitrage by the major market players.

For example, productivity increases in the Black Sea region have transformed a former net importer to the largest exporter of grains over the past three decades. Brazil – a contra seasonal supplier – continued to increase acreage yearly, now surpassing the US to become the largest exporter of maize and soybeans. Even with many countries providing sizable subsidies and other market distorting measures as part and parcel of a national safety-net mechanism, most policies since the 1990s have tended to decouple support levels from commodity prices. This has increasingly allowed the global forces of supply and demand to determine prices, hence allowing agricultural markets to maintain a generally healthy equilibrium.

Trade tensions and market interventions have resurfaced again since 2018, largely fuelled by the US initiative to reduce its reliance on imports of industrial and finished goods, most notably from China that expanded the conflict also to agricultural markets. However, trade escalations began to ease with the signing of the bilateral Phase One Trade agreement (2019) while the US pledged to realign its interests, particularly by using bilateral trade pacts with several countries and regions, challenging the long-fought establishment of multilateralism.

Although not completely inured to a bout of unilateralism and protectionism, the agricultural sector, building on multiple resiliencies over the years, has demonstrated its capacity to remain largely insulated from major disruption, including trade escalations. Elevated awareness, much in line with the main goal of AMIS, and instantaneous price signalling, have helped maintain global food supply chains intact, even during the current pandemic of COVID-19. In fact, trade in grains and oilseeds has continued to expand over the past couple of months, contrary to massive contractions confronting non-agricultural sectors.