ISLAMABAD: The ‘State of Agricultural Commodity Markets 2022’ report published on Tuesday says the global food and agricultural market has become denser, strengthening the market’s buffer capacity and resilience to shocks relative to the beginning of the twenty-first century.

The report, released by the Food and Agriculture Organisation (FAO) of the United Nations, said only a few countries still account for most of the value traded and only some countries source a large variety of food and agricultural products from many different exporters.

The imports of most countries are concentrated on a few products from a limited number of trade partners, making them vulnerable to shocks occurring in the exporter markets. The countries should aim to diversify the products they import and to increase the number of their trading partners to strengthen their resilience and ensure food security and healthy diets.

The FAO report said trade can be costly, and distance generally increases transport costs. There are also other costs related to insurance, export and import procedures and time delays at the borders.

On average, a food product faces eight different non-tariff measures and standards, and compliance significantly increases the cost of trade. In low-income countries, trade costs are estimated to be up to 400 percent in ad valorem equivalent, and such high costs inhibit trade integration, report said.

The report said the productivity gap in agriculture is huge, and on average, the top ten per cent of the richest countries produce about 70 times as much agricultural value added per worker as countries in the bottom 10 percent of the income distribution. Many lower middle and low-income countries face significant constraints in technology adoption and access to modern inputs.

The outbreak of the Covid-19 pandemic in early 2020 and the measures taken to contain it across countries put global food and agricultural markets to a test. National agri-food systems stretched but continued to provide adequate, nutritious and safe food worldwide.

Despite the significant restrictions on people’s movements and the uncertainty that settled upon the world, international trade continued to link food surplus areas with those in deficit, which safeguarded food security and nutrition globally.

Today, conflict in one of the breadbaskets of the world threatens global food security in multiple ways, including through the disruption of global food and agricultural markets. The war in Ukraine has not only resulted in a severe humanitarian crisis and a looming increase in global food insecurity, but also in the potential break-up of global cooperation in trade, according to the report.

Currently, the trade policy environment is characterised by a deadlock in multilateral trade negotiations under the WTO and a proliferation of deeper regional trade agreements (RTAs) that, in addition to market access, aim to promote convergence in domestic policies and regulations among their signatories.

The report says the regionalisation of food and agricultural trade – the tendency of countries to trade more within a region than with countries outside the region – has become more pronounced. Countries form trade clusters, which may be regional or expand to include countries across regions and within which they tend to trade more.

Published in Dawn, June 29th, 2022