In previous research going back to 2006, LIRNEasia has studied food supply chains, including, but not limited to, fruit and vegetable supply chains in Sri Lanka centered on Sri Lanka’s largest wholesale market in Dambulla which was recently shut down by the government along with several other wholesale markets. The closures were preceded by scenes of massive over supply, frustrated farmers throwing away unsold produce in large quantities, claims that the traditional traders were exploitative “middlemen,” and counterclaims that politicians were seeking to replace them, etc. On the other end, consumers confined to their homes under COVID-19 preventive measures were complaining not only of difficulties in getting adequate supplies but also in some cases of low quality and high prices. The government’s response included efforts to purchase unsaleable produce directly from farmers and to redistribute through government channels.
Some may argue that COVID-19 is a black-swan event which is impossible to prepare for. But it has raised the salience of the question of how to make food supply chains less vulnerable to shocks such as, but not limited to, COVID-19. Is it through self-reliance and local sourcing? Is it through approaches that prioritize planning, based on extensive data collection and the maintenance of stockpiles? Is it through mechanisms such as forward contracts and futures that allow for decentralized decision making that can incorporate the real risks of disruptions from epidemics (after 2020, there can be no epidemics that qualify for black-swan status) and climate change? Are there hybrid models that can be emulated? How can market disruptions be measured and assessed?
An op-ed informed by discussions on the above questions was published yesterday in Daily FT. The Sinhala version will be published on the weekend.
The response to COVID-19 and the resultant damage caused to food supply chains calls for a thorough re-examination of the entire agricultural system. The fragility of the current system has been laid bare. But the response should be nuanced and based on a sober consideration of evidence, giving due regard to the need for value for money in food. Instead of prohibiting imports and imposing taxes on consumers to protect inefficient producers, the state should ensure that supply chains are resilient because they are diversified both domestically and internationally. The best way to do this is by preventing the monopolisation of links in supply chains.
Simplistic retreat to slogans such as self-sufficiency will not suffice. Sri Lanka has experience with those policies from the 1970s. Then they gave rise to black markets for the affluent and malnutrition for the poor. What was implemented in a much simpler time cannot be made to work in today’s more complex economy where consumer preferences cannot be satisfied by ration shops