A time to rethink food policy in Timor-Leste

As the world is witnessing an unprecedented crisis in Ukraine, the effects are immediately being felt far and wide, manifested through the unfolding global food price crisis

Less than six months ago, the United Nations convened the first ever Food Systems Summit to set the stage for transformative solutions to help achieve the Sustainable Development Goals by 2030. Today, many countries are encountering a further hurdle: a food price crisis emanating from the conflict in Ukraine.

As of the first week of March 2022, the global wheat price had soared by almost 60 percent compared to the previous month and the highest since the 2008 global food crisis as a direct result of the conflict. Like in the 2008 food crisis, this rapid rise occurred in a short span of time and includes other key staple crops like corn and soybean.

The current spike in prices is likely to get worse as the Ukraine conflict rages on, through two fundamental elements: disrupted supply chains and reduced production. Globally, wheat is the second-most produced cereal grain behind corn, while its global trade is greater than all other crops combined.

With ports closed, traders are no longer able to book vessels to load and move commodities out of Ukraine. As a second largest global grain shipper, it means commodity exports have been thrown into chaos with ripple effects to be felt far and wide, as worries deepen about logjams in supply chains – which were already impacted by COVID-19. More importantly, Ukraine and Russia produce about 25 percent of global wheat production. As the conflict rages on, Ukrainian farmers have now abandoned their wheat fields which have turned into battle fields. Both countries are Indonesia’s top suppliers of wheat, a key ingredient of noodle, flour, and bread producers. Since Timor-Leste’s wheat imports are mainly from Indonesia, the conflict is likely to bring some supply-demand imbalances to the local market.

For Timor-Leste as a food deficit and import dependent country, it means importers (also hit by more expensive transport/fuel) are likely to see increased pressure costs which could ultimately impact consumer prices.

Recently, the country’s annual inflation edged up 5.4 percent in January 2022, the highest reading in almost 10 years, mainly on account of the increase in the food component of the Consumer Price Index. Rising inflation is unlikely to be transitory or to ease soon with current global developments. Typically, those most affected by the food price increases are the urban and rural poor who depend on the market to access food products, and this is likely to undermine their ability to meet essential food needs.

It may just be a good time to rethink the policy instruments on strategic grain reserves, import substitution, and social protection to mitigate the impact, especially on the vulnerable population.