High food prices drive rise in export restrictions

Update: Indonesia lifted its three-week ban on palm oil exports on Monday 23 May. On 24 May, Malaysia, the world's second largest palm oil producer, also ruled out introducing export restrictions (Bloomberg 2022).

Record high global food prices, rising energy and fertiliser costs, and the Russian invasion of Ukraine have led some countries to introduce food export restrictions.

As of 15 May 2022, the International Food Policy Research Institute (IFPRI) has recorded 23 countries with active export restrictions on food and fertiliser products (see Figure 1).

Uncertainty in global food markets is likely to see more food export restrictions introduced in 2022 (IFPRI 2022). This may reduce the supply of some commodities available for trade. It will also place upward pressure on global food prices.

Figure 1: Number of countries with export restrictions on food and fertiliser products - Comparison of the food price crisis (2008), the COVID-19 pandemic (2020) and the Russian invasion of Ukraine (2022)

Implications for Australian exporters

Australia has a positive outlook for the 2022–23 cropping season. This means Australian exporters will be able to fill some of the supply gaps created by export restrictions. Australia’s reputation as a reliable supplier of high-quality agricultural products is particularly important at a time of increasing uncertainty in global markets.

Impacts of export restrictions

Export restrictions are policies that aim to discourage or stop exports. Food export restrictions aim to reduce domestic food prices and improve domestic food security.

Export-restricting policies include:

• Export duties: Taxes to discourage exports
• Export quotas: Limits on the amount of a product that can be exported
• Export licences: Requiring exporters to have a permit to export
• Export bans: Complete ban on exports.

In isolation, export restrictions have the potential to reduce domestic prices in some circumstances. However, as more countries implement restrictions there is an increased likelihood of price volatility, panic buying, shortages and hoarding.

For example, in early 2008, food security concerns led several major rice-producing countries to introduce export restrictions. Simultaneously, major rice-importing countries attempted to increase their rice stockpiles. The impact of these policies was a tripling of rice prices and disorder in global markets as countries scrambled to buy as much rice as they could. In the case of major rice importer Bangladesh, a humanitarian crisis was narrowly averted by relaxing some export restrictions (Headley and Fan 2010).

Maintaining a strong international trading system where countries work together to limit distortionary trade policies is critical in preventing excessive price volatility and improving food security.

Where export restrictions being implemented

Major food exporters such as Argentina, India, Indonesia, Kazakhstan and Russia, as well as smaller exporters, such as Algeria, Turkey and Serbia have introduced food export restrictions (see Figure 2).

• To-date, the food export restrictions with the largest impact on global markets have been:
• Indonesia’s ban on palm oil exports
• India’s export controls on wheat
• Russia’s export restrictions on grains, oilseeds and sugar
• Kazakhstan’s export quota for wheat and flour.

Increasing risks to global food security

As of May 2022, world food prices are at record highs. Export restrictions cover a similar proportion of calories traded as during the 2007–2008 food price crisis (IFPRI 2022). Ongoing export restrictions, drought conditions in North America, India and East Africa, and the gradual rise of rice prices are increasing risks to global food security.

Figure 3: Proportion of global food exports (in calorie terms) subject to export restrictions

Grain and vegetable oil prices are most at risk of further price rises. It is likely that policy decisions will have a substantial impact on the price and availability of food over the medium term.

• Wheat: Prices are at near record highs and global supply is tightening. It is highly unlikely that major exporters such as Australia, the US and Canada will introduce export restrictions. China is the world’s largest producer and consumer of wheat. The outcome of its winter crop, harvested in May/June, will have an important impact on the global wheat market.
• Vegetable oils: Indonesia and Ukraine have already introduced export restrictions. Competition with biofuels and the potential for further export restrictions may push prices higher (IFPR 2022).
• Rice: Record global production is forecast for 2021–22 (USDA 2022). While rice prices have been relatively stable compared with other staple foods, they have increased 6% since early March (IGC 2022). Rising rice prices raise concerns about global food security, particularly in Asia where rice is the key staple food.

Resources

The Australian Government’s network of Agriculture Counsellors provided information for this article. More information about the Agriculture Counsellor network, including contact details, is available on the Department of Agriculture, Water and the Environment website.

The International Food Policy Research Institute’s COVID-19 Food Trade Policy Tracker.