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An Odd Crisis: Covid‐19 and UK Food Prices

Author

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  • Han Lin
  • Tim Lloyd
  • Steve McCorriston
Abstract
The Covid‐19 pandemic will have impacts that will vary across countries and commodity sectors, reflecting factors such as the importance of trade, differences in the functioning of supply chains and the market which producers and farmers supply. Some of these effects will be relatively short‐lived; others will be longer‐lasting. In this context, we set out the channels through which food prices will be affected by the Covid‐19 pandemic, emphasising the short‐ and longer‐term nature of the main effects. We focus on the UK but the insights extend to other (importing) countries. Drawing on a recent econometric model of UK retail food prices that accounts for both domestic and international factors, we show that the key drivers have potentially off‐setting effects, suggesting that the Covid‐19 shock to the food sector is likely to be different from previous shocks, particularly the commodity price crises of 2007–2008 and 2011. In many European countries, the Covid‐19 pandemic may manifest itself as something of an ‘odd crisis’, in which lower world and farm‐gate prices co‐exist with higher domestic retail prices. These off‐setting factors will frame policy responses targeted at different stages of the food chain across countries. Les incidences de la pandémie de Covid‐19 varieront selon les pays et les secteurs de produits, reflétant des facteur stels que l'importance des échanges, les différences dans le fonctionnement des chaînes d'approvisionnement et le marché que les producteurs et les agriculteurs approvisionnent. Certains de ces effets seront de relativement courte durée; d'autres plus persistants. Dans ce contexte, nous avons défini les canaux de transmission des effets de la pandémie de Covid‐19 sur les prix des denrées alimentaires, en insistant sur la nature à court et à long terme de ces principaux effets. Nous nous concentrons sur le Royaume‐Uni, mais les conclusions s’étendent à d'autres pays (importateurs). En nous inspirant d'un récent modèl eéconométrique des prix alimentaires de détail au Royaume‐Uni, qui tient compte des facteurs nationaux et internationaux, nous montrons que les principaux facteurs ont des effets potentiellement compensateurs, ce qui suggère que le choc de la pandémie de Covid‐19 sur le secteura limentaire pourrait être différent des chocs antérieurs, en particulier les crises des prix des produits de base de 2007–2008 et 2011. Dans de nombreux pays européens, la pandémiede Covid‐19 peut se manifeste rcommeune sorte de « crise étrange », dans laquelle la baisse des prix mondiaux et des prix au niveau de la ferme coexiste avec des prix intérieurs de détail plus élevés. Ces facteurs compensatoires en cadreront les réponses ciblées entermes d'action publique à différents stades de la chaîne alimentaire à travers les pays. Die Auswirkungen der Covid‐19‐Pandemie werden von Land zu Land und von Sektor zu Sektor unterschiedlich sein und spiegeln Faktoren wie die Bedeutung des Handels und Unterschiede in der Funktionsweise der Lieferketten sowie des Marktes, den Produzierende und Landwirtinnen und Landwirte beliefern, wider. Einige dieser Auswirkungen werden relativ kurzlebig sein, andere werden länger andauern. In diesem Zusammenhang zeigen wir die Kanäle auf, über welche die Lebensmittelpreise durch die Covid‐19‐Pandemie beeinflusst werden. Dabei heben wir die kurzfristigen und längerfristigen Hauptauswirkungen hervor. Unser Fokus liegt auf dem Vereinigten Königreich; die Erkenntnisse erstrecken sich jedoch auch auf andere (importierende) Länder. Auf der Grundlage eines aktuellen ökonometrischen Modells zu den Lebensmittelpreisen im britischen Einzelhandel, das sowohl inländische als auch internationale Faktoren berücksichtigt, zeigen wir, dass die wichtigsten Treiber potenziell gegenläufige Effekte haben. Dies deutet darauf hin, dass sich der Covid‐19‐Schock im Lebensmittelsektor wahrscheinlich von früheren Schocks unterscheidet, insbesondere von den Produktpreiskrisen der Jahre 2007–2008 und 2011. In vielen europäischen Ländern kann sich die Covid‐19‐Pandemie als eine Art „seltsame Krise” zeigen, in der niedrigere Welt‐ und Erzeugerpreise mit höheren inländischen Einzelhandelspreisen koexistieren. Diese gegenläufigen Faktoren werden den Rahmen für politische Maßnahmen bilden, die auf die verschiedenen Stufen der Lebensmittelkette in den einzelnen Ländern abzielen.

Suggested Citation

  • Han Lin & Tim Lloyd & Steve McCorriston, 2020. "An Odd Crisis: Covid‐19 and UK Food Prices," EuroChoices, The Agricultural Economics Society, vol. 19(3), pages 42-48, December.
    • Handle: RePEc:bla:eurcho:v:19:y:2020:i:3:p:42-48
    DOI: 10.1111/1746-692X.12291
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    References listed on IDEAS

    as
    1. Holger Breinlich & Elsa Leromain & Dennis Novy & Thomas Sampson, 2019. "Exchange Rates and Consumer Prices: Evidence from Brexit," CESifo Working Paper Series 8001, CESifo.
    2. Laborde Debucquet, David & Martin, Will & Vos, Rob, 2020. "Poverty and food insecurity could grow dramatically as COVID-19 spreads," IFPRI book chapters, in: COVID-19 and global food security, chapter 2, pages 16-19, International Food Policy Research Institute (IFPRI).
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