Bankia S A : The food security debate and its effect on exports

In the worst moments of the crisis caused by COVID-19, global production and distribution chains were interrupted, a fact that re-opened the debate on food security as a policy that governments must prioritise to ensure the supply of basic products to the population in cases of emergencies.

According to the United Nations Food and Agriculture Organization (UN-FAO), better known as the FAO, food security is understood as the capacity of each country to satisfy the food consumption of its population through national production.

A capacity that has been put under review with the expansion of the coronavirus and that has increased interest in shorter supply chains. According to the 'En clave Agro' report, prepared by Bankia Estudios, it is likely that, in the post-covid era, local supply chains will partially replace global ones, with proximity prevailing over distance.

It will also lead to many countries generating more diverse products to meet their domestic consumption needs, as a national defence strategy, and to try to bring closer and diversify the sources of supplies for food goods that they cannot produce internally.

The indicators used to monitor the concept of food security attempt to measure specific aspects of food affordability, accessibility, availability, nutritional value and safety, and range from the simple difference between the production and consumption of food in a country to the calorific energy deficit per capita, as well as net food exports.

Spain, an export country

In Spain, food exports have expanded by an annual average of 7% over the last decade, as the part of the process of economic restructuring after the housing bubble burst.

During this period, the competitiveness of the agricultural sector has improved significantly: the average labour cost of the sector fell by 10% accumulated from 2010 to 2019, which contrasts with increases of 15% in France and close to 30% in Italy.

Spain went from having a food trade balance of around 0% of GDP before 2008 to becoming a net exporter, reaching 1% of GDP in 2019, according to Customs data.

In 2019, food exports represented 17% of Spain's sales abroad, exceeded only by sales of capital goods. Fruit, vegetables and pulses and meat accounted for more than half of all food exports.

By destination, almost two thirds of these exports go to countries within the EU, which includes France (15.5% of the total), Germany (11.5%) and Italy (10.1%). Among non-EU exports, the most important destinations are China, the US and, above all, the United Kingdom, with 8% of the total, all net food importers.

Effects of food security

If the main markets of Spain decided to implement measures to reduce their external dependence, the country's external demand for food would be reduced. However, the diversification of the economy at national level in recent years and the concentration of agri-food exports in the EU member countries could buffer some of the negative impact that this external shock would have on the country's aggregate.

In fact, Spain could benefit from a policy of deepening trade relations within Europe (Europe first?), which could offset the decline in purchases made by the US and Asia.

However, there is also the risk that the intensification of the crisis will be answered by European countries with a national approach that entails restrictions on free movement in the common market, as was evident during the recent economic hibernation.