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FAO / SEA TRADE DISRUPTION FOOD COMMODITIES
STORY: FAO / SEA TRADE DISRUPTION FOOD COMMODITIES
TRT: 04:01
SOURCE: FAO
RESTRICTIONS: PLEASE CREDIT FAO ON SCREEN
LANGUAGE: ENGLISH / SPANISH / NATS
DATELINE: 02 FEBRUARY 2024, ROME, ITALY / FILE
FILE - 15 SEPTEMBER 2023, ROME, ITALY
1. Wide shot, headquarters of the Food and Agriculture Organization of the United Nations (FAO)
2. Wide shot, FAO headquarters
3. Med shot, FAO logo
02 FEBRUARY 2024, ROME, ITALY
4. Wide shot, FAO Chief Economist, Maximo Torero, in his office
5. Med shot, FAO Chief Economist, Maximo Torero, in his office
6. Med shot, FAO Chief Economist, Maximo Torero, working in his office
7. Close up, FAO Chief Economist, Maximo Torero, with FAO and UN flags in background
8. SOUNDBITE (English) Maximo Torero, Chief Economist, Food and Agriculture Organization of the United Nations (FAO):
“Today there are three routes that are of concern. Of course, the Black Sea, which we know there is no mobility of vessels since few months ago. The second one is the Red Sea, and the third one is the Panama Channel. Now, what are the consequences of these routes [being impacted by disruptions]? First, you have to move food from one continent to the other, for example, that's the case of Panama [Canal], that's the case of the Red Sea, or distributing food across some continents, like in the case of the Black Sea.”
FILE - 15 SEPTEMBER 2023, ROME, ITALY
9. Wide shot, FAO logo
10. Wide shot, FAO flag
02 FEBRUARY 2024, ROME, ITALY
11. SOUNDBITE (English) Maximo Torero, Chief Economist, Food and Agriculture Organization of the United Nations (FAO):
“First, it is being affected because the insurance costs will increase. There is more risk, because of potential attacks, and that will increase the transportation costs. The second issue is that, to avoid this, some companies will reroute vessels, and the rerouting of vessels will have to go through a longer distance and that will imply a higher cost. The major commodity that could be affected outside of oil, if we go directly to food, is the case of rice. We need to look at rice very carefully, because rice is the only staple commodity right now where the price has been going up for the last 12 months.”
FILE - 15 SEPTEMBER 2023, ROME, ITALY
12. Wide shot, people walking towards FAO headquarters
13. Wide shot, a board displaying FAO logo
02 FEBRUARY 2024, ROME, ITALY
14 SOUNDBITE (English) Maximo Torero, Chief Economist, Food and Agriculture Organization of the United Nations (FAO):
“What is happening in Panama in the last year is a drought, a significant drought, which has lowered the availability of water in Panama. What that means is that the capacity of the [Panama] Channel to move vessels in the regular velocity has declined. And this implies congestion. So you have congestion, then you have problems, more cost. So vessels that take X amount of days now will take X plus a delta amount of days because of the lack of water to accelerate the process. So the first reductions [to transportation] we're introduced in July 2023 and in January [2024] reached nearly 40 percent compared to last year, leading to extended waiting time and diversions.”
FILE - 15 SEPTEMBER 2023, ROME, ITALY
15. Drone shot, FAO headquarters
02 FEBRUARY 2024, ROME, ITALY
16. SOUNDBITE (Spanish) Maximo Torero, Chief Economist, Food and Agriculture Organization of the United Nations (FAO):
“Al haber menos agua, la velocidad de moverse de esos barcos se reduce, porque hay congestión. No pueden mover la misma cantidad o el mismo tamaño de barcos a la velocidad anterior, y eso aumenta los costos porque hay más demora, entonces es un costo muy grande, y además se buscan alternativas, como mover parte del contenido en barcos de menor tamaño o a través de otros mecanismos, utilizando trenes, etcétera. Entonces eso afecta la movilidad en un canal que es muy activo para mover, por ejemplo, todo lo que es la producción de Sudamérica de cereales y productos de alto valor a otros continentes, especialmente Asia. Entonces hay que estar muy atentos, se están haciendo todos los esfuerzos, pero es importante tomarlo en cuenta porque es lo que está pasando ya hace varios meses.”
["As there is less water, the speed at which these ships can move is reduced, because there is congestion. They cannot move the same number or the same size of ships at the previous speed, and that increases costs because there is more delay, so it is a very big cost, and also alternatives are sought, such as moving part of the content in smaller ships or through other mechanisms, using trains, and so on. So this affects mobility in a channel that is very active in moving, for example, all of South America's production of cereals and high-value products to other continents, especially Asia. So we have to be very attentive, every effort is being made, but it is important to take this into account because this is what has been happening for several months now". ]
FILE - 15 SEPTEMBER 2023, ROME, ITALY
17. Drone shot, FAO headquarters
18. Drone shot, FAO headquarters and UN flag
02 FEBRUARY 2024, ROME, ITALY
19. SOUNDBITE (English) Maximo Torero, Chief Economist, Food and Agriculture Organization of the United Nations (FAO):
“It will be an excellent tool for resilience, because we could understand what will be the impacts of these potential shocks, so it is not only to see them when they are happening, but it is also to understand them for the future, so that when something like this happens again, we can be more prepared and identify alternative routes, or other ways which are cost-effective, that will allow us to minimize these risks.”
FILE - 15 SEPTEMBER 2023, ROME, ITALY
20. Wide shot, UN and FAO flags
The convergence of disruptions in the Red Sea and other seaborne routes key to food transportation such as the Black Sea and the Panama Canal is a concern, says Maximo Torero, Chief Economist of the Food and Agriculture Organization of the United Nations (FAO), underscoring the importance of the Agricultural Market Information System (AMIS) in enhancing transparency and policy coordination to reduce volatility in world food markets.
Logistics and vessel mobility play a central role in moving food across the world, explained FAO Chief Economist, who noted that the current situation could impact the price of rice and other food commodities.
SOUNDBITE (English), Maximo Torero, FAO Chief Economist: “Today there are three routes that are of concern. Of course, the Black Sea, which we know there is no mobility of vessels since few months ago. The second one is the Red Sea, and the third one is the Panama Channel. Now, what are the consequences of these routes [being impacted by disruptions]? First, you have to move food from one continent to the other, for example, that's the case of Panama [Canal], that's the case of the Red Sea, or distributing food across some continents, like in the case of the Black Sea.”
Speaking about the attacks on vessels in the Red Sea, Torero recalled that this route accounts for about 10 percent of the maritime trade volume in the world and is very important for the transportation of commodities like oil and rice.
The FAO Chief Economist said disruptions have impacted transportation costs and this could affect the price of rice.
SOUNDBITE (English), Maximo Torero, FAO Chief Economist: “First, it is being affected because the insurance costs will increase. There is more risk, because of potential attacks, and that will increase the transportation costs. The second issue is that, to avoid this, some [transportation] companies will reroute vessels, and the rerouting of vessels will have to go through a longer distance and that will imply a higher cost. The major commodity that could be affected outside of oil, if we go directly to food, is the case of rice. We need to look at rice very carefully, because rice is the only staple commodity right now where the price has been going up for the last 12 months.”
FAO Food Price Index, which tracks monthly changes in the international prices of globally traded food commodities, registered a 21 percent increase in the price of rice in 2023, largely owing to concerns about the impact of El Niño on rice production and in the aftermath of export restrictions imposed by India. In January, price quotations for rice continued to rise (+1.2 percent).
Drought in the Panama Canal, crucial for moving food commodities from large food producers in Latin America to consumers in Asia, could also impact prices of other food commodities, explained FAO Chief Economist.
SOUNDBITE (English), Maximo Torero, FAO Chief Economist: “What is happening in Panama in the last year is a drought, a significant drought, which has lowered the availability of water in Panama. What that means is that the capacity of the [Panama] Channel to move vessels in the regular velocity has declined. And this implies congestion. So you have congestion, then you have problems, more cost. So vessels that take X amount of days now will take X plus a delta amount of days because of the lack of water to accelerate the process. So the first reductions [to transportation] we're introduced in July 2023 and in January [2024] reached nearly 40 percent compared to last year, leading to extended waiting time and diversions.”
SOUNDBITE (Spanish), Maximo Torero, FAO Chief Economist: “As there is less water, the speed at which these ships can move is reduced, because there is congestion. They cannot move the same number or the same size of ships at the previous speed, and that increases costs because there is more delay, so it is a very big cost, and also alternatives are sought, such as moving part of the content in smaller ships or through other mechanisms, using trains, and so on. So this affects mobility in a channel that is very active in moving, for example, all of South America's production of cereals and high-value products to other continents, especially Asia. So we have to be very attentive, every effort is being made, but it is important to take this into account because this is what has been happening for several months now.”
In the face of these risks, the FAO-hosted SIMA platform plays a pivotal role in reducing information asymmetry, a crucial factor in preventing wrong policy responses such as export distortions, market volatility, and potentially excessive speculation when issues ranging from conflicts to climate change threat to cause shocks.
Composed by G20 members, Spain, and eight additional major exporting and importing countries of agricultural commodities, AMIS is also a platform to coordinate policy action in times of market uncertainty. The system provides information to assess global food supplies, focusing on wheat, maize, rice and soybeans. In 2024 its commodities will be extended to oilseeds and fertilizers, and it will be improved to better understand logistics and the potential impacts on food markets.
SOUNDBITE (English), Maximo Torero, FAO Chief Economist: “It [AMIS] will be an excellent tool for resilience, because we could understand what will be the impacts of these potential shocks, so it is not only to see them when they are happening, but it is also to understand them for the future, so that when something like this happens again [disruptions in seaborne routes], we can be more prepared and identify alternative routes, or other ways which are cost-effective, that will allow us to minimize these risks.”
AMIS was launched in 2011 by the G20 Ministers of Agriculture following the global food price hikes in 2007/08 and 2010. It involves nine international organizations.
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