Export Curbs Spread Globally, Adding to Food-Inflation Pressures

The cascade of restrictions marks another setback for unfettered global trade, which has been dented in recent years by tariff and regulatory spats between the U.S. and China and moves by countries to safeguard supplies of medical equipment and vaccines during the coronavirus pandemic.

For governments, limiting food exports is a way to soothe public anger over rising prices and beef up domestic supplies, particularly after Russia’s invasion of Ukraine disrupted global food markets and raised prices for many commodities. Both countries are major exporters of grains and vegetable oils.

Economists, though, say experience has shown that restrictions on food exports inevitably push global prices up further as importers buy what they can from reduced supplies. While governments may get a brief respite from surging prices, they are rarely significant or long lasting, usually because farmers respond by limiting production or switching to other crops that attract better prices at home and abroad.

“It’s one of these classic things where there’s really a short-term sugar high for the government,” said

Simon Evenett,

professor of international trade and economic development at the University of St. Gallen in Switzerland. “And then you end up with the same scarcity problem you had before.”

Global food prices in April were 30% higher than a year earlier, according to an index published by the Food and Agriculture Organization of the United Nations. Meat prices were up 17%, prices for cereals such as wheat and maize were up 34% and vegetable oil prices were 46% higher.

Unlike tariffs and other import restrictions, export curbs on food aren’t covered by the commitments countries have made under various World Trade Organization agreements.

Most countries say the curbs are temporary, lasting on average for a few months or until the end of the year. Indonesia said Thursday it would lift a ban on palm-oil exports this week, while others such as Argentina, Moldova and Hungary have already lifted restrictions on exports of some products they put in place earlier in the year.

On Monday, Malaysia’s government said it would halt the export of 3.6 million chickens a month starting on June 1, citing tight supplies and high prices. “The government’s priority is the people,” Prime Minister

Ismail Sabri Yaakob

said. India, which banned wheat exports earlier this month, on Wednesday said it would set a cap on sugar exports between June 1 and Oct. 31.

Indonesia, which produces nearly 60% of the world’s palm oil, banned the export of many palm-oil products in late April to fight rising cooking-oil prices at home. The decision exacerbated a global shortage of edible oils after the war cut off exports of sunflower oil from Ukraine.

On Thursday, Indonesian President

Joko Widodo

said that in the weeks since, domestic cooking-oil prices had fallen by around 10% and local supplies had become more abundant.

Globally, though, palm-oil prices are on the rise again after easing from a March high. One metric ton of crude palm oil fetched $1,426 on Monday, up 2.4% on the week, according to the Malaysian Palm Oil Council. Malaysian prices are often used as a proxy for global prices. That is 6% lower than the average daily price in March, but 17% higher than the daily average in January.

Even in Indonesia, prices have remained stubbornly higher than the government’s target of around $1 per liter, causing difficulties for many Indonesians. Today a liter of cooking oil goes for roughly $1.20—about 15 cents less than it did in April, but roughly 30 cents more than a year ago, according to government data.

Syari Kusumastuti, who sells spring rolls out of her home on the outskirts of Jakarta, has started charging extra for her fried snacks. “Expensive cooking oil increases the burden of higher daily costs,” she said, adding that most Indonesian dishes call for vegetable oil.

Still, farmers had been pushing for the government to lift the ban, saying mills are offering them much less money for their palm fruit because there were no export opportunities.

“More than half of my income is gone. Try to imagine, how can I pay for fertilizer?” said Tatok Sugiarto, who grows palm oil on some 90 acres of land on the Indonesian island of Sumatra. He expressed satisfaction after the ban was removed.

In all, 26 countries have implemented some form of export restriction on food or fertilizer in 2022, according to the International Food Policy Research Institute in Washington, D.C. Restrictions include outright bans on exports as well as taxes and special licensing regimes.

That is more than at the height of the Covid-19 pandemic in 2020, but fewer than in 2008, when 33 countries put curbs in place after drought and high oil prices led to food inflation and worries over supplies.

Almost all the new restrictions came into force after Russia invaded Ukraine in February, and 23 countries had restrictions still in place as of Tuesday, according to the institute. Advanced economies including the U.S., Japan, the U.K. and Australia have also put export curbs on food in place, though their measures are aimed solely at Russia as part of sweeping sanctions against Moscow for its invasion.

Dozens of products are affected by the cascade of export curbs. Argentina has a ban on beef exports. Ghana has prohibited exports of maize, rice and soybeans. Iran has banned the export of potatoes, eggplants and tomatoes. Egypt has stopped exporting beans, olive oil, red lentils, wheat, corn and cooking oil.

All those countries are struggling with high inflation. Annual inflation in Egypt was 13% in April, according to data provider CEIC. In Ghana, it was 24%; in Iran, 36%; in Argentina, 58%. In Lebanon, annual inflation reached 207% last month.

Analysis of previous crises shows trade restrictions push up global prices. One paper published in 2012 looked at the years 2006 to 2008, when the price of rice rose 113%. Forty percentage points of that increase could be attributed to changes in trade policy, the authors found.

Export curbs can create other problems. India’s ban on wheat exports this month caught traders by surprise. At one point last week, more than 4,000 trucks laden with wheat were stuck in line for days outside the port in the Kutch district of the western state of Gujarat.

“There has been utter chaos at the port,” said Sanjay Mehta, chairman of the Deendayal Port Authority, which manages the port.

The big risk now, economists say, is that export restrictions keep proliferating, heaping more pressure on global prices.

“Other countries have an incentive to have similar policies for similar reasons, and therefore this augments the problem and pushes food prices further up,” said Michele Ruta, lead economist at the World Bank for macroeconomics, trade and investment.

The longer such restrictions stay in place, and the more countries that join in, the longer it takes for prices to stabilize, said Kym Anderson, emeritus professor of economics at the University of Adelaide in Australia, one of the authors of the 2012 paper looking at the effect of trade policy on food prices.

“Countries tend to act as if they’re individuals, when cooperation would serve them much better,” he said.

—Chao Deng in Cairo, Elvan Kivilcim in Istanbul and Nazih Osseiran in Beirut contributed to this article.

Write to Jason Douglas at [email protected], Jon Emont at [email protected] and Vibhuti Agarwal at [email protected]

The cascade of restrictions marks another setback for unfettered global trade, which has been dented in recent years by tariff and regulatory spats between the U.S. and China and moves by countries to safeguard supplies of medical equipment and vaccines during the coronavirus pandemic.

For governments, limiting food exports is a way to soothe public anger over rising prices and beef up domestic supplies, particularly after Russia’s invasion of Ukraine disrupted global food markets and raised prices for many commodities. Both countries are major exporters of grains and vegetable oils.

Economists, though, say experience has shown that restrictions on food exports inevitably push global prices up further as importers buy what they can from reduced supplies. While governments may get a brief respite from surging prices, they are rarely significant or long lasting, usually because farmers respond by limiting production or switching to other crops that attract better prices at home and abroad.

“It’s one of these classic things where there’s really a short-term sugar high for the government,” said

Simon Evenett,

professor of international trade and economic development at the University of St. Gallen in Switzerland. “And then you end up with the same scarcity problem you had before.”

Global food prices in April were 30% higher than a year earlier, according to an index published by the Food and Agriculture Organization of the United Nations. Meat prices were up 17%, prices for cereals such as wheat and maize were up 34% and vegetable oil prices were 46% higher.

Unlike tariffs and other import restrictions, export curbs on food aren’t covered by the commitments countries have made under various World Trade Organization agreements.

Most countries say the curbs are temporary, lasting on average for a few months or until the end of the year. Indonesia said Thursday it would lift a ban on palm-oil exports this week, while others such as Argentina, Moldova and Hungary have already lifted restrictions on exports of some products they put in place earlier in the year.

On Monday, Malaysia’s government said it would halt the export of 3.6 million chickens a month starting on June 1, citing tight supplies and high prices. “The government’s priority is the people,” Prime Minister

Ismail Sabri Yaakob

said. India, which banned wheat exports earlier this month, on Wednesday said it would set a cap on sugar exports between June 1 and Oct. 31.

Indonesia, which produces nearly 60% of the world’s palm oil, banned the export of many palm-oil products in late April to fight rising cooking-oil prices at home. The decision exacerbated a global shortage of edible oils after the war cut off exports of sunflower oil from Ukraine.

On Thursday, Indonesian President

Joko Widodo

said that in the weeks since, domestic cooking-oil prices had fallen by around 10% and local supplies had become more abundant.

Globally, though, palm-oil prices are on the rise again after easing from a March high. One metric ton of crude palm oil fetched $1,426 on Monday, up 2.4% on the week, according to the Malaysian Palm Oil Council. Malaysian prices are often used as a proxy for global prices. That is 6% lower than the average daily price in March, but 17% higher than the daily average in January.

Even in Indonesia, prices have remained stubbornly higher than the government’s target of around $1 per liter, causing difficulties for many Indonesians. Today a liter of cooking oil goes for roughly $1.20—about 15 cents less than it did in April, but roughly 30 cents more than a year ago, according to government data.

Syari Kusumastuti, who sells spring rolls out of her home on the outskirts of Jakarta, has started charging extra for her fried snacks. “Expensive cooking oil increases the burden of higher daily costs,” she said, adding that most Indonesian dishes call for vegetable oil.

Still, farmers had been pushing for the government to lift the ban, saying mills are offering them much less money for their palm fruit because there were no export opportunities.

“More than half of my income is gone. Try to imagine, how can I pay for fertilizer?” said Tatok Sugiarto, who grows palm oil on some 90 acres of land on the Indonesian island of Sumatra. He expressed satisfaction after the ban was removed.

In all, 26 countries have implemented some form of export restriction on food or fertilizer in 2022, according to the International Food Policy Research Institute in Washington, D.C. Restrictions include outright bans on exports as well as taxes and special licensing regimes.

That is more than at the height of the Covid-19 pandemic in 2020, but fewer than in 2008, when 33 countries put curbs in place after drought and high oil prices led to food inflation and worries over supplies.

Almost all the new restrictions came into force after Russia invaded Ukraine in February, and 23 countries had restrictions still in place as of Tuesday, according to the institute. Advanced economies including the U.S., Japan, the U.K. and Australia have also put export curbs on food in place, though their measures are aimed solely at Russia as part of sweeping sanctions against Moscow for its invasion.

Dozens of products are affected by the cascade of export curbs. Argentina has a ban on beef exports. Ghana has prohibited exports of maize, rice and soybeans. Iran has banned the export of potatoes, eggplants and tomatoes. Egypt has stopped exporting beans, olive oil, red lentils, wheat, corn and cooking oil.

All those countries are struggling with high inflation. Annual inflation in Egypt was 13% in April, according to data provider CEIC. In Ghana, it was 24%; in Iran, 36%; in Argentina, 58%. In Lebanon, annual inflation reached 207% last month.

Analysis of previous crises shows trade restrictions push up global prices. One paper published in 2012 looked at the years 2006 to 2008, when the price of rice rose 113%. Forty percentage points of that increase could be attributed to changes in trade policy, the authors found.

Export curbs can create other problems. India’s ban on wheat exports this month caught traders by surprise. At one point last week, more than 4,000 trucks laden with wheat were stuck in line for days outside the port in the Kutch district of the western state of Gujarat.

“There has been utter chaos at the port,” said Sanjay Mehta, chairman of the Deendayal Port Authority, which manages the port.

The big risk now, economists say, is that export restrictions keep proliferating, heaping more pressure on global prices.

“Other countries have an incentive to have similar policies for similar reasons, and therefore this augments the problem and pushes food prices further up,” said Michele Ruta, lead economist at the World Bank for macroeconomics, trade and investment.

The longer such restrictions stay in place, and the more countries that join in, the longer it takes for prices to stabilize, said Kym Anderson, emeritus professor of economics at the University of Adelaide in Australia, one of the authors of the 2012 paper looking at the effect of trade policy on food prices.

“Countries tend to act as if they’re individuals, when cooperation would serve them much better,” he said.

—Chao Deng in Cairo, Elvan Kivilcim in Istanbul and Nazih Osseiran in Beirut contributed to this article.

Write to Jason Douglas at [email protected], Jon Emont at [email protected] and Vibhuti Agarwal at [email protected]