Bulk of literature pertaining to the ties between food and finance appear to have been concentrated on big, private institutional investors and the speculative nature of their investments: commercial banks, insurance firms, pension funds, etc.
In recent decades, sweeping globalisation processes have radically altered the agricultural landscape. The growing penetration of economic motives, markets, institutions and elites in the activity and functioning of the global food system is a phenomenon that can be defined as the "financialization" of food. It is an important feature of this ongoing transition.
However, in the current time particularly 2020-21, the Covid pandemic is a new phenomenon that is being witnessed in human history. The severe negative effects of the pandemic on the global economy is a common problem. Food and agriculture industry are also being affected by its consequences.
Protection initiatives resulted in the closing of offices and educational facilities and temporary limits on travel and social gatherings. Flexible working from home and online meetings became common but for people working in the food industry to follow the work from home regime sounded absurd.
Yet the agricultural sector seemed to be less affected than other sectors at the first glance because lockdowns in response to the coronavirus (COVID-19) curtail economic activity around the world, the sector's companies were far from immune to what happened or what continues to happen in the wider economy. There is a significant strain on agricultural production and distribution networks with logistics and marketing disruptions. During the pandemic and as countries recover from it, ensuring that financial resources continue to flow to the agricultural sector is critical, with businesses adjusting to a new standard, disruptions can occur anywhere in the food supply chain if funding is not available, which will translate into less food on the table and increased food insecurity.
The shutdown of cafes, restaurants, hotels, bars, and other event venues have changed the way food is stored, delivered, and consumed easily and profoundly. People are consuming more meals at home than out, significantly reducing demand for kinds of food normally eaten in restaurants, including fish or shellfish. Around the same time, the closure in some countries of food processing plants and farmers' markets is taking place. COVID-19 is imposing drastic improvements to the delivery of food. As demand has moved to retail outlets, e-commerce platforms are evolving to facilitate farmer-to-finish customer transactions. This is contributing to logistics and marketing shifts. The increasing demand for food in smaller packages, for family or individual consumption.
As farmers and businesses adjust their business strategies and investments, however, funding also needs to adapt to these new requirements. New contactless processes and transactions, logistics infrastructure and e-commerce platforms require considerable capital and could lead to other investment needs, such as e-payment systems, for instance.
In order to transfer food from global surplus areas to deficit areas while sustaining food supplies as the next crop season begins in some countries, support for trade financing and loans for agriculture and food processing will become essential. For the purchase of inputs as well as plant, harvest, process, trade, and distribution, farmers and companies operating in the sector rely on finance.
It is equally critical that the flow of finance is constantly monitored and based not only on commercial banks, but also on public banks,
financial cooperatives and microfinance institutions in particular, as these organisations are the key providers of finance to smallholder farms and MSMEs in agriculture.
Finance plays a key role in reducing threats to the food system, adjusting food supply chains to current sanitary standards, and keeping food affordable for the most vulnerable.
**pictures are sourced from https://unsplash.com/
Written By - Ananya Chaturvedi
Edited By - Ishaan Kothari
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