key: cord-0955858-npfphhzm
authors: Coluccia, Benedetta; Agnusdei, Giulio Paolo; Miglietta, Pier Paolo; De Leo, Federica
title: Effects of COVID-19 on the Italian agri-food supply and value chains
date: 2021-01-01
journal: Food Control
DOI: 10.1016/j.foodcont.2020.107839
sha: 4e483d874d892c95d1cec2186f55528cea9e8d26
doc_id: 955858
cord_uid: npfphhzm

The spread of COVID-19 has not only led to many deaths but also to social and economic downturn globally. The study represents an exhaustive compilation of relevant macroeconomic data regarding the status of the agri-food sector from a demand side perspective and an overview of the food product producer and consumer prices after the shock. Its main purpose is to assess the resilience level of the agri-food sector to the coronavirus pandemic, analyzing its effect on commodity prices and focusing on the supply and value chain. The results highlight that fresh and perishable products, whose production or harvest took place during the first wave of COVID-19, have suffered price level effects, while storable products have not registered significant impacts. This phenomenon is mainly due to the vulnerability of the harvest and production phases, which affected fresh and perishable products supply, and to the resilience of transports and logistics, which instead ensured the supply of storable products to the final consumer. Especially in case of future pandemic waves, the implications and information deriving from the present analysis could support researchers, policy makers and managers, serving as an assessment tool to build suitable strategies for the whole agri-food supply chain and thus ensure sector resilience during these unprecedented times.

The coronavirus pandemic has caused a state of panic worldwide, challenging food security, 23 agriculture and food systems (Deaton & Deaton, 2020; Galanakis, 2020) . Where most businesses 24

were completely closed following governments restrictions, the food sector, as part of the national 25 critical infrastructures, remained operational across the supply chain in order to feed the people 26 (CISA, 2020) . This sector continues to face new challenges during the global coronavirus 27 pandemic, from supply chain disruption with its consequences on food systems (Galanakis, 2020) , 28 to meeting the high market demand, to protecting its workforce, while avoiding transportation 29 network disturbances and absenteeism and maintaining a high level of food safety and consumer 30

confidence (Nakat & Bou-Mitri, 2021; Hailu, 2020; McEwan et al., 2020; Weersink, 2020) . 31

Regarding food safety although there is no evidence that food is a possible route of transmission, 32 the possibility of transmission of COVID-19 through the food supply must not be neglected, both 33

for the risks associated with the presence of the virus in the workplace and for the risks associated 34 to the possibility that Coronavirus may reach food products or food packaging through an infected 35 person (Rizou et al., 2020). COVID-19 has forced companies to re-evaluate risks and opportunities, 36

to redefine priorities and to adjust their processes both to ensure high levels of safety for workers 37 and to provide consumer confidence and reassurance to all stakeholders (Nakat & Bou-Mitri, 2021) 38

and local government administrators must also help by providing correct information, educational 39 messages and timely updates to reduce fear and build trust in citizens (Faour-Klingbeil et al., 2021). 40

The perception of risk from touching contaminated surfaces and food packaging and being exposed 41 to infected people during food shopping is high. Consumption patterns have also changed. Meal 42 preparation and consumption at home has substituted the eating out (Faour-Klingbeil et al., 2021). 43

The trade of commodities among countries has been disrupted; accordingly, import of raw materials 44 and exportation of food products has been stopped (Gray, 2020) . The pandemic has influenced 45 certain food supplies more than others. For this reason, significant trade restriction policies are to be 46 expected, in the form of more costly inspections, strict regulations and protectionist's measures 47 from competing producers (Nakat & Bou-Mitri, 2021) . 48 It has been reported that in Canada the supply chains for fruits and vegetables have been the most 49 relevantly impacted as produce growers and distributors have been obliged to change their supplies 50 almost completely (Richards & Rickard, 2020) , having been challenged by labor availability and 51 logistical constraints. The dairy, poultry and egg sectors have also been affected by the closure of 52 processing facilities leading to the dumping of most of their products (Weersink, 2020) as an epidemic confined to specific geographical areas, but a widespread global pandemic. Figure 1 summarizes the major events that marked the spread of the pandemic in Italy during the 86 so-called "first wave" and the main measures implemented by the Italian government to limit 87

infections. 88

As can be seen, in Italy, an outbreak of COVID-19 infections was identified on 21 February 2020 89 starting from 16 confirmed cases in Lombardy, which increased to 60 the next day, with the first 90 deaths reported in the same days. On 23 February, the Council of Ministers issued the decree-law n. 91 6, which established the total closure and isolation of municipalities with active outbreaks with the 92 suspension of events and the interruption of railway services. The restrictive measures were 93 extended to the whole national territory with the decree of 9 March, which forbade any movement 94 between and within the regions, except for proven health reasons or for work needs and several 95 closures were imposed (schools, gyms, museums, cinemas, theaters…). That decree marked the 96 beginning of the Italian lockdown, and, in particular, of the so-called "Phase 1" of the restrictive 97 measures put in place by the government to contain the pandemic. 98

On 11 March, the "#IoRestoaCasa Decree" was published, which provided for the suspension of 99 common retail commercial activities, educational activities, catering services, and prohibited the 100 gathering of people in public places or places open to the public. On 22 March 2020, the Prime 101

Minister published a new decree implementing more stringent measures that provided for the 102 closure of all those activities not deemed necessary for the Italian production chain in relation to the 103 contingent situation. In companies where the activities were not suspended, measures were imposed 104 to combat and contain the spread of the virus in the workplace such as: closure to the public, use of 105 masks, sanitizing gels and imposed safety distance. 106

The measures adopted were further extended until 13 April with a new Ministerial Decree, and 107 thereafter until 3 May. 108

With the decree issued on 4 May 2020, since the epidemic curve was in a downward phase, the 109 beginning of the "Phase 2" was declared, with a gradual relaxation of the previous containment 110 measures. Starting from 18 May, all retail trade activities were reopened together with restaurants 111 and bars and shortly afterwards free movement between the regions was allowed, also enabling the 112 start of national tourism. 113

"Phase 3" began on 15 June, with further easing and openings both nationally and regionally, 114

despite the state of emergency being extended until 31 January 2021. 115 116

2.2. Methodology 117

As illustrated in Figure 2 , the study methodological framework consists primarily of a systematic 118 data collection from relevant institutional databases and/or reports (i.e. ISTAT, ISMEA, COEWEB 119

and COLDIRETTI) with an initial date of March 2019 and an end date of July/August 2020. 120

Data were considered eligible for inclusion in the analysis if they were useful to assess in particular: 121

(i) the effects on the agri-food demand, (ii) the effects on the agri-food chain services. 122

Among the data extracted from the abovementioned databases and reports whose time trend was 123 analyzed are: the retail sales value of agri-food sector, the value and share of agri-food exports, the 124 consumer food price index, and the producer price index for some agri-food product groups. In 125 particular, the four food groups whose producer price indexes were analyzed are: cereals, fruits and 126 vegetables; milk, dairy products and eggs; wine and olive oil; meat products (beef cattle, sheep and 127 goat, pigs and rabbits). 128

Collected data were analyzed using time series statistical methods in order to capture trends and to 129 compare the value of variables during the "first wave" restriction time period and the same period 130 in 2019, highlighting potentially relevant differences due to the effects of the pandemic. 131

The results of the analyses were interpreted and critically compared to the effects of the COVID-19 132 pandemic on agri-food supply and value chains observed in the existing scientific literature, 133

constituted by a rapidly rising number of studies. This allowed the authors to identify long-run 134 changes aimed at better facing the coronavirus pandemic and at developing new guidelines to learn 135 from and improve upon the global response. On the demand side, a clearly visible shock was generated by changes in food purchasing and by 142 interruption of the Horeca (Hotellerie-Restaurant-Café) channels at national and international level. 143

Moreover, another relevant factor concerns the negative impact on export flows, due to the 144 restrictions put in place by many countries in the world (Akter, 2020). In Italy, in fact, exports 145

previously generated about 40% of the total turnover of the agri-food sector (ISMEA, 2018). 146

Analyzing the sales data extracted from the ISTAT (Italian National Institute of Statistics) for the 147 first quarter of 2020, the agri-food sector has followed an opposite trend compared to that of the 148 other retail sectors. In particular, comparing the data of March, April and May 2020 with those of 149

the previous year, there was a general reduction in sales of non-food goods by about 36% in value, In fact, the first phase of the COVID-19 pandemic, despite the reassurances of the food industry 157

concerning the availability of food, was characterized by panic buying by consumers, who engaged 158 in stockpiling behaviors in anticipation of movement restrictions and fear of disruptions to the food 159 distribution systems (Hobbs, 2020; ISMEA, 2020a). As a result of the emergency, there was an 160

increasing trend for the supply of conservable products (pasta, rice, canned fish, canned tomatoes, 161

etc.) to create home stocks and a penalization of highly perishable products, replacing them with 162 those with longer conservation times (oranges, apples, potatoes and carrots rather than strawberries, 163 salads and asparagus) and the tendency to replace fresh products with frozen ones (Richards & 164 Rickard, 2020; ISMEA, 2020a; ISMEA, 2020b: ISMEA, 2020c (2020), it can be assumed that in the post-pandemic era, consumers will be led to eating 169 healthy food with good nutritional properties. 170

Considering the distribution channels, during the lockdown period, small supermarkets performed 171 best ( Figure 4 ). This In contrast to the positive trend in retail sales in the agri-food sector, in the two months of March-183

April, the Horeca stoppage generated a 93% drop in turnover, with estimated losses of over 34 184 billion euros. Therefore, the growth in retail sales (+3.1%) only partially offset the losses in non-185 domestic consumption (ISMEA, 2020b; 2020c). 186

On the export side, the effects of the lockdown have been extremely diverse depending on the 187 countries and the commodity sectors involved. In fact, the pandemic has spread with different 188 timing in different countries, each of which has adopted different containment measures (Vidya & 189 Prabheesh, 2020). 190

Moreover, the economic effects were more important for the sectors with a greater tendency for 191 exportation, in terms of the share of the exported turnover out of the total (fruit and vegetable  192 processing, olive oil, rice, baked goods, pasta, coffee, chocolate, condiments and spices, ready-193 made meals, wine and sparkling wine) (ISMEA, 2020a; 2020b; 2020c). In particular, in the first 194 semester of 2020, exports of agricultural products and food products increased respectively by 1% 195

and 4% compared to 2019, obtaining a positive result despite the decline recorded in the months of 196

March and April, especially for agricultural products ( May 2020 with those of the previous year, there is a general negative trend as a clear consequence 204

of the pandemic which slowed the growth recorded in the first months of the year. In particular, in 205

Europe there was an important and generalized decline in requests for Italian products in the period 206

analyzed. In those months, almost all of Europe suffered the squeeze of the restrictive measures 207

imposed by governments, with closures of bars and restaurants and restrictions on travel. In 208 particular, Germany, the first importer of Italian products, recorded the most important decline in 209

Europe (-21% for agricultural products, -21% for food, drinks and tobacco), followed by Spain and 210

the Netherlands. At an Extra-European level, the situation was more heterogeneous. 211

China and the Switzerland were the only countries analyzed to have achieved a positive trend in the 212 months of March, April and May 2020, both for agricultural products and for drinks, food and 213 tobacco (+ 23% and + 18 respectively). According to Wang et al. (2020) , the pandemic has changed 214 the habits of Chinese consumers who are seeking fresher high-quality products, an opportunity that 215 has favored the further growth of Italian agri-food products. 216

Japan and Turkey followed the same positive trend only for agricultural products, while the export 217 of food, tobacco and drinks decreased. The United States, the third importer of Italian products, 218 recorded a significant decline (-35%) in agricultural products, together with OPEC and Mercosur 219

countries. Finally, India was the country that contributed most to the contraction of exports both for 220 agricultural products and for food, tobacco and drinks (-72% and -33% respectively) ( <Insert Table 1>  228  229 The individual categories of products exported from Italy all over the world have had very different 230 performances, reflecting the effects of the pandemic on the sector. As shown in Figure 6 , the most 231 significant increases concern sheep meat (+ 38%), pig meat (+ 20%) and cereals (+20%), and also 232 the foreign trade of olive oil, of which Italy is the second country in the world by volume of 233 exports, grew by about 17%. Fruit and vegetables, despite the difficulties encountered in the 234 harvesting phase during the lockdown, managed to obtain a growing trend. 235

On <Insert Figure 7>  255  256 The phenomenon of increase in CPI for food has uniformly spread across the Italian territory. 257

However, the islands appear to be most affected by the lockdown, which caused an increase of 258 about 3%, compared to the data of the first quarter of 2019 ( Figure 8) The trend in consumer food prices described above, was largely offset by the collapse in energy and 273 oil prices, which totally eliminated inflation in April (ISTAT, 2020b). 274

Another element to consider is the trend in producer price indexes for food, which have had uneven 275 results between the among categories of products. In general, in the first four months of 2020, they 276 decreased by 0.9% on an annual basis, driven down by the basket of vegetable products (-4.1%), in 277 particular olive oil and vegetables. On the contrary, the lists of livestock products increased 278 compared to the level of the first quarter of 2019 (+3.1%), behind the impulse of eggs, while those 279 of dairy products resume the descent (ISMEA, 2020d). In particular, comparing the data of March, 280

April and May 2020 with those of the previous year, there was an increase of about 8% in the price 281 of cereals, a 42% increase in the price of fruit and an 8% decrease in the price vegetables ( Figure  282 10). The factors causing such an evident increase in fruit prices during the "first wave phase" 283 ( Figure 1 ) are many and not all of them can be assimilated to the pandemic. One of the reasons is 284 the anomalous climatic trend, with the alternation of frost and drought, which has upset crops and 285 reduced availability on the markets (Auci and Vignani, 2020). Added to this was the lack of foreign 286 seasonal workers in the countryside, who were blocked due to the closure of borders (Cortignani et  287 <Insert Figure 11>  305  306 Olive oil was characterized by the most dramatic drop in the Producer Price Index (-37%) ( Figure  307 12). According to current data, it represents the product that was affected the most by the 308 interruption of exports and the blocking of demand for hotels, restaurants and bars, due to the 309 decree of 11 March (Figure 1 ). The effects of the restrictive measures on the olive oil supply chain 310

have affected small and medium-sized companies that do not have commercial relations with the 311 large-scale retail trade and have seen orders canceled by the national Horeca and by the tourism 312

industries. In fact, despite the export growth, the price level is strongly influenced by the negative 313 trend of the domestic market. 314

On the other hand, the price of wine recorded an increase of approximately 2% compared to the 315 previous year. Despite the negative trend observed in exports and the decline in domestic demand, 316 the wine supply chain was resilient, and the original prices remained essentially stable, especially 317 thanks to the fact that it is a storable product (ISMEA, 2020d). 318

The prices of olive oil and wine have had opposite trends, despite the harvesting period being in 319 autumn for both products. These differences were determined by the pre-pandemic situations, 320

during which the price of olive oil was in sharp decline, negatively affected by the competition with 321

the Iberian market. The situation worsened with the need to sell off of the stocks created during the 322 closing period of the Horeca channel ( Figure 1 ). In the case of wine, on the other hand, the positive 323 results achieved in the first two months of 2020 were able to offset the losses recorded in the 324 lockdown period. Prices in the livestock sector, with the exception of eggs and dairy products, have tended to fall 331 ( Figure 13 ) (ISMEA, 2020d). The most relevant data concern rabbit and sheep and goat meat, 332

which suffered a price reduction of 21% and 13% respectively. This segment was particularly 333 affected by the drop in demand recorded in the Easter period, celebrated during "Phase 1" (Figure  334 1). The closure of the Horeca channel and the impossibility for families to move around for the 335 traditional out-of-town outings during the Easter period had a negative impact on the entire supply 336 chain. On the other hand, beef cattle prices remained stable, while pig prices have been falling 337

continuously since the beginning of the year. The increase in domestic consumption and the 338 simultaneous reduction in beef production have avoided a collapse of prices. However, in the case 339 of pigs, slaughterhouses and ham factories suffered the reduction in the workforce, imposed by the 340 government for the entire duration of the first wave (Figure 1) , and the simultaneous blocking of 341 demand by the restaurants. level (roads, rail, air and waterways) there was no evidence of particular slowdowns. In fact, in 352

Italy, even during the most acute phase of the pandemic, the transport and logistics companies 353 continued to ensure their full operations even in the face of substantial losses of approximately 20 354 billion euros, empty returns and capacity for volumes of goods to be moved halved (ALIS, 2020). 355

In fact, at the beginning of the year, the Italian logistics companies were in a particularly solid state 356

of health with few employee layoffs. Even during the period of the pandemic, they did not make 357 massive use of the social buffer, aiming to preserve their human capital and their workforce, 358 confident that in a few months the volume of traffic could resume the levels prior to the pandemic. 359

On the contrary, the biggest difficulties were encountered in farms and in factories. In particular, 360 labor shortages caused by workplace absenteeism due to illness (or quarantine, or refusal to work in 361 unsafe conditions) significantly slowed operations and created bottlenecks, particularly in highly 362 concentrated industries such as meatpacking (OECD, 2020; Maliszewska et al., 2020) . Further 363 slowdowns were caused by the numerous layoffs and the spread of smart working starting from 364

March. A particularly relevant element concerned the shortage of foreign labor in agriculture, 365 especially in the fruit and vegetable sector, due to the closure of the borders which could not be 366 compensated by Italian workers. The problem of labor in agriculture has affected the whole of the 367 European Union where it is estimated that almost one million seasonal workers were missing, with 368 disastrous consequences on crops and with an inevitable spike in the prices of fruit and certain 369 categories of vegetables (COLDIRETTI, 2020). In view of these considerations, the transport and 370 distribution phases of the agri-food chain have been resilient, while the production phase has 371 highlighted some weaknesses. In fact, from the study results, it emerged that the sector of fresh and 372 perishable products, whose production or harvest took place during the COVID-19 first wave 373 suffered effects on the price level, while storable products did not suffer relevant consequences. 374 375 5. Long run changes 376

In addition to the effects of demand-side shocks and potential supply-side disruptions, it is worth 377

considering whether the COVID-19 pandemic will have longer-lasting effects on the nature of food 378 supply chains (Mussell et al., 2020) . In Italy, the gradual reopening of activities starting from May 379 2020 has allowed for a progressive recovery of the Horeca sector. However, non-domestic 380 consumption will remain at lower levels than those recorded in 2019 due to the decrease in the 381 presence of foreign tourists. To compound this scenario, there could be the impact of the economic 382 crisis on households' spending power (Nicola et al., 2020) . In fact, Italy is among the countries in 383 the world most affected by the economic crisis triggered by COVID-19, with a decrease in the 384 number of employees equal to 381 thousand units and a significant increase in inactive ones (+ 880 385 thousand units) (ISTAT, 2020c). 386

Another element that will determine the future of the Italian agri-food sector is the export trend. The 387 scenario appears completely uncertain as the pandemic continues to spread with different timelines 388 in other countries and the measures adopted by governments are different and variable 389 (Gruszczynski, 2020) . In general, the impact will continue to be important on companies that 390 depend more on the foreign outlets (fruit and vegetable processing, olive oil, rice, baked goods, 391 pasta, coffee, chocolate, condiments and spices, ready-made meals, wine and sparkling wine). 392

Finally, in the scenario it is assumed that domestic consumption will remain significantly higher 393 until the end of the year, due to the greater diffusion of smart-working and the prolongation of the 394 state of emergency established by the government until 31 December 2020 (ISMEA, 2020c). 395

However, in a context characterized by anomalous fluctuations in demand, the supply chain could 396 be affected by the Bullwhip effect, triggered by the hoardings of the first months of the pandemic, 397 which will be followed by a period of moderate drop in demand (Metters, 1997) . In particular, small 398 fluctuations in downstream demand correspond to amplified swings in upstream demand. 399

Considering the effects of COVID-19 on food supply chains, the spike in demand for some 400 categories of goods affects the correctness of the forecasts of the supply chain actors furthest from 401 the final demand (Zhu and Krikke, 2020). Producers of the goods most in demand during the 402 lockdown, for example, could react by using flexibility tools that increase production to absorb 403 demand and prepare adequate stock levels. The consequences could be an increase in the cost of the 404 units produced, an increase in the frequency and volumes of delivery, with a consequent increase in 405 logistics costs. However, immediately after the hoarding race, there is a real risk of a sudden 406 freezing of the market due to saturation and a decrease in warehouse turnover. In this context, the 407 pandemic has also heightened consumer awareness regarding personal health. Therefore, it is 408 expected that, in the post-pandemic era, there will be a change in the approach to health, with 409 improvements in terms of safety and hygiene. In this regard, the fragility of the agri-food chain can 410 be countered with innovation and technological tools, which, when applied to the agricultural sector 411

and to the food industry, can improve the quality and the efficiency of the production chain (Deng  412  et health-enhancing food ingredients should rapidly increase (Galanakis et al., 2015) . In this direction, 417

according to Galanakis et al. (2018) , an efficient approach could be reutilizing healthy food 418

ingredients recovered from food processing by-products, obtaining both qualitative advantages and 419 significant economic savings. 420 421 6. Conclusion 422

Health crises have become numerous over the past few decades. Assessing the impact and effects of 423 these shocks on the supply and value chains is essential to building suitable strategies and thus to 424 achieve resilience. The study of price reactions may serve as a pattern for how to tackle the next 425 pandemic wave or for how to solve other global crises. There is no doubt that the analysis of the 426 COVID-19 impact on the agri-food demand, including exports, can be representative of consumer 427 behavior but also of the whole supply chain reaction and resilience level to the pandemic 428 restrictions. Its implications on logistics and transportation services have been also projected. 429

Globally, lockdowns are being reintroduced, workplaces are closing again, and those open are not 430 yet back to business as usual. The pandemic stimulated agri-food supply chains to re-consider 431 threats and opportunities, to re-assess priorities and to adapt their systems. This crisis is not likely to 432 remain a one-off. For this reason, further research efforts should be addressed to reflecting on its 433 long-term impacts, such as adverse consequences on job security, supply chains and globalization. 

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