The World Food Program, a hunger relief effort carried out by the United Nations, said last month that the pandemic has shown vulnerability in the world’s food system that could lead to “mass famine.”
In a new interview, Sara Menker — a former Morgan Stanley commodities trader who founded a data firm that tracks the agricultural sector — echoed that dire concern about the world’s food supply. She said the lack of resilience in the food system stems primarily from an industry preference for short-term deals at the expense of longterm stability.
“COVID exposed how fragile our food systems really are,” says Menker, founder and CEO of Gro Intelligence. “How they're built on very short-term thinking.”
“The breaks that we saw on the supply chains were a function of the fact that if you think about food and agriculture, it's an industry that's been around for over 12,000 years,” she says. “However, if I find oil in the ground, and I want to go sell it, 20 years forward, I can do that.”
“Most food transactions are still done on a week-to-week, month-to-month, day-to-day basis,” she says. “So that means that like, something goes wrong, the system breaks.”
Soon after the onset of the pandemic last year, the global food supply chain suffered a shock as some of the world’s top grain-producing nations imposed export controls that kept the product within their borders. Meanwhile, demand rose in countries like China that needed grain to support expanding livestock production. As a result, food prices spiked nearly 20% last year, the World Bank says.
Meanwhile, the worldwide economic downturn caused by coronavirus shutdowns pushed hundreds of millions into poverty, constraining their ability to afford food. Global food insecurity worsened severely and caused “unprecedented” migration, the United Nations said in November.
The crisis in the global food market owes to a glut in supply in some regions that cannot reach growing demand in others, Menker said.
“A huge part of the crisis we're working against was going to be driven by the fact that it is a global market,” she says. “So a global market means that you have sort of supply centers, and you have demand centers.”
“If there's these deep imbalances that are built, you could have areas where you have the largest growth in sort of demand, can have a complete mismatch from the areas where you have the largest growth in supply,” she adds. “So it's a function of trade, it's a function of demand growth, and then it's a function of cost.”
Menker spoke to Yahoo Finance Editor-in-Chief Andy Serwer in an episode of “Influencers with Andy Serwer,” a weekly interview series with leaders in business, politics, and entertainment.
Born and raised in Ethiopia, Menker moved to the United States for college at Mt. Holyoke and later received a master’s degree in business administration from Columbia University. She worked as a commodities trader at Morgan Stanley for eight years, but left in 2012 to improve the quality and accessibility of data in the agricultural sector.
Two years later, she launched Gro Intelligence, which aggregates thousands of data sources to model conditions that affect global agricultural output, such as drought and floods.
Speaking with Yahoo Finance, Menker said that the global food instability heightened by COVID-19 will likely worsen, as food-exporting countries like Brazil and Russia continue to curb exports to manage food prices within their borders. In turn, demand will outpace supply in other countries that rely on the imports, she said.
“What we're seeing happening this year,” she says. “It's a story that no one's really talking a lot about.”
“I think it's going to only manifest itself more and more,” she adds.