Chatham House Report

Image source/description: Pedro Miguel locks, Panama Canal. Photo: Gonzalo Azumendi/Getty Images
Chokepoints and Vulnerabilities in Global Food Trade

Executive Summary

Global food security is underpinned by trade in a few crops and fertilizers. Just three crops – maize, wheat and rice – account for around 60 per cent of global food energy intake.1 A fourth crop, soybean, is the world’s largest source of animal protein feed, accounting for 65 per cent of global protein feed supply.2 Each year, the world’s transport system moves enough maize, wheat, rice and soybean to feed approximately 2.8 billion people.3 Meanwhile, the 180 million tonnes of fertilizers applied to farmland annually play a vital role in helping us grow enough wheat, rice and maize to sustain our expanding populations.4

International trade in these commodities is growing, increasing pressure on a small number of ‘chokepoints’ – critical junctures on transport routes through which exceptional volumes of trade pass. Three principal kinds of chokepoint are critical to global food security: maritime corridors such as straits and canals; coastal infrastructure in major crop-exporting regions; and inland transport infrastructure in major crop-exporting regions.

A serious interruption at one or more of these chokepoints could conceivably lead to supply shortfalls and price spikes, with systemic consequences that could reach beyond food markets. More commonplace disruptions may not in themselves trigger crises, but can add to delays, spoilage and transport costs, constraining market responsiveness and contributing to higher prices and increased volatility.

The chokepoints on which global food security depends

This report offers a first-of-its-kind analysis of chokepoints in the global food system, combining trade data from the Chatham House Resource Trade Database (https://resourcetrade.earth) with a purpose-built model to map bilateral commodity flows on to trade routes. It identifies 14 chokepoints that are critical to global food security. These are indicated in Figure 1.

Among the maritime chokepoints, the Panama Canal and Strait of Malacca5 see the most significant grain throughput due to their positions linking Western and Asian markets. Over one-quarter of global soybean exports transit the Strait of Malacca, primarily to meet animal feed demand in China and Southeast Asia. The Turkish Straits6 are particularly critical for wheat – a fifth of global exports pass through them each year, largely from the Black Sea ‘breadbasket’ region.

Figure 1: Maritime, coastal and inland chokepoints and major shipping routes

Source: Shipping routes adapted from Rodrigue, J.-P., Comtois, C. and Slack, B. (2017), The Geography of Transport Systems, New York: Routledge, https://people.hofstra.edu/geotrans/.

The most important inland and coastal chokepoints lie in the US, Brazil and the Black Sea, which account for 53 per cent of global exports of wheat, rice, maize and soybean. Inland waterways carry about 60 per cent of US exports of the four crops (which account for 13 per cent of worldwide exports) to the sea, primarily to the Gulf Coast ports. In Brazil, four ports on the southeastern coastline are responsible for nearly a quarter of global soybean exports; these ports in turn depend on the roads linking them to the huge farms in the country’s interior. Around 60 per cent of Russian and Ukrainian wheat exports (12 per cent of the global total, and growing fast) depend on rail to reach the Black Sea.

Chokepoint risk is increasing

These chokepoints are exposed to three broad categories of disruptive hazards. First there are weather and climate hazards, including storms or floods that may temporarily close chokepoints, and weather-related wear and tear of infrastructure that reduces its efficiency and makes it more vulnerable to extreme events. Second, security and conflict hazards may arise from war, political instability, piracy, organized crime and/or terrorism. The third category of hazards are institutional, such as a decision by authorities to close a chokepoint or restrict the passage of food (for example, by imposing export controls).

Minor disruptions are common. All but one of the chokepoints covered in this report has seen a closure or interruption of transit at least once in the past 15 years,7 and the risk of a crisis arising from such events should not be discounted. While this report was being prepared, coalition forces in Yemen – one of the world’s most food-insecure countries – intensified their attacks on agricultural infrastructure. In June 2017, overland routes that carry 40 per cent of Qatar’s food imports – including just under a fifth of its wheat imports – were closed as part of a blockade. Such developments should be the catalyst for policymakers to prepare for worst-case scenarios, especially given the growing risks from extreme weather events.8

Moreover, these risks are increasing, driven by three distinct trends. First, dependency on chokepoints is growing (see Figure 2). For example, in the past decade and a half the share of internationally traded grain and fertilizers passing through at least one of the maritime chokepoints has increased from 43 to 54 per cent. A smaller but nonetheless significant share – 10 per cent – now depends on transit through one or more of the maritime chokepoints as the only viable shipping route, up from 6 per cent in 2000.

Figure 2: Annual maritime chokepoint throughput of maize, wheat, rice and soybean, 2000 and 2015

Sources: Chatham House Maritime Analysis Tool; Chatham House (2017), resourcetrade.earth, http://resourcetrade.earth (2015 data).

Growing international trade means that chokepoint dependency is likely to increase for the foreseeable future. Some chokepoints will come under more pressure than others. Rapid and continued growth in exports from the Black Sea region will increase dependence on the Turkish Straits, particularly for wheat. At the same time, sustained demand growth in China (averaging around 14 per cent a year for soybean imports over the past 15 years) will continue to increase shipments from crop exporters in the West via the Panama Canal and the Strait of Malacca.

Second, climate change is increasing the threat of disruption by acting as a hazard multiplier across all three categories of chokepoint risk. It will increase the frequency and severity of extreme weather, leading to more regular closures of chokepoints and greater wear and tear on infrastructure. Rising sea levels will threaten the integrity of port operations and coastal storage infrastructure, and will increase their vulnerability to storm surges. Climate change is expected to aggravate drivers of conflict and instability. It will also lead to more frequent harvest failures, increasing the risk of governments imposing ad hoc export controls.

Climate change may also increase the risk of concurrent supply disruptions. As extreme weather events become more common, the chances of coincidental disruptions occurring at different locations are likely to increase. Examples might include distant chokepoints being simultaneously disrupted by different weather systems, or a major chokepoint in one part of the world being closed during a harvest failure in a crop-growing region elsewhere. In such circumstances, market impacts are compounded. For example, if a hurricane comparable in ferocity to Hurricane Katrina in 2005 were to shut down US exports from the Gulf of Mexico at the same time as extreme rainfall rendered Brazil’s roads impassable (the latter happened in 2013), up to 50 per cent of global soybean exports could be affected. If this in turn occurred in conjunction with a Black Sea heatwave similar to the one recorded in 2010, around 51 per cent of global soybean shipments, together with 41 per cent and 18 per cent of global maize and wheat exports respectively, could be halted or delayed.9

Chokepoint failures threaten to compound market fragility by contributing to higher costs and longer delays in delivery, and by making major supply disruptions more likely

Third, chronic underinvestment in infrastructure is creating a double deficit – of capacity with respect to growing trade volumes, and of resilience with respect to climate change. The US’s inland waterways are old, congested, vulnerable to drought and flood, and likely to start failing in the near future; its Gulf Coast ports are vulnerable to hurricanes and storm surges. Brazil’s roads are poor and often rendered impassable by rain and subsidence. The Black Sea region requires significant investment in transport infrastructure, but regional instability is a deterrent to this. Each of the above-mentioned regions must mobilize significant investment in the coming decades to prevent bottlenecks and climate vulnerability worsening, but all face challenges in doing so.

The outlook for increasing chokepoint risk must also be understood in the context of mounting pressures on agricultural markets. Growth in cereal yields has fallen behind projected growth in cereal demand. Climate change is expected to exert a further drag on crop yields and become an increasingly destabilizing influence on global harvests. As a consequence, international markets are likely to become tighter and more volatile while dependence upon them increases. Chokepoint failures threaten to compound market fragility by contributing to higher costs and longer delays in delivery, and by making major supply disruptions more likely.

Which countries are most at risk?

Countries vary significantly in their exposure to chokepoint disruption. The criticality of a given chokepoint to a particular country depends not only on the share of imports that pass through it, but on how easily supply can be rerouted or secured through alternative means in the event of the chokepoint’s closure. For example, although almost 87 per cent of China’s grain and fertilizer imports are shipped through at least one maritime chokepoint, only 4 per cent pass through chokepoints for which no alternative route exists.

Conversely, just over a third of grain imports for the Middle East and North Africa (MENA) – the most food import-dependent region in the world – pass through at least one maritime chokepoint for which there is no alternative route. MENA countries rely on grain exports from the Black Sea, transported via Russian and Ukrainian railways and ports and on through the Turkish Straits; should these straits close for any reason, no alternative maritime routing option exists. This high degree of chokepoint exposure is compounded by proximity to the three Arabian maritime chokepoints (the Suez Canal, the Strait of Hormuz and the Strait of Bab al-Mandab), which determine market access for many countries in the region. Historical links between food insecurity and political/social instability make the region’s extreme exposure to chokepoint risk a particular cause for concern.

Structural vulnerabilities in poor countries amplify the potential consequences of chokepoint disruptions. In these countries, household spending on food and levels of pre-existing undernutrition are high, and the capacity of governments to respond is low. At the same time, the poor quality and limited extent of transport infrastructure – such as deep-water ports, railways and silos – in many developing countries also create local chokepoints and contribute to higher food prices.

Structural vulnerabilities in poor countries amplify the potential consequences of chokepoint disruptions

Among low-income food-deficit countries (LIFDCs), a cluster of African countries have high exposure to maritime chokepoints with no alternative routes.10 Many LIFDCs are also dependent on US exports and thus heavily exposed to US inland and coastal chokepoints. For example, Honduras sources 77 per cent of its maize imports and 88 per cent of its wheat imports from the US, and in Ethiopia the shares are 36 per cent and 27 per cent.11

The risk of chokepoint disruption is by no means a concern for low-income countries alone. Japan and South Korea rank among the most exposed countries in the world, despite also being two of the richest. Though not considered food-insecure by traditional metrics, both countries rely heavily on food imports that transit one, two or three chokepoints. Just under three-quarters of Japan’s maize and wheat imports pass through the Panama Canal; and one-third of South Korea’s wheat and maize imports pass through the Suez Canal, Strait of Bab al-Mandab and Strait of Malacca.

Chokepoint risks are poorly understood and poorly managed

Despite their importance to the availability and price of food, chokepoints are systematically overlooked in assessments of strategic food security. This stands in marked contrast with analyses of energy security, where chokepoint risk has been a key consideration for years and international governance mechanisms have emerged to manage it.

The most obvious exception to this picture is China, which is acutely aware of its exposures. It actively invests in overseas infrastructure to relieve pressure on existing chokepoints (e.g. as a major investor in Brazilian infrastructure); to diversify supply routes (e.g. through construction of a railway across South America to lessen reliance on the Panama Canal); and to increase its operational footprint along its supply chains (Chinese companies are ubiquitous owners and operators of ports and trans-shipment hubs).

However, the lack of cooperative approaches for dealing with food chokepoint risk is troubling, as it raises the prospect of uncoordinated, unilateral responses as states scramble to secure supply in the event of a major disruption, deepening the crisis as they do so.

Recommendations

Reducing chokepoint risk in the food system is a long-term project. New institutional and governance arrangements need to be negotiated and implemented at international and national level, existing infrastructure strengthened and new infrastructure built. Work must begin now for the necessary measures to be in place before climate change becomes a major source of disruption and instability. This report proposes five areas for action.

1. Integrate chokepoint analysis into mainstream risk management and security planning.

If supply chain risks are to be managed effectively, analysis of chokepoint dependence and chokepoint risk needs to be incorporated into risk management and security planning across a range of sectors – food security, national security, disaster risk management – at international, national and subnational level.

The United Nations (UN) should identify critical food security corridors around which memoranda of understanding may be developed for the protection of critical food trade through maritime chokepoints in the event of a disruption.

The United Nations should identify critical food security corridors

Governments in food-importing countries should undertake assessments of exposure and vulnerability to chokepoint risk at the national and subnational level. This process should be led by government agencies, in collaboration with international organizations such as the World Bank and UN Food and Agriculture Organization (FAO), bringing in donor agencies where appropriate.

Donor governments should commit funding to develop infrastructure disaster resilience strategies with national governments, agencies and a range of stakeholders to ensure effective coordination in disaster response and to mitigate negative food security outcomes.

Governments in at-risk countries should share knowledge, to the extent that it exists, on chokepoint risk assessment and management. One historical example was the US’s sharing of lessons learned, in terms of disaster response and recovery strategies, with other climate-vulnerable nations following Hurricane Katrina in 2005. These lessons were then used to inform the development of those countries’ own national contingency plans.

Providers of food security indicators should incorporate chokepoints in their analyses. For example, food security assessments produced by the FAO, the World Bank, the Famine Early Warning Systems Network (FEWS NET), the Economist Intelligence Unit and Maplecroft should take account of chokepoint risk.

2. Invest in infrastructure to ensure future food security.

This report argues that one of the biggest risks to agricultural trade is a lack of adequate infrastructure. Closing the infrastructure gap is not simply a question of more construction; new developments must be able to withstand increasingly hostile weather as they age.

The G20 should establish a taskforce on climate-compatible infrastructure. Building on the work of the Global Infrastructure Hub and the Task Force on Climate-related Financial Disclosures, the taskforce should establish common principles and guidelines for critical infrastructure that is resilient to future climate impacts.

The G20 should establish a taskforce on climate-compatible infrastructure

Governments should set up national-level independent infrastructure committees to advise on investment and policy decisions relating to major transport infrastructure. These committees should be cross-government in structure and should sit outside of parliamentary cycles to ensure a long-term, cross-sectoral perspective.

Multilateral development banks should prioritize investment projects that diversify food supply sources when taking decisions on funding – whether for regional trans-shipment hubs, transport infrastructure to boost market connectivity and support ‘multimodality’,12 or strategic reserves and storage infrastructure.

Governments should adopt a ‘landlord’ model of public ownership and private concessions for critical infrastructure in countries in which state-owned railways, roads, waterways or ports are failing as a result of poor management or underinvestment.

Governments in major food-exporting regions facing infrastructure financing deficits should seek strategic ‘win-win’ investment partnerships with key trading partners willing to finance infrastructure to relieve pressure on inland and coastal chokepoints.

International financial institutions and donors should continue to invest in agricultural extension services, agricultural research and development, and the cultivation and scaling up of alternative crops to support a diversified grain production base (particularly for crops with a relatively high tolerance to climate stresses) and so reduce exposure – both at national and systemic level – to chokepoint disruption.

3. Enhance confidence and predictability in global trade.

New governance measures are needed to counter the contagious spread of export controls – such as those seen during the 2007–08 food crisis. Where possible, policies and investment should promote the diversification of the global grain production base, and reduce dependence on a small number of exporting regions and their inland and coastal chokepoints.

The World Trade Organization (WTO) should instigate a process to continually reduce the scope for export restrictions. An outright ban on such restrictions would be ideal; a less ambitious approach could include clarifying and strengthening WTO rules to make it harder for governments to introduce ad hoc policies.

Developed food-exporting countries should reform trade-distorting farm support. Such support promotes systemic reliance on a handful of mega-crops and a small number of grain-exporting regions. Instead, public funds should be directed to supporting alternative sources of grain production around the world, in order to diversify global production and reduce import dependence elsewhere. A priority should be to direct such funding to farming in sub-Saharan Africa, where yield gaps remain while cereal demand is growing rapidly; this could be complemented with funding to support production of alternative crops.

4. Develop emergency supply-sharing arrangements and smarter strategic storage.

Strategic reserves, and provisions for their release and distribution at times of supply shortage or when prices are rising, are critical to managing chokepoint risk. However, unlike oil markets, no international institution exists to manage the risk of a major supply interruption in agricultural markets.

The FAO, UN World Food Programme (WFP) or Agricultural Market Information System (AMIS) should establish an emergency response mechanism among major players in the global food trade, modelled in part on that of the International Energy Agency in oil markets, to agree rules on coordination during acute market disruptions, including on the release and sharing of stocks and on measures to relax ‘biofuel mandates’.13

Grain-trading partners should pursue collaborative arrangements to store grain in destination markets – that is, beyond the location at which chokepoints could interrupt supply. This would involve exporting countries entering into extra-territorial storage agreements with importing countries – whereby the exporter stores grain in the importing country – to provide assurance over availability in the event of supply dislocations. Agreements would need to specify emergency access rights and pricing arrangements.

Governments in food-deficit regions should agree storage and emergency sharing arrangements at regional level

At-risk countries – such as those in the Horn of Africa and the MENA region – should ensure sufficient domestic stocks are available to meet needs during plausible worst-case supply disruptions. Where government capacity to manage stocks is lacking, arrangements to outsource stockholding at target levels to the private sector could be explored.

Governments in food-deficit regions should agree storage and emergency sharing arrangements at regional level to reduce collective vulnerability to chokepoint disruption. Facilities should be positioned strategically to bypass potential blockages and to spread the risk of damage or obstruction.

5. Build the evidence base around chokepoint risk.

Strengthening the evidence base around the importance of chokepoints to food security, and enhancing understanding of the nature and severity of disruptive hazards, are key first steps in the translation of chokepoint analysis into policy. These steps will require both new avenues of research and new modes of thinking about critical infrastructure.

Researchers should connect existing models of transport network dynamics with real-time food trade data to enable the modelling of rerouting options in cases of major disruption to maritime or coastal chokepoints. Expanded data functionality could provide the basis for the development of disaster management strategies. Where data are not open-source, research councils should support partnerships between the private sector and the research community that advance understanding of chokepoint risk while protecting commercially sensitive data.

AMIS should work with governments to harmonize nationally reported, macro-level transport infrastructure and asset data

AMIS should broaden its scope to include systemic chokepoints. An expanded remit should include risk assessment relating to the capacity and performance of systemic chokepoints, and evaluation of potential disruptions to them. In addition to raising awareness of chokepoint-related food security risks, such an initiative would promote the monitoring, disclosure and harmonization of data at national level, ultimately supporting better risk management.

Multinational institutions should integrate ongoing monitoring of chokepoint congestion and failures within existing frameworks for tracking infrastructure investments and infrastructure performance, to inform the identification of investment priorities. Examples of frameworks that could be adapted for this purpose include the OECD’s International Transport Forum (ITF) and the World Economic Forum’s Global Competiveness Report.

AMIS should work with governments to harmonize nationally reported, macro-level transport infrastructure and asset data, and to track spending and performance in the sector as a means to inform and attract multilateral and private-sector financiers.

Climate scientists and infrastructure industry associations should bridge the gap between climate impact modelling and infrastructure resilience planning, through industry-led dialogues that centre on the needs and constraints of infrastructure operators, and that support the downscaling of climate projections to sub-regional or project level.

Research councils and other funders should establish multidisciplinary frameworks to encourage the research community to address key knowledge gaps in the fields of food security, transport networks, disaster resilience, infrastructure development, infrastructure governance, risk assessment and climate science. Research is most urgently needed on at-risk food-importing regions and climate-exposed food-supply hubs.


1 Worldwatch Institute (2013), Vital Signs: The Trends That Are Shaping Our Future, Volume 20, Washington, DC: Worldwatch Institute.

2 Worldwatch Institute (2016), ‘Soybean Demand Continues to Drive Production’, http://www.worldwatch.org/node/5442 (accessed 20 Apr. 2017).

3 This assumes that all calories traded are available as food, and is based on the World Health Organization’s recommended daily intake of 2,000 kilocalories per capita per day. Caloric equivalence factors for wheat, rice, soybean and maize were derived by Paul West and James Gerber at the University of Minnesota, and are based on UN Food and Agriculture Organization (FAO) (2001), Food Balance Sheets: A Handbook, Rome: FAO, http://www.fao.org/docrep/003/X9892E/X9892E00.HTM (accessed 3 May 2017).

4 FAO (2016), World fertilizer trends and outlook to 2019: Summary Report, Rome: FAO, http://www.fao.org/3/a-i5627e.pdf (accessed 20 Apr. 2017).

5 Which also includes the Singapore Strait.

6 Consisting of the Bosphorus Stait and the Dardanelles.

7 Authors’ own analysis. For full details and sources, see Annex 2.

8 Press reports indicate that up to 40 per cent of Qatar’s total food imports are transported via Saudia Arabia. Wintour, P. (2017), ‘Gulf plunged into diplomatic crisis as countries cut ties with Qatar’, Guardian, 5 June 2017, https://www.theguardian.com/world/2017/jun/05/saudi-arabia-and-bahrain-break-diplomatic-ties-with-qatar-over-terrorism. Meanwhile, Chatham House estimates that 17 per cent of Qatar’s wheat imports are sourced from countries involved in the blockade at the time of writing – Saudi Arabia, Bahrain, the UAE and Egypt. Chatham House Maritime Analysis Tool; Chatham House (2017), resourcetrade.earth.

9 Authors’ analysis based on annual share of global exports, Chatham House Maritime Analysis Tool.

10 Burundi, Djibouti, Eritrea, Ethiopia, Kenya, Liberia, Mozambique, Rwanda, Sudan, Tanzania and Uganda.

11 Other examples: Afghanistan, Tanzania, Burkina Faso and Sierra Leone rely on the US for 61 per cent, 37 per cent, 27 per cent and 33 per cent respectively of their maize needs. Based on data for latest available year – 2015 for all but Afghanistan and Sierra Leone, for which 2014 data are used. Chatham House (2017), resourcetrade.earth, http://resourcetrade.earth.

12 Multimodality refers to transport infrastructure designed to support and facilitate the movement of cargo from one mode of transport to another.

13 National policies that mandate certain levels of biodiesel or bioethanol blends in transportation fuel.

Top