Crop traders in Myanmar serve as important links between farms and food processors, exporters, and other downstream actors. Thus, challenges for crop traders caused by the COVID-19 crisis have important implications for crop marketing and crop prices. In their research, Joseph Goeb, A Myint Zu, Phoo Pye Zone, Nang Lun Kham Synt, Duncan Boughton, and Mywish Maredia utilize the findings from three phone survey rounds with crop traders to assess how COVID-19 related challenges are affecting crop marketing. They also provide updated policy recommendations to improve business conditions for traders and mitigate COVID-19 effects for both farmers and consumers.
You can view the full policy note by Joseph, A Myint Zu, Phoo Pye Zone, Nang Lun Kham Synt, Duncan, and Mywish in English here.
Background
Crop traders comprise the mid-stream of Myanmar’s food supply chains, forming important links between farms and food processors, exporters, commodity exchange centers, and urban food markets. Many traders have strong and direct ties to farmers, often providing farmers with agricultural inputs on credit to strengthen relationships and to build business later in the year when crops are harvested and sold. These connections to the farm have important implications for any challenges that traders face due to the COVID-19 crisis. Effects on traders will be felt upstream by farmers through both their post-harvest crop marketing activities and challenges to crop trading will be felt downstream by consumers.
To understand how Myanmar’s crop marketing system has been affected by the pandemic, the Myanmar Agriculture Policy Support Activity (MAPSA) conducted phone interviews with more than 100 agricultural commodity traders every 30 days from late May until early August 2020. Qualitative interviews were also conducted with key informants on land-trading routes to China, Thailand, and India.
Effects of COVID-19 on crop traders
Whereas surveys conducted earlier in 2020 highlighted substantial disruptions from COVID-19, by early August, pandemic related disruptions affected much fewer crop traders. As displayed in Figure 1, the percentage of traders who reported COVID-19 effects on their business declined from 77 percent in late May to 43 percent in August. However, one-third and one-half of traders continued to report disruptions in early August to crop selling and buying, respectively.
After buying and marketing, collecting repayments from credit lent out to farmers (17 percent) was the third most common disruption in early August. Interestingly, the share of traders reporting difficulties obtaining new loans or credit increased from 9 percent in late May to 16 percent in early August. Thus, the pandemic’s effects on credit appear to be ongoing and may last into the coming monsoon harvest. In contrast, employee work availability and government required closures were problems for traders in May but were no longer issues by August.
Trader responses to COVID-19
Traders have responded to the COVID-19 crisis in several ways, with the most common response being to adopt safety practices to prevent disease spread. However, the share of traders doing so dropped from 87 percent in late May to just 48 percent in early August (Figure 2). The second most common response has been to change business practices through means such as mobile phone use to coordinate sales and purchases. However, this share has also declined over time.
Trading activities and prices
Trader margins decreased each survey round and mean margins were significantly lower in early August than they were in late May. These lower returns to trading are consistent with the fact that many traders paused operations in July and August before beginning again in the lead-up to the monsoon harvest.
Second, over the three months of phone surveys, commodity buying and selling prices have been stable on average. Buying prices were slightly more volatile than selling practices, though the averages of both volatility ratios were stable across survey rounds.
Border trade
An overarching challenge for Myanmar’s traders throughout the crisis has been a decline in overland exports. Border trade has experienced large disruptions as the governments of Myanmar’s neighbors have placed restrictions on movement across borders to curb the spread of COVID-19.
At the borders with China, Thailand, and India, nearly all formal and informal trade was brought to a halt in April. Though some informal trade has resumed with Thailand, Myanmar’s overall volume of trade with its neighbors has decreased dramatically.
The qualitative interviews highlight the magnitude of the disruptions faced by agricultural commodity traders involved in cross-border trade due to COVID-19 restrictions. None of the respondents expects these restrictions to be lifted in time for the coming monsoon harvest. Decreased export demand for Myanmar’s agricultural commodities will put downward pressure on prices and have negative effects on Myanmar’s rural economies that already are hard hit by the COVID-19 crisis.
Policy recommendations
- Coordinate domestic transport restrictions put in place in response to the recent second wave of COVID-19 to allow continued domestic trade of agricultural commodities.
- Facilitate safe exports of agricultural commodities. This should be done with formal agreements and government investments in monitoring and infrastructure. If borders remain closed into the monsoon harvest season later in 2020, farmers should expect to receive poor prices for their crops.
- Quickly expand the provision of loans for working capital to crop traders (CERP Action 2.1.1). This will enable traders to continue their buying activities through the coming harvest and prevent a possible decline in competition in the sector.
- Continue the waiver of the 2 percent withholding tax for crop traders (CERP Action 2.1.3).
MAPSA is monitoring the impact of COVID-19 on key actors in Myanmar’s agri-food system. This blog post highlights one of the many recent surveys and policy notes that MAPSA has conducted to assess the emerging constraints that these key actors face and to mitigate the possible impacts of COVID-19 on rural livelihoods and food security. Additional blog posts are available highlighting MAPSA’s research on the impact of COVID-19 on key actors in Myanmar’s agri-food system. Surveys are ongoing, and findings and recommendations will be periodically updated.
Related blog posts
- New evidence on the economic impacts of COVID-19 in Myanmar
- COVID-19 and business responses: How are Yangon’s poultry farmers adapting to the pandemic? (August)
- Poverty and food insecurity during COVID-19 (June and July)
Joseph Goeb is a Research Associate in the Department of Agricultural, Food, and Resource Economics (AFRE) at Michigan State University (MSU), based in Yangon, Myanmar. A Myint Zu and Phoo Pye Zone are Research Analysts with the Development Strategy and Government Division (DSGD) of the International Food Policy Research Institute (IFPRI), based in Yangon. Nang Lun Kham Synt is a Research Assistant with DSGD of IFPRI, based in Yangon. Duncan Boughton is a Professor of International Development in AFRE at MSU, Policy Advisor for the Ministry of Agriculture, Livestock, and Irrigation of the Government of Myanmar, and a lecturer at Yezin Agricultural University, based in Nay Pyi Taw, Myanmar. Mywish K. Maredia is a Professor of International Development in AFRE at MSU, based in East Lansing, Michigan, USA.
This blog post was prepared by Michael Wang, Mickey Leland International Hunger Fellow in DSGD of IFPRI, based in Yangon. The analysis and opinions expressed in this piece are solely those of the authors.
