Taiwan Shock Index: Impact on Agriculture

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. 

Sector Snapshot: Agriculture

Sectors Impacted Upstream: Fertilizer, farming equipment

Sectors Impacted Downstream: Food processing, food retailing, textiles

A Taiwan Strait Crisis would prompt severe and simultaneous shocks to both supply and demand in the agriculture sector. Over time, upstream substitutions could be found but the potential loss of the world's largest consumer of agricultural goods would radically alter the nature of the international food market and prompt a major shift in livestock and crop production. Highly developed nations can be expected to adapt more quickly but underdeveloped nations in the Global South can be expected to confront dire food insecurity.

Short-Term Impact – Highly Adverse

• China is the world’s largest producer of nitrogenic fertilizers, a major producer of farming equipment, and a key component of the global food processing supply chain. Two of the world’s other biggest fertilizer and food producers — Ukraine and Russia — are producing and exporting under capacity due to the war and sanctions. The loss of Chinese inputs to food production would raise costs for both farmers and consumers across the board.
• The loss of access to the Chinese market would lower revenues for Western, particularly American, farmers precisely at a time of increased costs for fertilizer and farming equipment — a double-sided shock to both supply and demand.
• The Global South would see increased food costs, exacerbating its current food insecurity challenge.

Medium to Long-Term Impact – Medium Adverse

• Other producers may be able to capitalize on the gap left by China in the global fertilizer market. Certain regions could see limited reshoring of the food processing industry.
• The potential for disruption in both the Chinese, as well as Russian and Ukrainian, components of the global food supply chain could lead to hunger in multiple regions throughout the Global South already contending with chronic food insecurity.
• Farmers will likely substitute livestock and crop types for more profitable use of arable land depending on market forces and subsidies.
• Depending on policy reactions, it is possible that the international food market is substantially de-globalized through a reorientation towards regional markets.

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