The dynamic response of the food import bill to global shipping costs

Maritime shipping carries almost 90 percent of global food and agricultural trade, making it essential for ensuring access to food worldwide. Disruptions that raise shipping costs can therefore exert significant pressure on food security, particularly in net food-importing developing countries. Grounding the analysis in trade models that endogenize transport costs and in the literature on price transmission under inelastic demand, we estimate the dynamic impact of shocks to dry bulk and container freight rates on the food import bill in the short run. Using monthly data for about 200 economies from 2005 to 2022, the empirical analysis relies on local projection. Local projections are well suited for this analysis because they estimate dynamic impacts without restrictive structural assumptions, accommodate unbalanced panels, and remain robust to model misspecification. Results indicate that a 10 percent increase in dry bulk rates raises the FIB by 1.2 percent after 1 year, while an equivalent rise in container rates increases it by 3.5 percent, with over 70 percent of the effect materializing within 6 months. For net food-importing developing countries, the impact of container cost shocks is even larger (4.3 percent) revealing their vulnerability. These findings point to the need for timely and targeted policy interventions to mitigate the consequences of shipping cost shocks. These include stabilizing foreign exchange and enhancing current account resilience; facilitating credit access to food importers; investing in port infrastructure, logistics, and digitalization; reducing trade barriers; and strengthening social protection mechanisms with targeted safety nets for poor consumers.