Food security in times of crisis

The uncertainties that lie ahead in the coming year present a challenge to the ability of governments to navigate the challenges that the recession will present to the less well off members of their population.

Worry over food insecurity arises from the fact that sluggish job creation and income growth effect the access of the poor to food.

The Trimestral Food Security Bulletin of the UN Food and Agricultural Organisation (FAO) reports that the current international situation is marred by the persistence of the sovereign debt crises in various EU countries. If recession strikes the euro zone, world demand will be effected and in turn sap the growth rates of emerging countries, which until now have been maintaining global growth.

The atmosphere of uncertainty has affected growth projections for the world economy, which have been lowered for 2012 from 6.2 to 5.4 per cent for developing countries and from 2.7 to 1.4 per cent for high income countries. Averaged, the overall world growth rate is expected to be 2.5 per cent for 2012.

Slower growth

Slower growth would mean that international trade would also decrease, which would probably drive down commodity prices. The World Bank calculates that world exports of goods and services grew by 6.6 per cent in 2011 (half of the rate for 2010, which was 12.4 per cent) and estimates they will drop to 4.7 per cent in 2012.

International food prices fell by 10 per cent between June and December 2011. Between December 2010 and December 2011, sugar prices fell 18 per cent, prices of oils and fats fell 14 per cent, and the average price of cereals -an essential component of the human diet- dropped by 8 per cent, while prices of milk products slipped 3 per cent.

It is likely that this downward tendency -which effects the expectations of agents of the international markets- will compound increases in the availability of food and generate a prolonged phase of price fluctuation for 2012, though within a narrower band.

However, it should be pointed out that fluctuations in international food prices do not carry over directly into individual countries: Latin America and the Caribbean (LAC) did not experience the increase in prices and it is not expected that the projected decreases will be felt there either. This is not to deny the effects of international price fluctuations but merely to point out the importance of national and local dynamics in pricing.

The record for food availability in 2011 was one of the primary reasons for the drop in prices in the last months of 2011. Supplies of cereals were ten million tonnes larger in 2011 than in 2010. Production also increased and FAO’s latest projections for cereal harvests in 2011/2012 are for a record of 2.3 billion tonnes, a 3.5 per cent jump from 2010/2011. Wheat production is projected to rise by 6.5 per cent though secondary grains and rice are expected to experience a slight drop.

The LAC countries maintained a relatively low rate of inflation (7 per cent) according to FAO’s January LAC Price Report, and annual food inflation shows signs of closing 2011 at 8.5 per cent, down from 9.6 per cent in 2010. Many countries in the region saw significant reductions in inflation rates between 2010-2011, while in some inflation even dropped to levels from before the 2008 global food crisis.

In terms of production, LAC prospects have worsened in Argentina where drought has caused projections for cereal production to be lowered by about 12 per cent. Brazil's wheat harvest is projected to be 16 per cent smaller than that for 2010/2011 because of freezes and reductions in planting. Parts of Mexico and Central America are expected to see lower corn production.

In 2012, the governments of Latin America and the Caribbean responded adequately to food price volatility. Some countries expanded income supplementation programmes that guaranteed a significant percentage of the poor access to food.

For the coming year, it is essential that these countries not lower their guard and carefully monitor the threat that a recession might pose for the food security of their poorest citizens, who always bear the brunt of international price volatility.