Food security, food crisis and its impact on the caribbean

1

ECLAC Subregional Headquarters for the Caribbean

Food Security, food crisis and

its impact on the Caribbean

October 2009

2

Outline

I. The 2006 – 2008 food crisis

II. Assessing the economic and social impact on

the Caribbean

III. Conclusions and policy recommendations

3

I. The Food Crisis

4

There is consensus that the “official” start for the food

crisis can be dated to mid 2006, when international

food prices began to rise at an accelerated pace

However, problems had been brewing for a while, with

a mixture of structural and external factors driving food

prices up

According to the FAO Food Price Index, between June

2006 and June 2008, the overall rise of international

food prices amounted to a staggering 77.7%

I. The Food Crisis

5

Source: Food and Agriculture Organisation.

* Data up to August 2009.

0

100

200

300

400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*

FAO General Food Index

Meat

Dairy

Cereals

Oil and Fats

The rise of food

prices reached its

zenith in June 2008

6

Structural Temporary

Demand side Sustained rapid growth and

changes in consumption

patterns in emerging

countries, driving food

demand up (China)

Surge in bio-fuel production

(Corn)

Speculative investment in

agriculture commodities futures

and options markets

Supply side Increases in production costs

(Oil, fertilizers)

Poor harvest due to natural

phenomena in some cases

(Australia – wheat)

Other Depreciation of the United

Sates dollar

Main drivers of world food inflation

7

0

100

200

300

400

500

600

700

Maize (US) Rice (Thai) Sorghum (US) Soybean (US) Wheat (US)

2006 2007 2008 Jan-Jun 2009

Source: Food and Agriculture Organisation.

* Data up to June 2009.

After 3 years of

continuous increase,

food prices declined

during the first half

of 2009

8

Recent Trends:

From 2008 on, international food prices have

contracted significantly

The global financial and economic crisis that started in

2008 is one of the main factors explaining this: Stagnation in the growth of food demand

Fall in the price of oil and other inputs

Collapse of speculative drives in the food markets

However, international food prices have not returned to

pre-crisis levels yet

The food crisis is “over”… by now

9

II. Economic and social impact on the Caribbean

10

657

868785

0

2,755

1,737

2,000

820

2,119

2,883

2,1252,000

0

1000

2000

3000

Corn Rice Coarse grains Wheat

Th

ou

san

d o

f m

etr

ic t

on

s in

2008/2

009

Domestic production Domestic consumption Imports

Source: United States Department of Agriculture

*Accumulated data for the whole Caribbean area for 2008/2009.

Imports are reported on a trade year basis. All other data are reported using local marketing years.

A fact: The Caribbean is very dependent on imported food

The Caribbean does not

produce wheat, which,

is extensively imported

and consumed

11

Economic impact: Price inflation accelerated in the Caribbean,

driven by rising food prices

9.1

14.9

7.6

22.7

45.5

21.4

29.5

17.1

27.8

22.8

30.8

64.7

33.4

64.5

7.8 7.8

-0.3

16.8

33.3

15.6 16.2

-10

0

10

20

30

40

50

60

70

Bah Bar Bel Guy* Jam Sur T&T

Accu

mu

late

d in

flati

on

fro

m J

un

e 2

006 t

o J

un

e 2

009

Headline inflation Food inflation Non-food inflation

Source: ECLAC on the basis of official data

* Data up to March 2009 in the case of Guyana

In all the cases, food

inflation was higher

than non-food and

headline inflation

12

15.5

5.2

9.111.2 11.1 11.5

10.1

17.7

29.9

18.4

22.621.6 21.6

17.5

14.4

25.9

9.4

1.8 2.2

5.0

2.0

9.27.4 7.8

-10

0

10

20

30

40

Ang* A&B Dom Gre Mon St KN St L St VG

Accu

mu

late

d in

flati

on

fro

m J

un

e 2

006 t

o J

un

e 2

009

Headline inflation Food inflation Non-food inflation


* Data up to March 2009 in the case of Anguila

Food inflation also was considerable in the smaller Caribbean

countries, pushing headline inflation up

13


* Data up to March 2009 in the case of Guyana and Anguila

Food inflation was the main contributor to headline inflation in

almost all Caribbean countries

Percentage points contributed by

food inflation to headline inflation

July 2006-June2009

MDCs

Bahamas 2.5

Barbados 9.9

Belize 7.8

Guyana* 13.1

Jamaica 25.1

Suriname 11.2

Trinidad and Tobago 17.7

ECCU

Anguila* 8.8

Antigua and Barbuda 3.8

Dominica 7.7

Grenada 8

Montserrat 10.1

St. Kitts and Nevis 4.8

St. Lucia 5.4

St. Vincent and the Grenadines 14.2

In Jamaica, food

inflation added 25.1

percentage points to

headline food

14

Inflation in the Caribbean Region, 2006 - 2009

Guy

Bel

Sur

T&T Jam

Bar

Bah

Ang

A&B

DomGre

Mon

St. K&N

St. L

St. V&G

AVERAGE

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

0% 5% 10% 15% 20% 25% 30% 35%

Non-Food Inf lation Jul 2006 - Jun 2009

Food Infla

tion J

ul 2

006 -

Jun 2

009


Guyana, Jamaica, Suriname and Trinidad and Tobago suffered the

highest food inflation and non-food inflation rates

15

1.5

7.8

3.9

5.4

18.0

3.2

11.5

3.7

6.1

8.18.9

14.3

19.0

10.4

5.2

9.7

6.8

2.5

8.6

2.0

18.3

1.4

-3.6 -3.2-4.0

3.6

-1.5

-5

0

5

10

15

20

Bah Bar Bel Guy* Jam Sur T&T

Fo

od

in

flati

on

by s

em

este

rs

2007-II 2008-I 2008-II 2009-I



In any case, during 2009 food inflation has slowed down in most

Caribbean countries

In some cases, food

inflation during the first

half of 2009 was

negative, reflecting a net

reduction of food prices

16

3.8 3.7

6.3

9.7

3.02.1

8.5

7.2

11.6

7.0

3.9 3.8

10.1

3.2

1.7

6.8

5.0

6.4

3.9

1.2

5.8

-5.0

1.5

-1.9

-3.4

5.7

2.0

-0.7

5.8

1.8

2.0

-0.3

-5

0

5

10

15

20

Ang* A&B Dom Gre Mon St KN St L St VG

Fo

od

in

flati

on

by s

em

este

rs

2007-II 2008-I 2008-II 2009-I



The ECCU countries have benefitted from a slowdown, or even a

reversal, of food inflation during 2009

17

Food prices in the Caribbean are downward rigid

75

100

125

150

175Ju

n-0

6

Au

g-0

6

Oct-

06

Dec-0

6

Feb

-07

Ap

r-07

Ju

n-0

7

Au

g-0

7

Oct-

07

Dec-0

7

Feb

-08

Ap

r-08

Ju

n-0

8

Au

g-0

8

Oct-

08

Dec-0

8

Feb

-09

Ap

r-09

Ju

n-0

9

World Food Index

Bah

Bar

Bel

Guy*

Jam

Sur

T&T



Most food price

indexes in the

Caribbean are

still higher than

world food index

18

Food prices in the Caribbean are downward rigid

75

100

125

150

175Ju

n-0

6

Au

g-0

6

Oct-

06

Dec-0

6

Feb

-07

Ap

r-07

Ju

n-0

7

Au

g-0

7

Oct-

07

Dec-0

7

Feb

-08

Ap

r-08

Ju

n-0

8

Au

g-0

8

Oct-

08

Dec-0

8

Feb

-09

Ap

r-09

Ju

n-0

9

World Food Index

Ang*

A&B

Dom

Gre

Mon

St KN

St L

St VG



Interestingly, food

price indexes within

the ECCU, are

closer to the current

level of the world

food price index

19

Some possible explanations for this phenomenon of

food prices being downward rigid

Price distortions due to monopolistic or oligopolistic market

structures

Lagged impact of the 2006-2008 food crisis still reverberating

across the Caribbean

Adaptive expectations among consumers and producers

keeping food prices up

Changes in consumer behaviour contributing to keep food

demand at high levels

20

Social impact: The food crisis may have translated into an increase

in poverty and indigence rates in the Caribbean

Indigence rate Poverty rate (including

indigence)

MDCs

Bahamas (2001) .. 9.3

Barbados .. ..

Belize (2002) 10.8 33.5

Guyana (2007) 13.0 31.0

Jamaica (2006) .. 14.3

Suriname (2000) 20.0 63.1

Trinidad and Tobago (2005) 1.2 16.7

ECCU

Anguilla (2002) 2.0 23.0

Antigua and Barbuda (2005-2006) 3.7 18.3

Dominica (2002-2003) 15.0 39.0

Grenada .. ..

Montserrat .. ..

St. Kitts and Nevis (1999-2000) 12.9 31.0

St. Lucia (2005-2006) 1.6 28.8

St. Vincent and the Grenadines .. ..

Source: Survey of Living Conditions except for Belize (Living Standards Measurement Survey), Guyana

(Household Income and Expenditure Survey) and Suriname (General Bureau of Statistics).

.. = not available

Poverty and indigence

rates in the Caribbean are

very heterogeneous, and,

due to methodological

differences, not strictly

comparable

21

36.5

31.0

26.1

14.3

21.0

16.7

0

10

20

30

40

50

Guyana 1999 Guyana 2007 Jamaica 1996 Jamaica 2006 Trinidad &

Tobago 1995

Trinidad &

Tobago 2005

Pe

rce

nta

ge

of

Po

or

in T

ota

l P

op

ula

tio

n

Available data strongly suggests that the region has made advances

in poverty reduction during the last decade


Due to methodological

differences between

countries and surveys,

the data are not strictly

comparable

22

Bah

Bel

Jam

Sur

T&T

Ang

A&B

Dom

St. LAVERAGE

0%

10%

20%

30%

40%

50%

60%

70%

0% 10% 20% 30% 40% 50% 60% 70%

Average Household Expediture on Food

Incid

en

ce o

f P

overt

y

Countries with high poverty rates and high household expenditure

on food are particularly vulnerable to food inflation


23

Source: ECLAC’s calculations on the basis of Kairi Consultants Ltd. (2007).

e = estimation

Household Cumulative percentage of

population

Per capita monthly

consumption expenditure

Per capita monthly

consumption expenditure

percentile (% ) 2005 2008 (estimated)

(% ) TT$ at current prices TT$ at current prices

0.8 (Indigence line 2005) 1.2 255 343

1 1.5 262 352

2 3.0 301 405

3 4.5 341 458

3.3 (Indigence line 2008e) 5.0 354 476

4 6.2 387 520

5 7.7 427 574

6 9.2 467 627

7 10.7 506 680

8 12.2 546 734

9 13.7 586 787

10 15.2 625 840

11 (Poverty line 2005) 16.7 665 894

12 18.1 689 926

12.8 (Poverty line 2008e) 19.1 708 951

13 19.5 714 959

14 20.8 738 992

15 22.2 762 1,025

16 23.6 787 1,057

17 25.0 811 1,090

18 26.3 835 1,123

19 27.7 848 1,139

20 29.1 884 1,188

An exercise: Rising food prices may have pushed up the poverty and

indigence lines in Trinidad and Tobago

A simulation

conducted by ECLAC

suggests that food

inflation in Trinidad

and Tobago

contributed to rise the

indigence line from

TT$ 255 to 476, and

the poverty line from

TT$ 665 to 951,

between 2005 and

2008

24

Therefore, indigence and poverty rates could be rising in Trinidad

and Tobago, due to high food prices

1.2

5.0

15.5 16.719.1

14.1

-5

0

5

10

15

20

25

2005 Survey 2008 Estimate 2005 Survey 2008 Estimate

Perc

en

tag

e o

f p

op

ula

tio

n

Indigent Poor but not indigent Total poor

Source: ECLAC’s calculations on the basis of Kairi Consultants Ltd. (2007).

e = estimation

The simulation by

ECLAC suggests that

the indigence rate

could have gone from

1.2% to 5.0% and the

overall poverty rate

from 16.7% to 19%

25

However, it is important mentioning that this exercise

make several assumptions:

The distribution of consumption remains constant within

the population

The population is not capable of increasing their income

high enough to compensate for the higher prices

Government policies totally fail to diminish the

enhancement of poverty and indigence

26

III. Conclusions and policy recommendations

27

Due to the food crisis and the current global crisis, it is

not clear if the Region will be able to keep improving

social standards

Progress already made in social development is in

jeopardy

What will happen depends on how well governments

secure resources, maintain social expenditures at

acceptable levels, and allocate them efficiently

However, many Caribbean countries are having a hard

time financing those expenditures

28

What is the current status of the food crisis in the

Caribbean?

Food prices are still at very high levels across the

Caribbean, and, in the case of some countries, prices

are still rising

Furthermore, the structural weaknesses of the region

regarding food security and food dependency still

remain strong

One fact is undeniable: in the future there will be new

episodes of food crisis and the region needs to

prepare for such scenarios

29

Policy recommendations include:

Foster anti-inflationary policies

Introduce greater competition in the distribution and

commercialisation of imported food

Reduce imported food dependency by promoting domestic

production

Decrease food consumption promoting changes in nutrition

patterns

Implement well targeted social programs to reduce poverty

and indigence and emphasize healthy living styles

Link nutrition and health policies to food production and

consumption

30

Thank you for your

attention

ECLAC Subregional Headquarters for the Caribbean

Food security, food crisis and its impact on the caribbean

Education

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