Issue of February, 20, 2012
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Credit: Fabricio Vanden Broeck
Analysis
Food Security in Times of Crisis
By Alan Bojanic *

Prospects for grain harvests in 2012 have worsened in Argentina, Brazil, Mexico and Central America, reports Alan Bojanic, interim FAO representative in Latin America and the Caribbean, in this column.

SANTIAGO, Feb 20 (Tierramérica).- 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 affect the access of the poor to food.

The Quarterly Food Security Bulletin of the United Nations Food and Agricultural Organization (FAO) reports that the current international situation is marred by the persistence of the sovereign debt crises in various European Union countries. If recession strikes the euro zone, world demand will be affected 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 percent for developing countries and from 2.7 to 1.4 percent for high income countries. Averaged, the overall world growth rate is expected to be 2.5 percent for 2012.

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 percent in 2011 (half of the rate for 2010, which was 12.4 percent) and estimates this growth will drop to 4.7 percent in 2012.

International food prices fell by 10 percent between June and December 2011. Between December 2010 and December 2011, sugar prices fell 18 percent, prices of oils and fats fell 14 percent, and the average price of cereals - an essential component of the human diet - dropped by 8 percent, while prices of milk products slipped 3 percent. It is likely that this downward tendency - which affects 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 tons 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 tons, a 3.5 percent jump from 2010/2011. Wheat production is projected to rise by 6.5 percent though secondary grains and rice are expected to experience a slight drop.

The LAC countries maintained a relatively low rate of inflation (7 percent) according to FAO's January LAC Price Report, and annual food inflation shows signs of closing 2011 at 8.5 percent, down from 9.6 percent 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 percent. Brazil's wheat harvest is projected to be 16 percent 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 programs 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.

* Alan Bojanic is the interim representative for Latin America and the Caribbean of the UN Food and Agriculture Organization (FAO). Copyright IPS.

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