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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 an...
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 pri...
5
Source: Food and Agriculture Organisation.
* Data up to August 2009.
0
100
200
300
400
2000 2001 2002 2003 2004 2005 200...
6
Structural Temporary
Demand side  Sustained rapid growth and
changes in consumption
patterns in emerging
countries, dri...
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
So...
8
Recent Trends:
 From 2008 on, international food prices have
contracted significantly
 The global financial and econom...
9
II. Economic and social impact on the Caribbean
10
657
868
785
0
2,755
1,737
2,000
820
2,119
2,883
2,125
2,000
0
1000
2000
3000
Corn Rice Coarse grains Wheat
Thousandofme...
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...
12
15.5
5.2
9.1
11.2 11.1 11.5
10.1
17.7
29.9
18.4
22.6
21.6 21.6
17.5
14.4
25.9
9.4
1.8 2.2
5.0
2.0
9.2
7.4 7.8
-10
0
10
...
13
Source: ECLAC on the basis of official data
* Data up to March 2009 in the case of Guyana and Anguila
Food inflation wa...
14
Inflation in the Caribbean Region, 2006 - 2009
Guy
Bel
Sur
T&T Jam
Bar
Bah
Ang
A&B
Dom
Gre
Mon
St. K&N
St. L
St. V&G
AV...
15
1.5
7.8
3.9
5.4
18.0
3.2
11.5
3.7
6.1
8.1
8.9
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
-...
16
3.8 3.7
6.3
9.7
3.0
2.1
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...
17
Food prices in the Caribbean are downward rigid
75
100
125
150
175 Jun-06
Aug-06
Oct-06
Dec-06
Feb-07
Apr-07
Jun-07
Aug...
18
Food prices in the Caribbean are downward rigid
75
100
125
150
175 Jun-06
Aug-06
Oct-06
Dec-06
Feb-07
Apr-07
Jun-07
Aug...
19
 Some possible explanations for this phenomenon of
food prices being downward rigid
 Price distortions due to monopol...
20
Social impact: The food crisis may have translated into an increase
in poverty and indigence rates in the Caribbean
Ind...
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...
22
Bah
Bel
Jam
Sur
T&T
Ang
A&B
Dom
St. L
AVERAGE
0%
10%
20%
30%
40%
50%
60%
70%
0% 10% 20% 30% 40% 50% 60% 70%
Average Hou...
23
Source: ECLAC’s calculations on the basis of Kairi Consultants Ltd. (2007).
e = estimation
Household Cumulative percent...
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....
25
 However, it is important mentioning that this exercise
make several assumptions:
 The distribution of consumption re...
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
so...
28
What is the current status of the food crisis in the
Caribbean?
 Food prices are still at very high levels across the
...
29
Policy recommendations include:
 Foster anti-inflationary policies
 Introduce greater competition in the distribution...
30
Thank you for your
attention
ECLAC Subregional Headquarters for the Caribbean
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Food security, food crisis and its impact on the caribbean

Assessing the economic and social impact of the 2006 - 2008 food crisis on the Caribbean.

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Food security, food crisis and its impact on the caribbean

  1. 1. 1 ECLAC Subregional Headquarters for the Caribbean Food Security, food crisis and its impact on the Caribbean October 2009
  2. 2. 2 Outline I. The 2006 – 2008 food crisis II. Assessing the economic and social impact on the Caribbean III. Conclusions and policy recommendations
  3. 3. 3 I. The Food Crisis
  4. 4. 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. 5. 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. 6. 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. 7. 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. 8. 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. 9. 9 II. Economic and social impact on the Caribbean
  10. 10. 10 657 868 785 0 2,755 1,737 2,000 820 2,119 2,883 2,125 2,000 0 1000 2000 3000 Corn Rice Coarse grains Wheat Thousandofmetrictonsin2008/2009 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. 11. 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 AccumulatedinflationfromJune2006toJune2009 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. 12. 12 15.5 5.2 9.1 11.2 11.1 11.5 10.1 17.7 29.9 18.4 22.6 21.6 21.6 17.5 14.4 25.9 9.4 1.8 2.2 5.0 2.0 9.2 7.4 7.8 -10 0 10 20 30 40 Ang* A&B Dom Gre Mon St KN St L St VG AccumulatedinflationfromJune2006toJune2009 Headline inflation Food inflation Non-food inflation Source: ECLAC on the basis of official data * 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. 13. 13 Source: ECLAC on the basis of official data * 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. 14. 14 Inflation in the Caribbean Region, 2006 - 2009 Guy Bel Sur T&T Jam Bar Bah Ang A&B Dom Gre 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 Inflation Jul 2006 - Jun 2009 FoodInflationJul2006-Jun2009 Source: ECLAC on the basis of official data Guyana, Jamaica, Suriname and Trinidad and Tobago suffered the highest food inflation and non-food inflation rates
  15. 15. 15 1.5 7.8 3.9 5.4 18.0 3.2 11.5 3.7 6.1 8.1 8.9 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 Foodinflationbysemesters 2007-II 2008-I 2008-II 2009-I Source: ECLAC on the basis of official data * Data up to March 2009 in the case of Guyana 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. 16. 16 3.8 3.7 6.3 9.7 3.0 2.1 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 Foodinflationbysemesters 2007-II 2008-I 2008-II 2009-I Source: ECLAC on the basis of official data * Data up to March 2009 in the case of Anguila The ECCU countries have benefitted from a slowdown, or even a reversal, of food inflation during 2009
  17. 17. 17 Food prices in the Caribbean are downward rigid 75 100 125 150 175 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 World Food Index Bah Bar Bel Guy* Jam Sur T&T Source: ECLAC on the basis of official data * Data up to March 2009 in the case of Guyana Most food price indexes in the Caribbean are still higher than world food index
  18. 18. 18 Food prices in the Caribbean are downward rigid 75 100 125 150 175 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 World Food Index Ang* A&B Dom Gre Mon St KN St L St VG Source: ECLAC on the basis of official data * Data up to March 2009 in the case of Anguila Interestingly, food price indexes within the ECCU, are closer to the current level of the world food price index
  19. 19. 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. 20. 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. 21. 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 PercentageofPoorinTotalPopulation Available data strongly suggests that the region has made advances in poverty reduction during the last decade Source: ECLAC on the basis of official data Due to methodological differences between countries and surveys, the data are not strictly comparable
  22. 22. 22 Bah Bel Jam Sur T&T Ang A&B Dom St. L AVERAGE 0% 10% 20% 30% 40% 50% 60% 70% 0% 10% 20% 30% 40% 50% 60% 70% Average Household Expediture on Food IncidenceofPoverty Countries with high poverty rates and high household expenditure on food are particularly vulnerable to food inflation Source: ECLAC on the basis of official data
  23. 23. 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. 24. 24 Therefore, indigence and poverty rates could be rising in Trinidad and Tobago, due to high food prices 1.2 5.0 15.5 16.7 19.1 14.1 -5 0 5 10 15 20 25 2005 Survey 2008 Estimate 2005 Survey 2008 Estimate Percentageofpopulation 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. 25. 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. 26. 26 III. Conclusions and policy recommendations
  27. 27. 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. 28. 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. 29. 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. 30. 30 Thank you for your attention ECLAC Subregional Headquarters for the Caribbean

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Assessing the economic and social impact of the 2006 - 2008 food crisis on the Caribbean.

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