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FOOD: Price shock hotspots



lead photo
JOHANNESBURG, 6 August 2012 (IRIN) - As global grain prices begin to
climb, the Sahel countries of West Africa, those in the Horn, and in
central and southern Africa - many of which depend mainly on imported
cereals to feed their people - are most exposed to the impact of more
expensive food, said the UN Food and Agriculture Organization (FAO).
Around the world plenty of people are already living with high food
prices, and more will be joining them.

The international prices of cereals

began to rise to record levels in mid-June this year, when the
implications of one of the worst droughts ever to hit the US, the
world's largest producer of maize and soybeans, became breaking news
and commodity markets reacted.

Soaring food prices in 2007/08 forced the poor to sell their assets,
cut down their spending on quality food, education and health, leaving
them more vulnerable to future shocks, said FAO.

The transmission of high international prices to consumer prices in
countries is not only the result of import dependency and domestic
production. Other factors, in particular policy interventions, also
play a role, said Liliana Balbi, Team Leader of the FAO Global
Information and Early Warning System (GIEWS). "In North African
countries, for example, the price transmission to consumers during the
food price crises of 2007-08 and 2010-11 was limited due to extensive
food subsidies."

Gary Eilerts, programme manager at the Famine Early Warning Systems
Network (FEWS NET), run by the US Agency for International Development
(USAID), told IRIN, "In the food insecure world, in general, the
pricing impacts may, at least initially, be more muted and relatively
delayed, due to less reliance of many of these countries on the global
grain trade."

FEWS NET monitors 30 countries vulnerable to food insecurity. "Abundant
rice supplies will help to counter price rises in some countries. An
important issue to watch is whether, and to what extent, wheat prices
are carried along by the corn/maize prices, and thereby put growing
pressure on bread prices, a product heavily consumed by urban
populations in the food insecure world."

The Sahel

In an assessment exclusively compiled for IRIN, GIEWS said countries in
the Sahel are going
through a food crisis triggered by reduced cereal harvests in 2011 and
already high food prices, and are very sensitive to shocks. The price
of staple grains like sorghum, maize and millet have increased steeply
m> across the Sahel, but the prices of imported rice and wheat have
been mostly stable in recent months.


Reports to watch out for
USDA's global food
update (10 August)
FAO GIEWS country
briefs
ved=0CG8QFjAA&url=http%3A%2F%2Fwww.fao.org%2Fgiews%2Fcountrybrief%2F&ei=
cYQfUKWoNMvtsgaEkoDIBw&usg=AFQjCNE65CbX0NP8u5VmUuljWbb4FnSnhA&sig2=DqTly
tTvePSV5DFXuuzXSg>
FEWS-NET monthly
price watch
ved=0CGQQFjAA&url=http%3A%2F%2Fwww.fews.net%2F&ei=N4QfUOWjFYr0sgbb-ICoAg
&usg=AFQjCNG1dfQUoczk0hHRGfGXlYkr4rfHfQ&sig2=C1pvYOY1yqMTQfqippzhbg>
World Bank food price
watch
K:22838758~pagePK:210058~piPK:210062~theSitePK:336992,00.html>
"A new price shock from the international market would dramatically
aggravate the already serious food security situation," Balbi warned.
Sahel countries - including Mauritania, Senegal, Mali, Burkina-Faso,
Niger, Chad, and Gambia - would be affected. The price of locally
produced grains in many of these countries is already more than 50
percent higher compared to 2011.

The World Bank reported this week that since mid-June, wheat prices
gave gone up by over 50 percent, and the price of maize has risen more
than 45 percent, while soybeans are now almost 30 percent more
expensive and up almost 60 percent since the end of 2011.


The Horn / East Africa

Cereal prices are moving up in several countries in northeastern
Africa, partly on account of global hikes, leaving them vulnerable
generally. Around 9.95 million people are still food insecure after
drought hit the Horn in 2011.

However in Somalia, which was gripped by a food crisis in 2011, prices
of local cereal staples declined sharply during the last 12 months from
their peak in June 2011, and have been relatively stable at low levels
since the first months of 2012, GIEWS reported.

In Sudan and South Sudan

, prices hit record levels in all monitored markets following
disruptions and the decline in production in 2012, said GIEWS.

Sudan relies heavily on imported wheat and FAO expects recent increases
in international grain prices, mainly wheat, to affect local prices.
Wheat prices in Sudan have declined moderately since the start of 2012,
but in June the average price in the capital, Khartoum, was $659 per
tonne - slightly higher (5 percent) than the levels in the previous
year.

In June 2012, the price of the main staple in Khartoum, and in El
Gadarif (a major surplus-producing region), was more than twice the
price in June 2011.

In South Sudan, sorghum prices in July 2012 were some 220 percent
higher compared to a year earlier.


'' Congo,
Equatorial Guinea and Gabon in central Africa "are almost totally
reliant on international markets to cover their cereal consumption
requirements (wheat and rice)
''
Ethiopian cereal prices have been rising since February 2012, but are
currently stable at high levels. But wholesale wheat prices in most of
Ethiopia's markets have also increased by an average 18-20 percent
since the beginning of the year, mainly following increases in
international prices, said GIEWS.

Maize in Uganda increased by about 60 percent between January and April
2012 and stabilized at around $390 per tonne, about 42 percent higher
than a year earlier, said GIEWS.

In Kenya, maize prices have been rising by an average of 20-25 percent
in the last three to four months in main markets as supplies from the
short-rains harvest (completed in March 2012) have started running out.

Maize prices are very high in Tanzania's main wholesale markets, but
not on account of the international prices. In the main cities of Dar
es Salaam and Arusha, maize was being sold in May/June at almost record
levels of $350-380 per tonne because of higher energy and transport
costs, and the renewed flow of maize exports since the ban was lifted.

Southern Africa

The recent hike in the global maize price was almost instantly
transmitted to South Africa, the largest maize producer in Africa.
Southern African maize importers like Botswana, Namibia and Swaziland
will feel the sharp end of the price spike. Maize production in Lesotho
- a major importer - has dipped by 77 percent compared to 2010/11, and
the country will struggle to feed its people, as will others in the
region.

Lesotho
d-to-worse> is still recovering from the impact of a food price shock
in 2010 and subsequent flooding in the mountain kingdom, which has
forced to spend millions buying food and material to repair damaged
infrastructure. In 2011, crop production was affected by poor rains.
Without factoring in the current price spike, the International
Monetary Fund, in its May 2012 report, estimated that the cost of
flood-related imports, and buying food and fuel until 2013, would
amount to 4.2 percent of Gross Domestic Product (GDP), which the
anticipated revenue from its diamond exports was not going to cover.

There is more bad news. In a global food security assessment and
projection for the next 10 years, the Economic Research Services of the
US Department of Agriculture
tion-and-outlook/gfa23.aspx> (USDA) listed Lesotho among four
countries where nearly 100 percent of the population is projected to
remain food insecure until 2022. The other three are the Democratic
Republic of Congo, Burundi and Eritrea.



Photo: Phil Behan/WFP
People in the Sahel are particularly vulnerable
"Angola also had a very poor harvest (dry weather) and is forecast to
import larger quantities than last year, while Zimbabwe

will also require more, however, their relatively good stock levels
will also partially help to meet the larger deficit in 2012/13," Balbi
said in an email.

Central Africa

Congo, Equatorial Guinea and Gabon in central Africa "are almost
totally reliant on international markets to cover their cereal
consumption requirements (wheat and rice)," said Balbi. "Central
African Republic and Cameroon are normally self-sufficient in maize,
their main staple, but have uncertain prospects for this year's
cropping season, and may need to import from international markets in
2013.

"Moreover, they normally import from international markets significant
amounts of wheat and rice, mainly consumed in urban areas."

North Africa and Middle East

Syria in the Middle East and Morocco in North Africa would be countries
to monitor for food price shocks, though in the case of Syria
> , internal conflict and consequences of international sanctions on
trade in addition to the spike in global grain prices could cause food
security to deteriorate.

There is great uncertainty over how Syria's wheat crop will fare
because of the prolonged civil strife, the GIEWS assessment noted,
while wheat production in Morocco is expected to fall by 40 percent
compared to 2011 because of poor rains.

Generally, countries in North Africa and the Middle East depend heavily
on imports to satisfy domestic cereal consumption. "Even in good years
they import from 30 to 70 percent of their cereal needs," said Balbi.
"Although extensive food subsidies are in place, and food inflation is
relatively moderate, their cereal import bills - and the burden of food
subsidies on public budgets - increase considerably when international
prices are high."

Asia

In Asia, Bangladesh
food-insecure> , Indonesia and the Philippines, which rely on wheat
imports, are countries that could also be susceptible to a global price
spike.

There has been some concern over the huge import orders placed by
China, one of the world's largest consumers of cereals. The China Daily
newspaper reported that imports of all kinds of grain increased by 41.2
percent in the first half of 2012. The poor monsoon rains in some
countries of Southeast Asia, and floods in others, are also causing
concern.

The US hoped that rain in July might ease the drought, but the latest
reports from the USDA
say it has
intensified, and the percentage of the maize crop expected to do well
has dropped to 24 percent - 38 points lower than at the same time in
2011 - while soybean prospects have fallen to 29 percent - 31 points
below the same time last year.

To illustrate the severity of the drought, the crop estimates for maize
and soybeans were revised downwards by two percent in just one week.
Any tightness in the supply of maize and soybeans, used mainly as
livestock feed, could impact on wheat, the world's most widely consumed
staple grain.

India

With the world's second largest population India is one of the largest
consumers and producers of food, and any drought there will have a
global impact.

This week, Agriculture Minister Sharad Pawar noted that 400
of India's 627
districts received poor monsoon rains but said it would be left to the
affected provinces to declare a drought. The monsoon rains determine
the amount of rice planted.

As weak to moderate El Ni

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