C’bean among most vulnerable as food prices rise, again

World food prices are rising again, triggering fears of another crisis like in 2007-08, when social unrest erupted in poor and developed nations after food prices rose dramatically.{{more}}

And the International Monetary Fund (IMF) has identified the Caribbean among the regions most vulnerable to the current food price hike.

The IMF’s findings were published in its latest World Economic Outlook, released this month.

Data complied by the IMF show the Caribbean having the highest food imports as a share of total merchandise imports in 2010: about 14 per cent.

The 2010 number is about 2 percentage points higher than 2007-08, when the region also had the highest figure.

In descending order, the Caribbean is followed by North Africa, former Soviet Union, Central America, Middle East, Sub-Saharan Africa, the European Union, the other regions of Europe, Southeast Asia, East Asia, South America, South Asia and Oceania, with North America having the lowest food imports as a share of total merchandise imports.

At the same time, the Caribbean has the second lowest stock-to-use ratio for corn, the third lowest for soybean and rice, and the lowest for wheat, the IMF said.

In 2008, the 15-member Caribbean Community, except Haiti, imported US$3.5 billion in food. Jamaica alone imported US$1.6 billion.

But the IMF said the current food price shock is less severe than that of 2007-08 because it has not affected all key crops uniformly and has not been aggravated by trade restrictions and high energy input costs.

It, however, said that when focusing on vulnerability, there are significant variations across regions.

“[T]he African, Central American, Caribbean, and Middle Eastern regions appear to be the most exposed to rising food prices amid low inventory buffers and high dependence on the global market for their food supplies,” the IMF warned.

It said various forms of export restrictions by major food exporters worsened the 2007-08 food crisis.

But major food exporters have implemented no such policies during 2012.

“Since the last food crisis, supply has responded to robust demand and relatively high prices through higher acreage and yields as well as productivity gains.

“As a result, global inventory buffers, measured by stock-to-use ratios, have improved significantly, especially for rice and wheat. Spillovers from energy markets are much more limited in 2012,” the IMF said.

It said energy prices feed into global food prices through two main channels: cost push and demand pull.

“First, energy-intensive inputs such as ammonia-based nitrogen fertilizers and power provide a transmission mechanism from energy prices into food prices.

“Second, the diversion of crops from food to fuel production has become an important factor in recent years — corn and sugar have been increasingly used for ethanol production and soybeans and other oilseeds for biodiesel production,” the IMF said.

It noted that energy prices surged alongside food prices during the 2007-2008 food crisis, intensifying the spillover through both channels, but energy prices have recently declined, limiting the spillover to food prices.

“The expiration of government subsidies to the US ethanol industry in 2011 also helped reduce the use of food crops for energy production. Therefore, the pass-through from energy prices to food prices plays a less important role than in 2007-08.

“Nevertheless, countries in Africa, Central America, the Caribbean, and the Middle East are vulnerable to rising food prices. Despite significant heterogeneity, regions with low inventory buffers, high dependence on the global market for their food supply, and a high share of food in final consumption seem to be the most vulnerable to recent food price hikes.

“Compared with 2007-08, the extent of regional exposure to global food price fluctuations has not changed significantly,” the IMF said. (kentonchance@searchlight.vc)