Share

Regional Food Supply Update

By Alana Tummino and Danielle Renwick

The rise in food prices are generating concern across the globe. AS/COA looks at how rising prices are affecting Latin American, as well as regional responses to meet increased demand and combat food shortages.

Last year’s “maize riots” in Mexico City were perhaps an antecedent to the food concerns sweeping the globe. The UN Food and Agriculture Organization (FOA) reports that food prices between March 2007 and March 2008 jumped 130 percent for wheat, 74 percent for rice, 87 percent for soy beans, and 53 percent for corn. 

In Latin America, while some of the poorest countries have been hit hard by escalating food costs, other countries are in a position to try to offset price increases. The World Bank has identified 36 countries in crisis, including Bolivia, Nicaragua, the Dominican Republic, Haiti, and Ecuador. Riots in Haiti and protests in Peru reflect worldwide food anxiety.

Growing Middle Class

Increased demand is one of the principal causes cited for the food challenges today. Experts look to the growing middle classes in China and India as a large reason for increased global demand. Likewise, Latin America’s growing middle class has prompted increased demand for agricultural output. The middle classes in Brazil and Mexico—countries that account for half of Latin America’s population—has grown substantially in the past decade. According to the Economist Intelligence unit, between 2000 and 2005, Brazil’s middle class (those earning between $5,900 and $22,000) grew 50 percent to 22.3 million households. Similarly, according to GEA, a Mexico City-based consultancy, the number of Mexican families with a monthly income between $600 and $1,600 increased from 5.7 million to 10.7 million between 1996 and 2006. Across the region, Banco Santander notes that approximately 15 million households have escaped poverty between 2002 and 2006. 

Increasing Production

Farmers are expected to increase production in the coming year to meet demands. According to the FOA, cereal production in South America was expected to reach 131.5 million tons in 2008. But the production of 1 million more tons of cereals (0.7 percent growth) lags behind the expected 2.6 percent growth worldwide. In Central America and the Caribbean cereal output is estimated to jump 3.6 percent.

Unsatisfactory levels of rice production in Oceania were central to sparking the global food outrage. But in South America, and especially Uruguay, the region’s top exporter, rice is expected to be a bumper crop. Uruguay exports 95 percent of its rice crop, enjoying increased profits as prices have risen 25 percent in the past two months. Annual rice production is currently 1 million tons, but plans are underway to try to double production. Argentina, despite increased export tariffs, is also increasing its rice exports. In total, Uruguayan rice exports reach approximately $17 million, while Argentina’s exports are at an estimated $9 million annually. 

According to the FAO, Brazil leads the region in soybean production with 50.7 million metric tons produced in 2005. After the United States, Brazil is the second largest producer in the world, with Argentina ranking as the region’s second biggest producer. Brazil’s soy exports totaled $5.4 billion in 2004 while Argentina’s totaled $1.7 billion.

Brazil is also the region’s leading producer of maize, with Mexico in close second with $2.3 billion in production. Mexico imports maize, while Argentina, with lower production ($2.1 billion) exported $1.1 billion in maize in 2005. 

Government Response

Governments across the region are taking measures to curb high levels of food inflation and create policies to combat food shortages. Policies range from increasing export taxes to restricting exports so that food can be used to feed the local market. 

In most countries, governments are restricting exports of basic food supplies to satisfy local needs. In Brazil, Lula’s government has temporarily suspended rice exports to stave off domestic food shortages. President Evo Morales of Bolivia has followed suit, prohibiting exports of corn, rice, meat, and vegetable oil. In neighboring Peru, soldiers have been giving out rice, oil, and beans.

Policy decisions can create a domestic backlash. Argentina is a prime example. After the second round of negotiations collapsed between farmers and the government, Argentine farmers cut off grain exports and withheld crops in response to the government’s rising export tax and price caps—exacerbating an already tenuous relationship with a government that relies on agricultural exports for over 50 percent of its earnings. 

A look to the future

Nicaragua’s regional summit on May 7 united presidents and ministers from across Latin America to confront these issues. Despite the surprise last minute cancellation of Venezuelan President Hugo Chávez, leaders came together to brainstorm regional strategies and alliances, emphasizing the need for at least 10 percent of total private bank lending to be dedicated to farmers. Presidents Manuel Zelaya of Honduras, Óscar Arias of Costa Rica, Rafael Correa of Ecuador, Evo Morales of Bolivia, and René Préval of Haiti were among the attendees. Venezuela, taking advantage of it strong, oil-fueled economic position is planning to implement the “oil-for-food fund” to offset rising food prices in poorer countries. According to Venezuela’s foreign minister, the fund will “devise a formula based on the price of oil and the level of production.” Together with Bolivia, Nicaragua, and Cuba, Venezuela had already pledged $100 million at a summit of the Bolivarian Alternative for the Americas (ALBA) to provide food for the neediest countries.

The FAO will host a global summit of heads of state and government from June 3-5 to discuss the impact of soaring food prices and how to improve world food security. UN Secretary General Ban Ki-moon’s attendance is among a number of already confirmed leaders.

Related

Explore