Remote Monitoring Report

High levels of inflation will continue to significantly reduce food access

February 2022 to September 2022

February - May 2022

June - September 2022

IPC v3.0 Acute Food Insecurity Phase

1: Minimal
2: Stressed
3+: Crisis or higher
Would likely be at least one phase worse without
current or programmed humanitarian assistance
FEWS NET classification is IPC-compatible. IPC-compatible analysis follows key IPC protocols but does not necessarily reflect the consensus of national food security partners.
FEWS NET Remote Monitoring countries use a colored outline to represent the highest IPC classification in areas of concern.

IPC v3.0 Acute Food Insecurity Phase

1: Minimal
2: Stressed
3: Crisis
4: Emergency
5: Famine
Would likely be at least one phase worse without current or programmed humanitarian assistance
FEWS NET classification is IPC-compatible. IPC-compatible analysis follows key IPC protocols but does not necessarily reflect the consensus of national food security partners.

IPC v3.0 Acute Food Insecurity Phase

1: Minimal
2: Stressed
3+: Crisis or higher
Would likely be at least one phase worse without
current or programmed humanitarian assistance
FEWS NET classification is IPC-compatible. IPC-compatible analysis follows key IPC protocols but does not necessarily reflect the consensus of national food security partners.
FEWS NET Remote Monitoring countries use a colored outline to represent the highest IPC classification in areas of concern.

IPC v3.0 Acute Food Insecurity Phase

Presence countries:
1: Minimal
2: Stressed
3: Crisis
4: Emergency
5: Famine
Remote monitoring
countries:
1: Minimal
2: Stressed
3+: Crisis or higher
Would likely be at least one phase worse without
current or programmed humanitarian assistance
FEWS NET Remote Monitoring countries use a colored outline to represent the highest IPC classification in areas of concern.

Key Messages

  • Urban areas in the region are expected to continue experiencing Minimal (IPC Phase 1) outcomes thanks to economic recovery. However, difficulty accessing food as a result of rising inflation will lead to Stressed (IPC Phase 2) outcomes, especially for the region's rural poor households. In addition, Crisis (IPC Phase 3) conditions are expected for very poor households in eastern Honduras and in the Honduran Dry Corridor, who suffered significant agricultural losses in 2021. During the lean season, the proportion of households in Crisis (IPC Phase 3) is expected to increase, particularly in Nicaragua, without a change in area classification.

  • Sharp increases in fuel prices of up to 35 percent over the five-year average have had a negative impact on transportation costs. This, in addition to the climate-related agricultural losses of 2021, is increasing the prices of staple grains and reducing access to food. These conditions are expected to continue throughout the outlook period.

  • The apante/postrera tardía season is expected to yield average results, while weather forecasts indicate an average start to the rainy season for most of the region and rainfall accumulations within normal parameters. This will support the growth of primera crops. However, the high costs of agricultural inputs will result in smaller cropped areas, resulting in below-average production and a decrease in the demand for labor, especially for subsistence farmers.

ZONE CURRENT ANOMALIES PROJECTED ANOMALIES
Regional  Reserves from the postrera season for producing households in Honduras and Nicaragua will run out up to two months earlier than usual due to losses caused by rainfall deficits in 2021. Despite a slowdown in their growth, remittances are expected to remain above average. The poorest households, which are in construction or trade and domestic services — the sectors boosted most by remittances — will only benefit indirectly from the remittances.
Regional  With the arrival of the apante/postrera tardía harvest, wholesale prices of white maize and red beans in the region remained stable in January compared to December. However, compared to the previous year, maize increased 34.7, 38.3, and 47.7 percent in the San Salvador, Tegucigalpa, and Managua markets, respectively. Bean prices, on the other hand, increased from December to January by 16.6 and 28.9 percent in Honduras and Nicaragua, respectively, while El Salvador reported a decrease of 7.6 percent, since the postrera harvest had near-average yields. Tourism in the region is expected to remain below pre-pandemic levels, albeit with a slow recovery.
Regional  Annual inflation continues to increase, with year-on-year variations of 6.5, 6.2, and 7.7 percent in El Salvador, Honduras, and Nicaragua, respectively. The food sector increased by 9.0, 7.5, and 10.3 percent in El Salvador, Honduras, and Nicaragua, respectively, from January 2021 to January 2022, making it the sector with the largest increases. Fuel prices are expected to remain high throughout the outlook period, which will contribute to maintaining current inflation levels, including high food prices, specifically staple grains, but also animal protein and vegetable sources. Only the Honduran government is expected to subsidize fuel prices.
Regional  Despite the stability in fuel prices between December 2021 and January 2022, diesel still reported increases of 35.3, 28.5, and 33.6 percent from January 2021 in El Salvador, Honduras, and Nicaragua, respectively. At the moment, Honduras is the only country with a fuel subsidy. In the case of fertilizers, urea prices in January were still high, with month-on-month variations of 16.6 and 25 percent in Honduras and Nicaragua, respectively. However, compared to January 2021, they had increased by 133.8, 188.9, and 158.7 percent in El Salvador, Honduras, and Nicaragua, respectively. White maize prices are projected to be high for all three countries throughout the period analyzed — up to 56 percent above the five-year average.
Regional    Regarding red beans, despite a near-average apante/postrera tardía season, prices in all three countries are also projected to exceed the average by up to 50 percent throughout the outlook period. This is because there will not be enough to compensate for the losses of the two previous seasons, and also because of the expected high transportation and fertilizer costs.
Regional    Despite favorable weather forecasts for the cultivation of primera staple grain crops, high fertilizer prices will result in less planting and a slight reduction in production in the three countries, while subsistence producer households will see moderate declines.
Regional    Due to the reduction in the amount of land available for cultivation and the increase in production costs, the demand for labor is expected to decrease, especially for small and medium-sized producers.
Regional    The political scenario in Nicaragua will persist with few opportunities for national and international investment.

 

PERSPECTIVA REGIONAL PROYECTADA HASTA SEPTIEMBRE 2022

The postrera harvest in El Salvador produced yields close to average, meaning that, currently, both the markets and the reserves of producing households are well stocked. These households will have typical reserve levels, sufficient until March or April, after which they will have to resort to market purchase as their main source of food.

On the other hand, non-producer, urban and rural households are also benefitting as the pace of price increases has slowed. In January, for example, wholesale and retail prices stabilized with respect to the previous month for both white maize and red beans (Figure 1). That said, wholesale maize prices are still 34.7 percent higher compared to the previous year. In addition, these prices were 31.3 percent higher compared to the five-year average. Regarding red beans, the priority product during the postrera season, prices were slightly lower (7.6 percent) in January compared to January 2021, and only 6.6 percent higher compared to the five-year average.

Despite the country reporting a new wave of COVID-19 cases in January, the government did not reinstate any movement restrictions, allowing economic activities to continue. This included tourism, which increased at the end of the year. The tourism sector was hit hard by the pandemic and has been gradually recovering, and with this comes associated formal and informal jobs. Household incomes that depend on these jobs have begun to improve, although they are still below pre-pandemic levels.

Income has also improved this season as a result of improved urban commerce, rural work and day labor in cash crops such as coffee and sugar cane. In December 2021, the Salvadoran Coffee Council (CSC) reported a preliminary production of 475,850 quintals of ready-to-roast coffee — 56.4 percent more compared to December 2020. In the case of sugar cane, according to the Consejo Salvadoreño de la Agroindustria Azucarera [Salvadoran Sugar Agroindustry Council — CONSAA], preliminary harvest values were similar to the previous year. Remittance inflows in December 2021, in addition to showing a seasonal increase, showed a 16 percent increase year on year.

However, high food prices are putting pressure on Salvadoran households. Headline inflation in January was 6.5 percent higher compared to the previous year, and during the same period, the food and non-alcoholic beverages category of the Consumer Price Index reported a 9.0 percent increase. These increases began in September and are strongly linked to the rise in fuel prices which increased costs for services and transportation. This will mean a reduction in households’ purchasing power, especially for the poorest — both urban and rural — who still have debts to pay and livelihoods to rebuild after the COVID-19 crisis. This reduction will be particularly relevant starting in March or April with the depletion of own-produced reserves run out and the seasonal reduction in job opportunities as the annual lean season begins.

During this period, planting for the primera season also takes place, which this year is expected to be on time given the average rainfall forecasts (Figure 2). However, high fertilizer prices (Figure 3) will force producers to reduce fertilizer application and planting area, resulting in a slight reduction in production. The demand for labor will decrease in line with planted area reductions. Inflation will remain high until September, due to the expected continuation of the fuel price trend. Maize and bean prices are both projected to follow a seasonal trend, but with above-average increases of up to 27 and 13 percent, respectively.   

In Honduras, producer households — especially subsistence farmers — have suffered primera and postrera harvest losses due to rainfall deficits in 2021. As a result, they will start to run out of reserves in February, relying on the market for their food about two months earlier than usual. However, in the northern area, the postrera tardía harvest will start at the end of February and will continue in March. Beans are the main crop, representing about 15 percent of national production in Honduras. Given the favorable climate conditions, yields are expected to be close to average.

The flow of freshly harvested grain to the market will increase availability in the markets, reducing the pressure from the significant losses of previous seasons, but not enough to compensate for them. For producer households, the harvest will increase their income: while many will consume the few reserves from the primera and postrera harvests this month, most of this harvest will be destined for sale. This is due to the current high bean prices, which will mean they can afford to continue buying their food and the necessary inputs to start this year's primera season. However, given existing debts and high prices, they will have reduced purchasing power going into this year’s primera season.

In January, both white maize and red bean prices stabilized compared to the previous month. Nevertheless, wholesale prices continue to change significantly (Figure 1). For maize and beans, they are 38.3 and 28.9 percent higher than last year and 24.3 and 46.8 percent higher than the five-year average, respectively. This situation is the result of a combination of smaller harvests in 2021 and inflation which has increased by 6.2 percent year on year. The pressure on households, especially the poorest, continues despite government fuel subsidies and price caps which have been in place since October 2021.

Regarding the level of employment and household income, the Monthly Economic Activity Index (IMAE) in December 2021 showed year-on-year increases in tourism-related construction (17.6 percent), trade (15.9 percent), and hotels and restaurants (61.8 percent), indicating an improvement.

In February, the level of rural employment will reach its annual peak as cash crops such as coffee and sugar cane are at their most abundant. However, 2021/2022 coffee production in Honduras is forecast to be 20 percent lower than the five-year average and 12 percent lower than the previous year due to climate conditions, an increase in the prevalence of coffee rust and other diseases/pests, and a slight reduction in area planted. Regarding sugar cane, the United States Department of Agriculture (USDA) forecasts from April 2021 indicated a recovery from the damage caused by storms Eta and Iota. As a result, Honduran production this year is expected to reach average ranges. Households dependent on day labor in cash crops usually save part of their income generated during this season to cover basic needs for the next two to three months, and production costs for the primera season. However, the shocks experienced in recent years have led to atypical debt and the deterioration of their livelihoods, such that part of the income earned from work over these months — which is already below average — will have to be used to pay off debts, reducing the amount available to cover current and future basic needs.

For the next few months, the annual lean season is expected to start two months earlier than normal due to harvest losses, which were as high as 80 percent among subsistence farmers. As a result, these households will have to start buying most of their food earlier than usual, at a time when food prices are high, since inflation is expected to remain high. Staple grains will follow a seasonal upward trend, with additional increases of up to 40 and 50 percent compared to the average for maize and red beans, respectively.

In addition to this pressure on the household economy, rural producers will have to face a similar-sized increase in fertilizer prices (Figure 3) and, like those in El Salvador, will be forced to reduce their application and reduce cropped areas. This will result in below-average production — despite forecasts of average rainfall performance throughout the season (Figure 2) — and a significant reduction in labor demand, which in turn will result in lower wages and below-average income.

In Nicaragua, despite the recent apante/postrera tardía harvest with average yields, market supply for red beans will be below average. This is because the new harvest will not compensate for the losses caused by irregular rainfall and a smaller planted area in 2021. In January, maize prices decreased by 7.1 percent compared to the previous month, while red beans remained stable (Figure 3). However, the price of both grains increased compared to the previous year by 47.7 and 16.2 percent, respectively, and by 51.9 and 39.6 percent compared to the five-year average.

Nicaragua, like the rest of the region, reported a 7.7 percent year-on-year increase in headline inflation in January, also related to fuel price increases. This increase is reflected in transportation, with the Consumer Price Index reporting a 12.3 percent increase compared to January 2021. In addition, a 9.2 percent increase was reported for the same period in Nicaragua's services sector — the biggest increase in the region. Regarding employment in other sectors, the IMAE shows a year-on-year increase of 12.2 percent in manufacturing industry activity and 7.8 percent in trade, a minimal increase of 3.5 percent in construction, and a significant increase of 18.5 percent in hotels and restaurants, suggesting that tourism and related services are starting to recover. The 2021/2022 coffee harvest in Nicaragua is expected to grow by 5 percent over 2020/2021, while sugar cane production is expected to grow by 2 percent, resulting in stable labor demand in cash crops.

Like Honduras, Nicaragua's annual lean season is expected to start early given reduced production in the 2021 primera and postrera seasons and its implications for the duration of producer households' reserves. The early lean season is worsened by budgetary constraints as households allocate part of their income to debts accumulated from previous shocks and, to a lesser extent, to the recovery of their livelihoods, which have deteriorated over the last few years. In addition, income-generating opportunities in rural areas decrease seasonally from March, with small peaks during the planting and harvesting of staple grains in the primera season, while the complex macroeconomic scenario and prevailing political conditions mean that private and public investment are expected to be limited and unemployment, underemployment, and informal employment are expected to remain high. In general, and especially for the poorest rural and urban households, price increases, the consequences of recent shocks including the depletion of food reserves in February, and limited income opportunities have triggered a sharp deterioration in food access. These conditions, and the macroeconomic dynamics, will continue throughout the projection period. For example, the wholesale price of white maize is projected to increase up to 56 percent above the five-year average, while red beans are projected to increase up to 42 percent above the five-year average.

Weather forecasts for the next primera season indicate that the start of the rainy season is likely to fall within normal parameters, creating relatively favorable conditions for normal crop growth in this season. However, similar to the rest of the region, the high price of fertilizers will lead to reduced cropped area and a decrease in production as producers may opt to apply less fertilizer, despite the government's planned delivery of agricultural packages which include fertilizer along with seeds. This will have negative impacts, namely reduced food reserves for producer households and reduced hiring of day laborers.

Results

From February to May 2022, household food security outcomes will be characterized by seasonal reductions in purchasing power, exacerbated by prevailing macroeconomic conditions. In urban areas throughout the region, most households will be experience Minimal (IPC Phase 1) outcomes, supported in part by the flow of remittances to mainly middle-income households. Despite this, poorer households in urban areas, which are more susceptible to price shocks, and which are dependent on informal employment in the services, trade, and manufacturing, will face Stressed (IPC Phase 2) or, to a much lesser extent, Crisis (IPC Phase 3) outcomes. Rural households, which, in addition to having had their livelihoods deteriorate from negative events in previous years, were affected by agricultural losses in 2021, and day laborers with an irregular income will also be in Stressed (IPC Phase 2) until May 2022. However, those located in eastern Honduras and in the Honduran Dry Corridor are expected to be in Crisis (IPC Phase 3) as a result of high food prices and the drop in income options to be able to plant primera crops and to be able to access food.

For the period June to September 2022, food insecurity levels are expected to follow a seasonal trend and peak in early August. In Nicaragua in particular, the percentage of households in Crisis (IPC Phase 3) is expected to increase progressively due to continued above-average prices. However, this deterioration is not expected to be sufficient to change the classification of the areas in which these households are located. Reduced income-generating opportunities, high prices, and early dependence on market purchase to access food will cause rural households to resort to coping strategies such as opting for less preferred foods and eventually reducing food quantity and variety, as well as reducing essential non-food expenditures, thus resulting in their classification of Stressed (IPC Phase 2). Worst-affected households will intensify coping strategies by moderately reducing the number of meals per day and will continue to rely on credit or food support from third parties to maintain minimum feeding, resulting in Crisis (IPC Phase 3) outcomes. Then, in late August or early September, food insecurity will start to decrease when the primera harvest begins. This harvest will allow rural producer households to replenish their food reserves, making them less dependent on market purchases and less vulnerable to high prices, although to a lesser extent than in average production years due to the reduced cropped area and production. Non-producer households, both urban and rural, will also benefit from the primera harvest thanks to its effect on market supply and the consequent drop in prices, which will partially reduce the pressure on household budgets.

The recent conflict in Ukraine, and subsequent sanctions on Russia, could disrupt global grain and fertilizer exports from Ukraine and Russia. The extent of these disruptions is still being analyzed as events in Ukraine unfold. The potential impact is detailed in the following section.

Events that Might Change the Outlook

Table 1. Possible events over the next eight months that could change the most likely scenario

Área Evento Impacto en los resultados de Seguridad alimentaria
Regional  Above- or below-average rainfall An anomaly in the distribution in time and space of rainfall could cause damage and losses to crops, especially rainfed staple grains. The impact will depend on the location and magnitude; it can potentially decrease food availability for affected households, and even for national production, influencing market prices. This could increase the population experiencing Stressed (IPC Phase 2) and Crisis (IPC Phase 3) outcomes.
Regional  Additional increases in fuel, food and transportation prices A significant increase in the price of fuels and some grains in the international market, as well as the cost of transportation, as a result of the conflict in Ukraine and sanctions on Russia, could cause additional increases in the price of food, fertilizers, and raw materials, further reducing access to food for the poorest households, hindering economic recovery, and increasing the population facing Stressed (IPC Phase 2) and Crisis (IPC Phase 3) outcomes.
Regional  Hurricanes While there is currently nothing forecast for the 2022 hurricane season, the direct or indirect influence of a tropical event could change agricultural production prospects and other sources of income, which in turn could reduce food access and availability; this will depend on the hurricane's trajectory and magnitude. Loss of crops and other livelihoods could increase the population facing Stressed (IPC Phase 2) and Crisis (IPC Phase 3) conditions.

 

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