Rising fuel prices reduce profits from crop sales, while conflict intensifies in Ma’rib

• In Yemen, protracted conflict and poor macroeconomic conditions — as well as seasonal flooding in some areas — continue to disrupt livelihoods, reduce access to income, and drive significantly above-average food prices. Even in the presence of large-scale humanitarian assistance, Crisis (IPC Phase 3) outcomes are widespread at the governorate level. Hajjah and Amran are expected to be in Emergency (IPC Phase 4) during the local lean season, with improvement to Crisis! (IPC Phase 3!) expected around April/May. Although not the most likely scenario, Famine (IPC Phase 5) would be possible if food supply is cut off for a prolonged period. 

• In January, prices of key food commodities continued to rise in northern governorates, largely attributed to fuel scarcity and increasing fuel prices. Meanwhile, in Aden and some other southern areas, the inability of the government to purchase fuel is worsening access to electricity and public services. Despite stable or declining food prices in southern areas in January, southern ROYG authorities increased the official price of petrol by around 13 percent in February, which is already reportedly impacting food prices. During the projection period, farmers are expected to realize further reductions in profits due to the increasing cost of fuel for irrigation, with reduced production levels likely in some areas.

• In February, conflict escalated in Ma’rib and Al Jawf, as Ansar Allah forces continue their offensive east toward Ma’rib City, with around 8,000 people newly displaced in Ma’rib in the second two weeks of the month. It is likely that conflict will continue at intensified levels in the coming months, expected to lead to additional displacements and disrupt livelihoods. Although not the most likely scenario, it is possible that conflict reaches Ma’rib City during the projection period. Should this occur, tens or hundreds of thousands of civilians in and to the west of the city (including many in displacement settlements) would be impacted, with Emergency (IPC Phase 4) or Catastrophe (IPC Phase 5) outcomes likely among worst affected households who are displaced to areas where assistance cannot reach, or are unable to flee and unable to access markets or assistance due to movement restrictions.

Current Situation

Conflict, political instability, and poor macroeconomic conditions in Yemen continue to restrict access to income and drive increasing food prices. Over 17 million people are currently in need of humanitarian assistance to prevent food consumption gaps and protect livelihoods.

In February, conflict escalated on the Ma’rib and Al Jawf fronts as Ansar Allah (known as the Houthis) forces continued their offensive east toward Ma’rib City. According to the International Organization for Migration (IOM), conflict has been increasingly concentrated on the frontlines west of the city in Sirwah district of Ma’rib. In mid-February, Houthi forces reportedly gained territory in sight of the Ma’rib dam in mid-February according to a Yemeni security firm. On other frontlines, including the Al Bayda, Al Dali’, Al Hudaydah, and Ta’izz fronts, conflict has continued, though at somewhat reduced levels in February according to data from Intelyse, likely due to the increased attention on Ma’rib. However, cross-border attacks resumed in late January and have continued into February, resulting in an uptick in incidents in Hajjah and Sa’dah. In the south, progress toward the implementation of the Riyadh Agreement remains stalled.

Conflict continues to disrupt typical livelihood activities and drive large-scale displacement, with Ma’rib worst affected in 2021 to date. From January 1 to February 22, the IOM recorded an estimated 15,000 individuals displaced across the 13 of 24 governorates monitored. Given limited coverage, this is an underestimate of the total number displaced in Yemen in this time period. In the monitored governorates, most recorded displacements in January occurred in Al Dali, Ta’izz, and Al Hudaydah, while most displacements in February occurred in Ma’rib. In the two weeks from February 7 to February 22, around 8,000 people were newly displaced in Ma’rib, most of whom moved to nearby locations within the governorate. During this time, Sirwah district was worst affected, with over 1,000 households (around 6,000 people) expected to have been displaced. IOM is coordinating the provision of emergency shelter and non-food assistance. Ma’rib hosts the highest number of displaced people of any governorate – likely over 800,000 across seven districts.

Driven by the impacts of protracted conflict, Yemen’s economy continues to be impacted by severe government revenue and foreign currency shortages, depreciation of the currency, and rising costs of imported commodities. Yemen is highly dependent on imports for staple food, fuel, and medicine. According to data from UNVIM and FAO, food import levels through Yemen’s main sea ports of Aden, Al Hudaydah, and Salif in January 2021 totaled 645,918 MT, 43 percent higher than the monthly average in 2020 and higher than in any recorded monthly total in 2020. In December 2020, the Central Bank of Yemen (CBY) in Aden used the last of the $2 billion Saudi deposit to buy currency and temporarily stabilize the exchange rate according to key informants. As such, concern is mounting over the sustainability of Yemen’s letters of credit import financing mechanism that allows importers to access foreign currency at preferential exchange rates. However, according to the Central Bank of Yemen, a new round of letters of credit was initiated in January, expected to cover commodity imports through March/April and food supply through around June to August given typical lag time in the supply chain. For this round, the preferential exchange rate was increased from 540 to 630 YER/USD, raising costs for importers and signaling that the mechanism is stressed.

Meanwhile, 80,854 MT of fuel were imported through Yemen’s Red Sea ports of Al Hudaydah and Salif in January 2021, a total 43 percent lower than the monthly average in 2020. As a result, fuel shortages and increasing parallel market prices continue to impact livelihoods and food prices in northern areas. Meanwhile, in Aden and other southern areas, inability of the government to purchase fuel is worsening access to electricity and public services. In February, the official prices of diesel, petrol, and cooking gas were raised by 12 to 13 percent throughout southern governorates and the length of planned power outages in Aden was extended. Livelihood activities which depend on fuel include those in the agriculture, fishing, transportation, processing, and manufacturing sectors.

After generally depreciating over the past year, the average parallel exchange rate across southern governorates appreciated slightly (by 2.6 percent) from December 2020 to January 2021 according to data from FAO, marking the second month in a row of slight appreciation. However, key informants report that the exchange rate in Aden, which generally drives the exchange rate in other southern governorates, has been depreciating from January 1 to February 19, 2021. From December to January, average prices of imported staple wheat flour remained stable or decreased by up to 10 percent in many southern governorates. Despite this, wheat flour prices in southern governorates were still around 30 to 60 percent above levels recorded last year (Figure 1). Although authorities in Aden have expressed the need for traders to commit to lowering market prices of basic imported commodities in order to continue receiving preferential exchange rates, traders have not complied. Over the past year, wages have also been increasing due to inflation, but purchasing power as measured by terms of trade between wheat flour and wages in southern governorates remains worse than at the same time last year, with Shabwah, Lahij, and Al Mahrah worst affected (Figure 2).

In the north, the average parallel exchange rate continued to remain stable in January 2021. Despite stability of the exchange rate, prices of food have been increasing gradually over the past year, driven primarily by rising fuel prices and, consequently, increasing processing and transportation costs amidst shortages since mid-2020. According to key informants, parallel market fuel prices increased in many northern governorates in the second half of January 2021, with food prices also increasing as a result. According to data from FAO, monthly average imported wheat flour prices remained stable overall in January in some northern governorates, but increased by 11 percent in Amanat Al Asimah (Sana’a City) and by 7 percent in Raymah, Dhamar, and Sana’a, also driving deteriorating terms of trade relative to the previous month. In some northern governorates, improved terms of trade relative to the same time last year are being driven by higher wages. More recently, according to key informants, a large trader in the north has confirmed plans to increase prices of wheat grain and flour, expected to increase retail prices in northern areas by over 10 percent.

The number of new reported COVID-19 cases has remained under ten per day from early September to late February, although low testing capacity continues to limit understanding of disease spread with the continued expectation for significant underreporting of cases. Yemen has signed an agreement with the COVAX facility, which aims to accelerate equitable access to COVID-19 vaccines. Planning is underway to deliver vaccines to all governorates throughout 2021, and a first batch of 2.3 million doses of the AstraZeneca vaccine has been confirmed and is expected to be delivered by March. Restrictions at land borders and increased screening and quarantine measures at ports likely remain in place according to available information.

Agricultural production and income levels last year are expected to have been similar to or better than in 2019 in many areas due to favorable precipitation throughout 2020 and consequent decreased reliance on fuel for irrigation. Currently, cereal harvesting activities are expected to be ongoing in many lower elevation areas of Yemen and fishing activities are expected to be at their peak in coastal areas and Socotra. This is expected to be increasing poor households’ access to income from labor opportunities and temporarily increasing access to food and income from crop production and fishing. However, due to impacts of the protracted conflict, the scale of agriculture (especially for food crops) and fishing in Yemen has declined over the years. FAO estimates that Yemen’s total domestic cereal production contributes less than 20 percent of all utilization needs, while domestic production of wheat—Yemen’s key staple—contributes 5-10 percent; however, the domestically produced share of many other food commodities is expected to be higher according to Ministry of Agriculture data. Meanwhile, in higher elevation areas including Hajjah and Amran, food and income availability are at seasonally low levels.

According to key informants, livestock body conditions are poor in many areas due to lack of veterinary services and high prices for livestock inputs including medications. These conditions are reported to be average to below average for this time of year. In January 2021, prices of sheep and goats remained stable at the national level, at levels 2-6 percent above prices at the same time last year. However, trends differed across governorates due to local supply and demand factors.

Access to income from other sources remains significantly below pre-conflict levels and the five-year average, driven primarily by impacts of the conflict and consequent poor economic conditions. Due to government revenue shortages, salaries for civil servants continue to be impacted by delays or non-payment. According to key informants, the value of salaries has reduced given the impacts of depreciation, and much of the ROYG military had gone months without pay as of January. Meanwhile, given high fees for money transfers from southern to northern areas due to diverging exchange rates following the enforced ban on new bank notes in the north, remittance transfers within Yemen are likely to be below average. Remittances from Saudi Arabia to Yemen are also likely to be below average in many areas due to the compounding impacts of the mid-2020 global oil price slump and COVID-19 control measures (in 2020 and early 2021) on Saudi Arabia’s economy in addition to rising cost of living in Saudi Arabia and increasingly nationalized Saudi labor policies.

In December 2020, WFP targeted 5.3 million beneficiaries with emergency food assistance after access constraints prevented WFP from accessing some warehouses in Aden between mid-November and late December. Beneficiaries in southern areas who were not reached due to those constraints were moved to the January distribution cycle. In January 2021, WFP targeted 8.1 million beneficiaries. All beneficiaries are targeted with approximate 80 percent rations monthly in southern areas and every two months in northern areas.

No nutrition SMART surveys have been conducted since 2019. Though nutrition screening data is confounded by a variety of factors — including changes in the number, capacity, and location of treatment sites, changes in reporting rates among existing sites, and changes in the number of people seeking treatment — trends can still be useful to monitor. According to WHO’s December 2020 Nutrition Surveillance report, MAM prevalence (measured by MUAC due to COVID-19 prevention protocols) among children screened at non-representative sentinel sites across 107 priority districts decreased slightly to 17 percent in November and December after remaining steady at around 19-20 percent from June to October 2020. Meanwhile, SAM prevalence decreased to around 5 percent in November and December after remaining stable at around 7-8 percent from June to October. In general, there is no evidence that trends are deviating from those recorded last year, though it is possible that the true trend differs due to the confounding factors described.

As a result of below-average income and rising food prices, poor households in many areas are expected to be facing increasingly constrained food access. In northern areas, the ongoing cuts to humanitarian assistance are expected to be restricting access to food, though improvements in purchasing power in some areas may be mitigating impacts. Available information suggests that most Yemenis face at least slight food consumption gaps or are engaging in negative livelihoods-based coping strategies such as selling productive assets in order to meet their food needs. Widespread Crisis (IPC Phase 3) or worse outcomes persist even in the presence of ongoing humanitarian food assistance, with an increasing number of worst-affected households in the current situation expected to be facing Emergency (IPC Phase 4) or Catastrophe (IPC Phase 5) outcomes in areas where active conflict is separating households from assets and livelihoods or where the prices of food and essential non-food commodities are driving the most rapid deterioration in terms of trade. Given available evidence on livelihoods, contributing factors, and outcomes, Hajjah and Amran are currently expected to be in Emergency (IPC Phase 4) at the current peak of the local lean season. Overall, FEWS NET estimates that 17-19 million people need emergency food assistance across Yemen.

Assumptions

The most likely scenario for the February to September 2021 period is based on the following national-level assumptions:

• Conflict is likely to continue at current high levels, including recently intensified levels in Ma’rib and Al Jawf. This is expected to lead to high levels of displacement to other parts of Ma’rib, Shabwah, and Hadhramaut. Although not the most likely scenario, it is possible that conflict reaches Ma’rib City during the projection period (see events that could change the scenario). In other parts of western Yemen, typical volatility in conflict and further displacement is likely. In the south, progress toward implementation of the Riyadh agreement is expected to remain stalled.
• Conflict-related access constraints are anticipated to persist throughout the scenario period. Key transport corridors are likely to continue to be closed or restricted, though volatility is likely. Delays at security checkpoints between northern and southern areas are expected to continue.
• Cumulative rainfall during Yemen’s first rainy season from March to May 2021 is expected to be below average, driven by La Niña conditions. Although there is uncertainty given the long lead time, during the start of Yemen’s second rainy season from July through September, cumulative rainfall is expected to be above average. Given this, risk of flooding is expected to be below average in the first rainy season and above average in the second rainy season. Coastal areas are more at risk of flooding during the first rainy season and eastern lowland areas more at risk during the second season. A typical risk of cyclone and associated flooding exists for Socotra and the southern coast, with peak risk expected from mid-March to mid-June and from October to December. Above-average mean temperatures are forecast throughout most of the country through September 2021.
• Risk of water- and vector-borne diseases such as cholera, malaria, and dengue, are expected to be elevated during Yemen’s rainy seasons (in particular in association with flooding) and in areas where active conflict threatens public services infrastructure linked to water and sanitation.
• Some locust breeding in coastal areas is expected in the coming months. However, given forecast precipitation and wind direction, locust presence is expected to remain minimal throughout the projection period. Some risk of re-infestation persists, especially in eastern Yemen in the June to August period given typical seasonal wind direction. 
• Overall, crop production in 2021 is expected to be below average due to the impacts of protracted conflict including loss of access to land and increased cost of inputs including seeds and fuel. Given expectations for below-average rainfall from March to May, as well as fuel shortages and consequent increased irrigation costs, production levels and income from crop sales are expected to be below last year’s levels, particularly in northern areas.
• Harvesting of qat is expected year-round in higher elevation areas. Qat production is expected to be near average given prioritization of this cash crop with respect to irrigation resources.
• Given expectations for below-average precipitation from March to May, pasture conditions are expected to be below average in western Yemen during the first half of the projection period. Given historical patterns and expected above-average rainfall, pasture conditions in the west are likely to improve to above-average during the second half of the projection period, though mixed anomalies are possible due to spatial and temporal distribution of rainfall.
• Livestock body conditions and productivity will likely remain poor in some areas due to lack of veterinary services and high medication costs, and are likely to decline to below average levels in some areas in the first half of the projection period due to below-average pasture conditions and increased fodder prices. Milk availability is expected to increase seasonally around April. Livestock prices and demand are expected to increase prior to Ramadan and Eid holidays, increasing access to income from livestock sales.
• Fishing will likely remain below pre-conflict levels, with western coastal areas worst affected.
• Oil production and export levels are likely to be similar to levels in 2020. Given recovery of global oil prices since mid-2020, foreign exchange earnings from oil exports in 2021 are expected to be slightly higher than last year’s levels and above the five-year average, but significantly below pre-conflict levels.
• The number of newly reported COVID-19 cases is expected to remain low throughout the projection period, though with underreporting of cases likely to continue. Some limited vaccination is expected in the scenario period. Currently enacted control measures are expected to remain in place. Restrictions on businesses and gatherings are likely to remain lifted.
• Income from foreign remittances is expected to gradually recover given expectations for economic recovery in Saudi Arabia but remain below pre-COVID levels in some areas of Yemen throughout the projection period. Income from domestic remittances is expected to remain below-average throughout the projection period due reduced purchasing power among those who send remittances and increasing fees for money transfers.
• Funding for humanitarian operations in Yemen is expected to remain similar to relatively lower 2020 levels during the projection period, with some humanitarian operations likely to continue at relatively reduced capacity.
• Given expectations for oil export revenue, remittances, and funding for humanitarian operations, foreign currency shortages are expected to persist throughout the scenario period. Informal markets will continue to play a key role in regulating access to foreign currency. No large deposit of foreign currency (similar to the 2 billion USD deposit made by Saudi Arabia in early 2018) is expected in the scenario period.
• Due to the impacts of protracted conflict and foreign currency shortages, macroeconomic conditions are likely to continue deteriorating. In southern areas, the YER is expected to depreciate throughout the projection period due to the inability of the CBY in Aden to intervene, reaching levels between 908 to 938 YER/USD by September 2021. In northern areas, the YER is expected to remain generally stable.
• Due to persistent government revenue shortages, income from civil servant salaries will likely remain below average throughout the projection period. Payment will likely continue to be intermittent or absent in many areas.
• Access to income from agricultural and non-agricultural labor is expected to remain below average but seasonally increase in highland areas and seasonally decrease in lowland areas in the second half of the projection period due to shifts in demand for labor associated with typical harvest periods and associated economic activity. Throughout the projection period, wages are expected to increase in many areas due to inflation. However, the real value of income from labor opportunities is expected to remain stable or decrease and remain below average.
• Food and fuel imports are expected to continue at levels similar to those recorded in the second half of 2020, though with month-to-month volatility. Further erosion of the import financing mechanism and/or a sharp and sustained decline in levels of food imports to significantly low levels is not expected in the projection period. Informal trade of food and livestock across land borders is expected to continue at reduced levels relative to the pre-conflict period.
• Fuel prices are expected to remain significantly above five-year average and pre-conflict levels, with further price increases and significant volatility likely in northern areas due to ongoing fuel shortages and in southern areas given government plans to further increase prices in the coming months.
• Driven by depreciation of the currency and increasing fuel prices, prices of essential food and non-food items are expected to continue increasing throughout the scenario period, with southern areas worst affected. During this time, additional upward pressure on prices is expected due to the progression of the agricultural lean season in the highlands through March and in the lowlands through July. In Al Hudaydah, wheat flour prices are expected to increase throughout the scenario period, to reach levels between 294 and 307 YER/kg by September 2021. In Aden, prices are generally expected to remain over 100 YER/kg higher, though some month-to-month volatility is possible and increase throughout the scenario period in proportion to the exchange rate in the south.
• Beneficiaries reached by WFP with emergency food assistance in northern Houthi-controlled areas are expected to continue receiving distributions only every other month. Beneficiaries in other areas are expected to continue receiving distributions monthly. Some delays in deliveries are expected as humanitarian partners will continue to face restrictions on movement as well as fuel shortages. Access to humanitarian assistance is expected to be constrained at times and in areas where conflict or flooding impacts travel routes.
• Schools and WFP school feeding programs are expected to remain open through the end of the school year in June. Nutrition treatment programs are expected to continue operating at current capacity.

Most Likely Food Security Outcomes

Throughout the projection period, access to income among poor households is expected to remain significantly below average. Despite some improvements in access to income expected for households dependent on foreign remittances and during times of peak labor availability, access to income from other sources is expected to remain similar to or lower than current levels. In particular, households dependent on fuel for their livelihoods are likely to experience reductions in income-earning throughout the scenario period. Meanwhile, it is unlikely that wages will be able to fully keep pace with inflation, with the real value of wages expected to decrease in some areas. Given this and expectations for rising food prices — especially in the south — household food access will likely be increasingly constrained for many poor households in lower elevation rural areas and in urban areas worst affected by rising food prices and declining terms of trade. Meanwhile, access to food and income is expected to seasonally improve around April/May for many poor households in higher elevation areas given the end to the typical lean season and the start of harvesting.

Most areas of western Yemen are expected to remain in Crisis (IPC Phase 3) or Crisis! (IPC Phase 3!) throughout the projection period, though pockets of Emergency (IPC Phase 4) outcomes are likely. Around April/May, area-level improvement to Crisis (IPC Phase 3) is expected in Hajjah and Amran, although a relatively higher proportion of the population is expected to continue facing worse outcomes. In Ma’rib and other areas impacted by active conflict, households who are displaced or re-displaced will be separated from shelters, assets, and livelihoods. Displaced households are likely to experience Stressed! (IPC Phase 2!) and Crisis! (IPC Phase 3!) outcomes in the presence of humanitarian assistance, although worse outcomes are likely in areas where conflict restricts access to safer areas and to humanitarian assistance.

The prevalence of acute malnutrition is expected to seasonally increase through the typical peak around May to July (as has been the case in 2019 and 2020 according to WHO nutrition screening data) due to increased disease prevalence, and then decline somewhat through the end of the projection period. Overall, the total population in need of food assistance is likely to remain stable given seasonality factors, though with approximately 17–19 million people in Yemen still expected to need humanitarian assistance throughout the projection period to prevent consumption gaps and protect livelihoods. Seasonal improvements in food security are not reflected in the food insecurity mapping given that, despite these likely fluctuations, improvements are not enough to change area-level phase due to significantly below average access to food and income overall. Though not the most likely scenario, Famine (IPC Phase 5) remains possible should there be a significant shock to commercial import levels or if food supply is cut off from particular areas for a prolonged period.

Events that Might Change the Outlook

Possible events over the next eight months that could change the most-likely scenario: