Reduced harvests in 2021 expected for smallholders due to unfavorable weather conditions

• Large and medium producers will reach near average primera and postrera crop production throughout the region, yet below-average harvests are expected for small producers, limiting income generation for poor households. Crop damage is expected from dry conditions in central and eastern Honduras and northwestern Nicaragua and from above-average rainfall in the Pacific basin in El Salvador.

• Staple food prices will be above average throughout most of the outlook period in all three countries. Imports are expected to help stabilize the effects of reduced domestic production, preventing steeper increases. 

• Economic recovery will continue to be uneven and gradual through January. The slow COVID-19 vaccination rollout in Honduras and Nicaragua will continue limiting economic activity, especially in urban areas, despite a minimal level of COVID-19 restrictions. 

• Crisis (IPC Phase 3) outcomes are expected in parts of the coffee-producing livelihood zone in western El Salvador, in hurricane-affected areas of northern and southern Honduras and northwestern Nicaragua until the primera harvest in September. From October to January, the primera and postrera harvests, a seasonal increase in income from cash crop labor, and a relative decline in food prices will alleviate the severity of food insecurity in most of the region. However, several areas in the Dry Corridor will remain in Crisis (IPC Phase 3), especially in Honduras. Although Nicaragua will face Stressed (IPC Phase 2) outcomes, Nueva Segovia department is also an area of concern within the Dry Corridor. 

With rainfall close to average throughout the region and with irrigation and agricultural inputs available for large and medium farmers, the primera harvest is expected to be close to average at the national level. However, subsistence producers in central and eastern Honduras and northwestern Nicaragua will have a below-average harvest during this cycle because of irregular and delayed start of the season, poor access to improved seeds, limited irrigation, less capacity to resow, and further dry conditions in July. In these areas, maize water requirements are well below normal compared to median levels (Figure 1).

Even with a forecast of above-average accumulated rainfall from August on, smallholders will once again face a below-average postrera production. They have less capacity to cope with fungal diseases in bean crops caused by expected high moisture levels. National postrera production will be close to average.

Since domestic food stocks are seasonally low at this time of year, markets throughout the region rely on imports for supply, resulting in stable retail and wholesale prices for white maize and red beans. Prices for both products are below last year’s and maize prices are also below the five-year average, as the measures to contain the spread of COVID-19 in 2020 caused a significant spike in food prices that has now receded. The presence of some food assistance in Honduras and El Salvador has also played a role in decreasing maize prices; however, prices are expected to swing upward seasonally as August approaches, right before the primera harvest. Once the market starts to receive flows of freshly harvested products, prices will return to normal.  

Red bean prices are expected to remain above average throughout the outlook period in all three countries, driven by abnormally high prices in 2020, an increase in the fertilizer and fuel prices, speculation, and some losses during the postrera cycle. Conversely, white maize prices are expected to follow a seasonal upward trend through September and will likely be slightly above average by 10-20 percent from October to January. Compared to last year, the impact of localized losses on maize prices will be mitigated by average primera production, imports, the release of strategic reserves, and below-normal demand due to limited income sources.

Currently, rural households are fully dependent on purchasing their food in local markets, as stocks from previous harvests have already been consumed. Urban households are always dependent on markets as they have no production of their own. With no COVID-related restrictions at the moment, physical access to markets is open. Yet, despite favorable prices as compared to last year’s spike, the seasonal decline in income for rural households, combined with scarce jobs and a drop in formal and informal employment in urban households, has hindered their purchasing power. Indebtedness for most poor households—a result of economic constraints in 2020—is further limiting their income. For the outlook period, a seasonal increase in income-generating opportunities is expected in the last quarter of this year through January/February from the seasonal cash crop harvest season, principally coffee, in addition to others such as vegetables, peanuts, and sugar cane. According to USDA forecasts, coffee production is expected to be slightly above last year’s for El Salvador (1.7 percent) and Nicaragua (at least 5 percent), while below for Honduras (12 percent), mostly due to the impacts of climate shocks and the effects of coffee rust. In all three countries, income will not increase enough to enable poor households to fully recover their livelihoods from the impacts of past shocks.

Tourism and related sectors will not recover in Honduras and Nicaragua, mainly due to the low vaccination rate, as these two countries are expected to continue experiencing challenges in accessing to vaccines and in significantly stepping up their vaccination rates. A higher rate of vaccination in El Salvador is expected to cover at least 50 percent of the population by January, enabling and incentivizing tourism. According to the World Bank, the economic growth of Honduras and El Salvador is projected to be 4.1 and 4.5 percent, respectively, for 2021, with a slower recovery in employment, primarily for women and informal jobs in industry and service sectors. In the particular case of Nicaragua, due mostly to the political situation, the economy will see only a 0.9 percent increase for 2021 and is not expected to return to the pre-pandemic levels before 2023. Regionally, remittances will continue sustaining recipient households as they have for the last year and a half.

The first half of this outlook period covers the most critical conditions according to the seasonal calendar, gradually improving as the period goes forward. Crisis outcomes (IPC Phase 3) are expected for the areas where households have yet to recover their livelihoods and infrastructure remains damaged by hurricanes Eta and Iota (including Cortés, Colón, Atlántida, and Santa Bárbara departments in Honduras and Jinotega, RACCN, and RACCS departments in Nicaragua). This also extends to poor rural households in the coffee livelihood zone in El Salvador, especially in Ahuachapán department, who have been struggling with a continual decline in their coffee harvests for the past several years and who also significantly felt the economic impacts of the COVID-19 pandemic. These households will see a seasonal improvement by late September/October, when the primera harvests begins and prices decrease in response, and again in November with the start of high labor demand. For the second half of the outlook period, these areas will see a progressive economic recovery, seasonal improvements in the labor options, and near-average harvests. Nonetheless, these factors will not provide enough improvement for the Salvadoran coffee livelihood zone, as it will remain in Crisis (IPC Phase 3).

Subsistence farmer households in the Honduran departments of Choluteca, La Paz, Valle, the eastern part of Olancho and particularly El Paraíso, as well as in the Nicaraguan departments of Estelí, Madriz, Matagalpa, and Nueva Segovia are likely to have a delayed and below-average primera harvest, due to the irregularity and production deficits from the beginning of the season, reducing their food stocks and extending the lean season by 15-20 days. A below-average postrera is also going to affect their food stocks and their income, as most sell a portion of their beans for cash in order to cover other basic needs. From October on, a seasonal increase in the labor demand for cash crops will likely increase income for these households. Given these factors, a decrease in the stocks will be partially compensated through market purchase with income from labor, along with coping strategies that will enable them to meet basic food consumption, classifying them in Stressed (IPC Phase 2). Nonetheless, there will be households throughout the Dry Corridor, particularly in Honduras, where primera losses will be significant or total, as they were not able to resow, have no harvest of their own, and will likely resort to more critical coping strategies to cover their needs, despite seasonal labor opportunities. These households are expected to continue to be in Crisis (IPC Phase 3). Overall, Nicaragua is expected to face Stressed (IPC Phase 2) outcomes throughout the outlook period, although Nueva Segovia department is an area of concern.

Finally, Stressed (IPC Phase 2) outcomes, with the poorest households in Crisis (IPC Phase 3), are expected in the remaining parts of El Salvador and Honduras for those who work in services, commerce, and domestic tourism. Related industries are likely to see partial recovery but remain below normal as the economy is slow to recover. Access to food for these households will remain below normal given their dependency on food purchase and their sensitivity to income and price shocks.

Events that Might Change the Outlook

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