Food prices remain high despite start of Postrera harvest

• Areas of the Dry Corridor and the Alta Verapaz region will be classified as Crisis (IPC Phase 3), until at least May 2024, as the average income earned during the season of high day labor demand has been insufficient for poor households to improve access to food. The compounding shocks experienced over the last few years, debt carryover, and high food prices are the main causes of rapid income use. Due to the losses of subsistence crops in the Primera season, caused by El Niño triggered irregular rainfall and high temperatures, the prolonged need to purchase staple grains at the market will force poor households to resort to unsustainable coping strategies such as the sale of productive assets and atypical migration of more household members to meet minimum food needs. 
• Areas in the rest of the country will be classified as Stressed (IPC Phase 2), as Primera and Postrera staple grain harvests remain in average ranges, and the increased availability of income earned during the seasonal peak of day labor will allow poor rural households to moderately improve their access to food. However, high food prices continue to constrain household purchasing power. Starting in February, several areas in the western Altiplano and the eastern part of the country will experience Crisis (IPC Phase 3) outcomes, as seasonal sources of agricultural labor dwindle, and household staple grain reserves run out. High spending on essential food needs throughout the year combined with reduced yields of staple grains due to high production costs and climatic conditions have led to increased household indebtedness and low capacity to save. To guarantee minimum food needs, households in these areas will be forced to adjust diet quantity and resort to unsustainable coping strategies such as selling productive assets.
• Commodity grain prices will remain above the five-year average and similar to those observed in 2023 through the end of the 2024 production season. Irregularity in the arrival of Postrera crops to the market will limit the seasonally typical price declines.  During November, prices showed minimal reductions, less than 10 percent compared to the previous year and remain about 50 percent above the five-year average, forcing higher household spending to meet food needs. High prices of agricultural inputs, late and staggered harvests of staple grains, the impact on crops due to weather irregularities, which meant a resowing and, consequently, higher production costs, are the main reasons for these increases. Given that maize is the staple food for the poorest households, the high cost of grains reduces the possibility of diet variety.

Production of staple grains: The Primera staple grain production cycle and the only cycle of the Altiplano highlands are ending late due to the irregular rainfall delaying planting, damaging the first sowing, necessitating re-sowing, and impacting the overall development of the crops. According to data from the Ministry of Agriculture’s Directorate of Regional Coordination and Rural Extension (DICORER), as of November 2023, subsistence farmers in all departments of the country reported crop damage either by drought or by excessive rains/ floods. All municipalities in the Alta Verapaz region reported damage from both events. In eastern and southern departments of the country, farmers reported reduced moisture from limited rainfall as the biggest source of crop damage. In contrast, in the northern, northeastern, and western areas of the country, the majority damage was due to a combination of drought and excess rainfall/ flooding. The Postrera maize and bean production cycle is currently underway in the growth, flowering, and fruiting stages and in the harvest stage in the south of the country. This cycle is mostly dedicated to cultivating beans; however, in recent years, the prevalence of bean crop planting has decreased due to high production costs and the susceptibility of the plants to humidity and other climate impacts.

Prices of staple grains and household spending: According to the Guatemalan National Statistics Institute (INE), in November, the Consumer Price Index (CPI) stood at 174.14, a slight decrease from October. The inflationary rhythm continues to be higher than in November 2022. Since January 2023, the CPI has risen steadily and reached its highest value in October (175.29), as a result of the disruption in the flow of goods caused by the road blockades for approximately 10 days at the beginning of that month. Inflation slowed in November 2023 from 4.98 percent in October to 4.30 percent in November, well below the peak recorded this year in February when it reached 9.92 percent. Slower inflation is due to the reduction in the food and transportation spending divisions, thanks to lower fuel prices which directly impact the cost of transporting goods to the market. Maize and bean prices have remained high since mid-2021 due to the high cost of agricultural inputs and reduced or excessive rainfall events that delayed plantings or damaged crops. In the Terminal wholesale market in Guatemala City, in November, the price of a quintal of maize increased 8 percent in comparison with last year and increased 53 percent compared with the 5-year average. The price of beans increased 22 percent compared to with precious year and 56 percent compared with the 5-year average.

Household income: The demand for agricultural day labor in cash crop harvesting will remain stable through February/March. During the peak season for agricultural work, members of rural households migrate to the different production areas around the country for periods of between two and three weeks up to periods of three months or more (particularly in the case of sugarcane harvesting) at a time to take advantage of the labor opportunities. Day labor income from coffee, sugarcane, cardamom, vegetable, and fruit harvesting is a major source of income for poor rural households. In this high migration season, laborers work an average of 20 days per month over the three-to-five-month period. An increase from opportunities outside the migration season, consisting of land preparation, planting, and maintenance of staple grain crops, which only provide around five to ten days of work per month. This year, this local and sporadic work, which typically starts between February and March, will be even more limited due to the 2023 season crop losses and high agricultural production costs. Limited labor opportunities will decrease household income sources, particularly impacting poor rural households. 

Remittances are also an important source of income for household. Typically, remittances increase in December during the time of end-of-year holidays. In November 2023, the total amount of foreign exchange remittances received, according to BANGUAT, increased 11 percent compared to the same month last year. This money is used by recipient households primarily for consumer spending, which boosts the local economy.

The assumptions used by FEWS NET to develop the most likely food security scenario for the period of October 2023 to May 2024 remain valid for this update.

For the period covered by this outlook, Stressed (IPC Phase 2) outcomes are expected in most areas of the country, and Crisis (IPC Phase 3) outcomes are expected in areas of the Dry Corridor, Alta Verapaz, the Altiplano, and some areas in the Eastern part of the country. 

Most of the country will be classified as Stressed (IPC Phase 2) until May 2024. Stable seasonal wage income from agricultural work and household staple grain reserves (which were able to cover household maize consumption for a few months post-harvest) will allow rural households to meet their basic food needs. However, high food prices will continue to restrict access to varied and diverse foods, forcing households to adjust diet quality and resort to unsustainable coping strategies such as use of savings and buying food on credit to guarantee minimum household food consumption. Poor households in the areas of the western and eastern Altiplano highlands, which will be classified as Stressed (IPC Phase 2) through January, were able to utilize household reserves of staple grains to delay market purchase of food products for approximately two months. However, their access to food will be restricted towards the end of the high labor demand season, classifying them in Crisis (IPC Phase 3) from February through May 2024. High food prices coupled with the rapid use of income to pay off accumulated debts from reduced harvests of staple grains in previous cycles, will prevent household savings from covering food needs, so to guarantee a minimally adequate diet, households will have to adjust the amount of food consumed and resort to negative coping strategies such as the atypical migration of more household members in search of employment and the sale of household assets.

In the areas of the Dry Corridor and Alta Verapaz, poor households will be classified in Crisis (IPC Phase 3) during the period covered by this update as they are unable to improve food access due to accumulating impacts from various shocks in recent years, coupled with the impact of erratic rains from the El Niño, which this year caused almost total losses of staple grain crops. This is despite the seasonal increase in employment sources. Household purchasing power continues to be restricted by the rapid use of income for debt repayment and purchasing expensive food staples at the market. The minimal subsistence harvest led to the unseasonably early purchase of staple grains in the market at very high prices, further restricting household purchasing power. Households in these areas are forced to adjust the quantity of food consumed, such as decreasing portion sizes, adjusting the timing of food consumption, and prioritizing feeding children before other household members. To meet food needs, households will resort to unsustainable coping mechanisms such as selling productive assets and necessitating household members who do not normally migrate for work to search for employment.