High food prices weaken household purchasing power and limit food access for poor households

• A major food security emergency is ongoing in Yemen, caused by conflict-related disruptions to household livelihoods. FEWS NET estimates that across the western half of the country, households continue to face Crisis (IPC Phase 3 or 3!) or Emergency (IPC Phase 4) food security outcomes. Food consumption gaps, elevated levels of acute malnutrition, and/or excess mortality are likely in these areas.

• Although food security data is limited, FEWS NET estimates that approximately seven to ten million people currently face Crisis (IPC Phase 3) or worse food security outcomes. Amongst this population, about 25 percent are in Emergency (IPC Phase 4). 

• Large-scale humanitarian assistance is currently playing an important role in preventing higher levels of food insecurity in many areas. For example, WFP provided on average 38,662 MT of food assistance per month to 3.6 million beneficiaries during the months of May and June 2016. In the absence of this assistance, additional areas (Hajjah, Sa’dah, Sana’a, Amran and Ad Dali’) would have likely faced worse food security outcomes, in line with Emergency (IPC Phase 4). 

• Based on an analysis of WFP’s mVAM data over the past year, food security outcomes do not appear to have drastically changed. At a national level, the percentage of the population with “poor” food consumption has remained relatively stable while reporting of consumption-based coping behaviors has increased moderately. However, in certain governorates (ex. Ta’izz), these food security indicators appear to be deteriorating more sharply.   

• Due to a rapidly evolving political and security situation, including the recent suspension of peace talks and the ongoing banking crisis, future food security outcomes are uncertain. However, based on FEWS NET’s most-likely scenario, the current food security emergency is projected to continue through at least January 2017. Western areas will remain in Crisis (IPC Phase 3 or 3!), with the exception of Ta’izz governorate where Emergency (IPC Phase 4) outcomes will continue.

• Populations in Crisis (IPC Phase 3) or Emergency (IPC Phase 4) require urgent humanitarian assistance to fill food consumption gaps, treat acute malnutrition, protect livelihoods, and save lives. Additionally, given the currently limited availability of food security data, additional data collection efforts are needed to strengthen future food security analyses.

Current Situation

CONFLICT

• Peace talks were recently suspended in Kuwait and conflict persists across Yemen, particularly in western areas. Governorates affected by recent fighting and/or airstrikes include Abyan, Ad Dali’, Al Bayda, Al Hudaydah, Al Jawf, Amran, Hadramaut, Ma’rib, Sa’dah, Sana’a, Shabwah, and Ta’izz.

DISPLACEMENT

• According to the Task Force on Population Movement’s ninth report, there were an estimated 2,080,117 IDPs located in Yemen in May 2016, of which 98.7 percent were displaced by conflict and 1.3 percent were displaced by natural disasters. Although this represents a decline compared to April estimates, the Task Force indicated that this was at least partially due to a change in data collection methodology in northern areas. The largest numbers of conflict-affected IDPs are residing in Ta’izz (25 percent) and Hajjah (18 percent).
• Very few IDP households reported that their displacement was caused by a “lack of access to sustainable income” or a “lack of access to basic services” according to a UNHCR location assessment conducted in Al Hudaydah, Al Mahwit, Amant Al Asimah, Amran, Dhamar, Hajjah, Ma’rib Raymah, Sa’dah, and Sana’a governorates in late 2015. Exceptions, however, were Bani Hushaysh district in Sana’a governorate and Mazhar and As Salafiyah districts in Raymah governorate where 22, 33, and 19 percent of respondents, respectively, reported that these factors caused their displacement.   
• Additionally, the Task Force reports that of conflict-affected IDPs, 83 percent were residing in rental residences or with host families. There were, however, significant regional variations with more than 30 percent of IDP households in Al Jawf, Al Maharah, Hajjah, and Ma’rib residing in other types of shelter, including informal camps and settlements, isolated households outside of settlements, and government, public, or private buildings. According to UNHCR, Muhamasheen[1] IDPs in areas such as Amran and Ta’izz governorates have faced particularly difficult shelter challenges during their displacement.

MACROECONOMIC CONDITIONS

• The Yemeni economy and state revenues are highly dependent on oil and gas exports, with crude oil production contributing to 45 percent of total state revenues. However, in 2015, foreign oil companies pulled out of the country and oil exports were suspended in April 2015, resulting in a decline in oil and gas exports by approximately 85 percent (Figure 2). This, along with low confidence in the local economy and currency, a decline in foreign investments and donor-funded development projects, and logistical issues facing banks converting Saudi Riyals (the most common form of remittances) to US dollars (USD), has led to a shortage of USD.
• Foreign reserves by the Central Bank of Yemen (CBY) fell from $5.3 billion in 2013 to $4.8 billion in 2014, $2.1 in December 2015, and $1.3 as of April 2016 (Al Monitor 2016). More recent media reports in June and July 2016 have indicated that foreign reserves ranged from $1.1 billion to $1.25 billion (Reuters 2016, Al Arabiya 2016). Despite recent CBY efforts to limit withdrawals of foreign currencies and maintain the exchange rate, the absence of alternative revenue sources greatly limits opportunities for the CBY to continue to maintain its official rate. Both the official and parallel exchange rates have recently depreciated (Figure 3) and were at 250 YER/USD and 283 YER/USD respectively as of early July.
• In early August 2016, the Yemeni government requested that international banks limit the access of CBY officials to CBY reserves held outside of the country (Reuters 2016).  Though the immediate impacts of this request are not yet known, this will likely further exacerbate the banking crisis within Yemen. 

IMPORTS

• Yemen is heavily dependent on imports to meet staple food requirements with more than 90 percent of its cereal supply imported from international markets (FAOSTAT). By commodity, Australia, Russia, the USA, and Germany are Yemen’s key providers of wheat, Argentina for maize, and India and Thailand for milled rice (UN COMTRADE). Commodities on global markets are generally traded in US dollars. While global supply levels of wheat, maize, and rice are currently favorable (FEWS NET July 2016 Price Watch), international prices of these commodities will not likely be the key driver of food prices within Yemen, given current conflict levels and macroeconomic difficulties facing Yemen at this time. 
• The Yemeni government’s direct involvement in food distribution and price setting via food subsidy programs was largely phased out during broader economic reforms in the 1990s (FAO 2014) and currently, there is a mix of large private food processing firms (wheat flour in particular) operating in Yemen. Until recently, the government’s most direct participation and support to commercial staple food imports has been via guarantees on lines of credit and preferential exchange rates. However, the central bank stopped guaranteeing lines of credit for the import of fuel in 2015 and for sugar and rice in February 2016. Following the central bank’s declaration that they would quit guaranteeing lines of credit for sugar and rice, the average price of sugar rose by 27 percent, as for June 2016 (WFP). However, given that the largest month-to-month price increases were observed between May and June (12 percent) it is unclear to what extent these price increases were driven by issues relating to importing this commodity versus increased demand during the month of Ramadan.
• Media reports indicate that international and Yemeni banks are becoming increasingly unwilling to provide lines and letters of credit for importers into Yemen due to concerns about repayments and the inability of moving money outside to the country (Reuters, March 2016, Reuters, July 2016).
• As of late May/June 2016, key informants reported that the ports in Aden, Al Hudaydah, Saleef (Al Hudaydah governorate), and Al Mukalla (Hadramaut governorate) were operational while the port in Al Mokha (Ta’izz governorate) was closed. Additionally, amongst the six formal land border crossing within Yemen, only the Al Abr–Al Wade’ah crossing to Saudi Arabia in Hadramaut governorate was operational. The amount of goods imported through this point, however, has continued to decrease since the start of the crisis, and was estimated to be approximately 15 percent of pre-crisis levels due to increased transport costs and the depreciation of the Yemeni rial. It is unknown how porous Yemen’s vast land borders with Saudi Arabia and Oman are or to what extent informal trade between these countries is currently occurring.
• Estimates from FAO indicate that Yemen requires approximately 233,000 to 250,000 MT of wheat each month. According to the Logistics Cluster, 289,509 MT of wheat flour was imported in May 2016 and an additional 196,684 MT was imported in June 2016, representing an average of 243,097 MT per month during the two months. Additionally, there has been a normalization in the number of unique bulk ship arrivals in Yemen (a proxy for food imports) with 15 ships arriving in June 2016, compared an average of 14 ships per month during 2014 (FleetMon). Data from FleetMon, the Logistics Cluster, and the United Nations Verification and Inspection Mechanism (UNVIM)[2] all indicate a decline in the number of ships arriving in Yemen between May and June 2016 although given the significant month-to-month variations in Yemen’s ship arrivals over the past two years, this decline is not necessarily a source for concern. 

INTERNAL TRADE AND MARKET FUNCTIONING

• According to the Logistic Cluster’s June 28 Access Constraints map, many major roads across Yemen remain difficult to access due to insecurity and infrastructure damage. Closed roads are reported in southwestern areas (Ta’izz and Lahij governorates), west of Sana’a City (Sana’a and Ma’rib governorates), and in northern areas (Al Jawf, Amran, Hajjah, and Sa’dah governorates). This is also generally in line with information received from FEWS NET’s key informants on the status of marketing corridors as of late May/early June 2016 (Figure 4). Frequent issues identified as limiting activities along major corridors included harassment by armed groups, threat of airstrikes and on the ground fighting, bribes, checkpoints, and increased fuel costs.
• The majority of monitored markets had normal functioning as of late May/early June, according to key informants in Abyan, Ad Dali’ , Aden, Al Bayda, Al Hudaydah, Al Mahwit, Ibb, Lahij, Sa’dah, and Ta’izz governorates. However, reduced activity levels were reported at markets in Aden, Al Bayda, Al Hudaydah, Sa’dah, and Ta’izz and limited activities were reported in Al Mahwit and Sa’dah.   

COMMODITY AVAILABILITY

• Key informant information indicates that there is approximately 900,000 MT of wheat grain and 80,000 MT of wheat flour within Yemen as of early August. Based on FAO’s estimates that Yemen requires approximately 233,000 to 250,000 MT of wheat grain each month, these stocks will likely cover national requirements for at least three to four months.
• Wheat flour was generally somewhat available or plentiful in late May/early June 2016, depending on the zone, according to key informants in Abyan, Ad Dali’, Aden, Al Bayda, Al Hudaydah, Al Mahwit, Ibb, Lahij, Sa’dah, and Ta’izz (Figure 6).  Information from WFP’s most recent June market update also indicates that wheat flour availability ranges from “sparsely available” to “available” with no areas reporting no availability. Compared to three months ago, WFP reports that wheat flour has become more available in Ma’rib and Socotra but has declined in Abyan, Ad Dali’, Sana’a, and Shabwah. Information about Ta’izz City from LMMPO and Save the Children in early 2016 also suggest food supply issues earlier in the year.
• Fuel (gasoline, diesel, and cooking oil) was generally “somewhat available” in late May/early June, according to key informants in Abyan, Ad Dali’, Aden, Al Bayda, Al Hudaydah, Al Mahwit, Ibb, Lahij, Sa’dah, and Ta’izz. Exceptions, however, included Ibb where key informants reported that supply levels for all three fuels were “plentiful” and Al Mahwit were the availability of gasoline and diesel were very limited. Other areas with “somewhat available” fuel levels include Ad Dali’ (gasoline, diesel, and cooking oil), Aden (gasoline), Abyan (gasoline), Al Hudaydah (diesel), Sa’dah (cooking oil) and Al Bayda (cooking oil). Information from WFP’s most recent June market update indicates that all three fuels were “sparsely available” in all governorates in June 2016.

PRICES

• The national average price for wheat flour[3] rose sharply between May and June (+28 percent) and is 47 percent above pre-conflict February 2015 levels (WFP). In several governorates (Amran, Sa’dah, Sana’a, Dhamar, and Shabwah) and in Sana’a City, June prices for wheat flour were either similar to or exceeded the highest prices observed during 2015 when increased conflict drove sharp price increases. Given seasonal high demand relating to Ramadan, it’s not entirely known to what degree these recent price increases were caused by the depreciation of the currency or local supply issues versus seasonal price increases with the holiday. However, price increases since 2009 during Ramadan have never been as sharp as those observed this year. According to WFP data, wheat flour prices remain the highest in Ta’izz governorate, where June 2016 prices were 24 percent above the national average. According to a UNHCR location assessment conducted in Hajjah, Amran, Raymah, Ma’rib, Al Hudaydah, Amant Al Asimah, Dhamar, Al Mahwit, Sa’dah, and Sana’a governorates in late 2015, high food prices were identified as a key issue limiting food access amongst respondents. A rapid assessment in Ta’izz conducted by Lmmpo also found that 92 percent of respondents reported that rising prices were a major cause of a worsening situation in their community.
• Unlike wheat flour prices, the national average price for diesel was stable between May and June, although it remains 77 percent above pre-conflict February 2015 levels (WFP). The highest diesel price (438 YER/liter) was observed in Ta’izz governorate, where prices were 65 percent above the national average. The national average for cooking oil remained stable between May and June, while the average for gasoline increased 22 percent. Similar to diesel, the highest prices for both commodities were observed in Ta’izz governorate.

LOCAL AGRICULTURAL PRODUCTION

• Local cereal production is not a major source of food as Yemen imports more than 90 percent of its cereal supply. However, given that the agricultural sector employs about 25 percent of Yemen’s total population (World Bank), the agricultural sector still requires close monitoring.
• Remote sensing data suggests that most areas of Yemen received well above-average rainfall during the March to June rainy season, which has resulted in positive vegetative growth across most agricultural zones. However, a satellite-derived proxy for plant health (Eta) has indicated poor plant health in localized areas, particularly in Ta’izz governorate, which may be the result of conflict-related disruptions to agricultural production. However, key informants in Ta’izz report that while agricultural activities near Ta’izz City have been disrupted, planting activities in more rural, mountainous areas of Ta’izz have been relatively normal. 
• Rising prices and shortages of diesel are reportedly limiting irrigation agriculture across the country. As a result, agricultural labor opportunities and wages are expected to be atypically low for most rural agricultural households.
• Unusually heavy rains and last year’s tropical cyclones have also escalated concerns about Desert Locusts. According to FAO, locust swarms have increased in interior areas of the country and have spread to the central highlands and coastal areas of the Red Sea.  Due to security issues, only light monitoring for locusts is currently occurring but agricultural production levels and related labor opportunities may be negatively affected.

INCOME SOURCES

• The ongoing conflict has disrupted livelihoods and reduced household incomes, resulting in a weakening of household purchasing power for many across the country. According to key informants interviewed by FEWS NET in late May/early June, household incomes were down by more than 50 percent in Al Hudaydah, Al Mahwit, Ibb, Lahij, Sa’dah, and Ta’izz (Table 2). Amongst the key informants interviewed, only key informants in Abyan indicated that they experienced no changes in income levels. Livelihood disruptions and a decline in household incomes due to the conflict have also been reported by various other organizations, such as Save the Children in Sa’dah and LMMPO in Ta’izz. Key informants also report that households are becoming increasingly reliant on humanitarian assistance, gifts, and loans to access cash compared to pre-conflict levels.
• Key informants in late May/early June reported that households generally still had access to international remittances, although remittances were often delayed and/or paid out using less favorable parallel exchange rates rather than at the official rate. Government salaries were also reportedly still being paid although payments through the Social Welfare Fund had ended. More recently, a few media sources have been reporting that government salaries are not being paid in July due to the banking crisis, although this has not been confirmed (Al Arabiya, July 2016; IRIN, July 2016).

FOOD ASSISTANCE

• During the months of May and June 2016, WFP provided on average 38,662 MT of food assistance per month to 3.6 million beneficiaries. Hajjah and Ta’izz received the largest quantities of assistance during this period.
• In addition to WFP, many actors are running cash transfer programs throughout the country. According to several NGOs interviewed by FEWS NET staff, many organizations have recently adjusted the size of their cash transfers to offset the effects of the ongoing currency depreciation within the country. 
• Humanitarian assistance levels from the Middle East/Gulf Countries are not entirely known. However, various in-kind food distributions (food baskets and dates) by Saudi Arabia to conflict-affected zones have been reported by the King Salman Center for Relief and Humanitarian Aid.
• Based on FEWS NET’s analysis of WFP’s assistance data, FEWS NET estimates that humanitarian assistance is likely large enough to be changing the IPC phase classification in Hajjah, Sa’dah, Sana’a, Amran, and Ad Dali’. However, given that numerous other organizations are also providing humanitarian assistance in Yemen, the real effect of humanitarian assistance on food insecurity is likely larger than is reflected by this analysis.  

WFP’S MVAM SURVEYS[4]

• Based on April to June 2016 mVAM data, more than 20 percent of the population in all governorates had “poor” food consumption[5], except for in Al Maharah, Hadramaut, Al Hudaydah, Sa’dah, Al Mahwit, Sana’a City, Lahij, and Abyan. The highest proportion of the population with poor food consumption (30 – 35 percent) was observed in Ma’rib, Ad Dali’, Ta’izz, Raymah, and Al Jawf. Similar to past months, Al Maharah was the only governorate where at least 80 percent of the population reported “acceptable” food consumption.
• Similarly, more than 20 percent of the population in all governorates had a reduced coping strategies index (rCSI) of greater than or equal to 21, except for in Al Maharah. Additionally, over 50 percent of the population had a rCSI greater or equal to 21 in Ad Dali’, Al Jawf, Al Mahwit, Amran, Dhamar, Hajjah, Ibb, Raymah, Sa’dah, Sana’a and Ta’izz.   
• According to WFP’s June 2016 mVAM report, IDP households reported, on average, significantly poorer food consumption in comparison to non-displaced households (Figure 10).

NUTRITION

• While the full report is not yet available, preliminary data from a UNICEF and MoPHP SMART survey conducted in May 2016 found a prevalence of global acute malnutrition (GAM) in Ta’izz City, lowland areas of Ta’izz, and highland areas of Ta’izz to be 17.0 percent, 25.1 percent, and 14.4 percent, respectively. While no historical data is available for Ta’izz City, these GAM prevalences are relatively high and slightly above levels recorded during previous years in lowland and highland areas. However, the change is only statistically significant in lowland areas.
• Beyond Ta’izz, there is very limited recent information on nutritional outcomes. In late April, UNICEF conducted a screening of 189 children of flood-affected IDPs in Amran and found four cases (two percent) of severe acute malnutrition (SAM) and 23 cases (12 percent) of moderate acute malnutrition (MAM), or 27 total cases (14 percent) of global acute malnutrition (GAM). In March, the International Medical Corps screened 359 children in Sana’a and enrolled 55 (15 percent) in MAM treatment and 12 (3 percent) in SAM treatment, or 67 total cases (18.7 percent) of GAM.
• Historical data from January 2014 to June 2016 on severe acute malnutrition (SAM) admissions to community-based management of acute malnutrition (CMAM) programs indicates a wide variation in admissions levels from one month to another. Across most governorates, there has been an upward trend in the number of admissions, with the exception of Abyan, Hadramaut, Lahij, Sa’dah, and Ta’izz where cases have been on a general downward trend and in Al Jawf and Raymah where they have been stable.

CURRENT FOOD SECURITY

• Currently, there is a major food security emergency ongoing in Yemen, due to the effects of conflict-related disruptions to household livelihoods and food access through market purchases. Currently available information (ex. WFP’s mVAM data, results for recent rapid assessments, nutrition data, qualitative information from key informants and partners) suggests that household food consumption, particularly amongst those residing in the western half of the country, is reduced in terms of both quantity and dietary diversity.
• FEWS NET estimates that approximately seven to ten million people are likely facing Crisis (IPC Phase 3) or worse food security outcomes, with about 25 percent of this population in Emergency (IPC Phase 4). A lack of recent food security data limits FEWS NET’s ability to develop more precise food insecure population estimates.
• The most severe food security outcomes, in line with Emergency (IPC Phase 4), are currently being observed in Ta’izz governorate and amongst IDPs populations throughout the country. This food insecurity is due to the effects of lost livelihoods, high food prices, and limited humanitarian access for these populations. Households in Crisis (IPC Phase 3) or Emergency (IPC Phase 4) face food consumption deficits and/or are depleting livelihood assets at an accelerated rate. Additionally at Emergency (IPC Phase 4), excess mortality and well above-average levels of acute malnutrition are likely.
• FEWS NET’s analyses of currently available humanitarian assistance data from WFP suggests that food insecurity is currently being reduced in Hajjah, Sa’dah, Sana’a, Amran and Ad Dali’ by ongoing humanitarian assistance. In the absence of this assistance, these areas would have also been classified as Emergency (IPC Phase 4).
• In Hadramaut and Al Mahrah, livelihoods disruptions and the related food security impacts have been less severe. Based on currently available food security information, FEWS NET estimates that poor households in these two governorates face Stressed (IPC Phase 2) food insecurity.

Assumptions

The most likely scenario for the June 2016 to January 2017 period is based on the following national level assumptions:

• Conflict: For the purpose of this most-likely scenario, FEWS NET assumes that on the ground fighting and airstrikes will continue at current levels, which will maintain IDP population at high levels, similar to those currently being observed. 
• Agricultural production: Depending on the zone, many agricultural households will harvest cereals at times between August and November. However, production will likely be below average due to a lack of availability and/or access to inputs. Related agricultural labor opportunities will be atypically low. Locust-related damages will also reduce crop production in localized areas (ex. the central highlands).  Qat production, however, will continue to be relatively average.
• Oil exports: Even with the slight recovery of global fuel markets in the coming months, oil production and exports will not resume during the scenario period. This will limit revenues and access to foreign exchange for the Yemeni government.
• Exchange rate: Foreign reserves will likely continue to decline during the scenario period, which will result in a slight to moderate depreciation of the Yemeni rial against the US dollar.
• Liquidity constraints: Liquidity constraints at banks within Yemen will likely limit general economic activities and complicate import activities.
• Imports/commercial stocks: Wheat and fuel imports, as well as commercial stocks, are expected to be below pre-conflict levels but similar to the status quo. However, there will likely be considerable variation in import levels from one month to another.
• Market demand: Despite below-average crop production, market demand from consumers will remain atypically low during the scenario period due to weak household purchasing power caused by below-average incomes.
• Wheat flour and fuel prices: Significant price volatility for both wheat flour and fuel prices are expected to continue during the scenario period, although sharp, sustained price increases above current levels are not anticipated.
• Remittances: Remittance services will remain open in most areas and many households will continue to receive remittances from household members abroad. However, delays in receiving these remittances are expected due to the banking crisis.
• Nutrition: Given expected food consumption gaps during the scenario period, acute malnutrition is expected to rise during the scenario period and remain above seasonally normal levels across much of the country. Based on historically data, SAM admissions to treatment programs are usually at their seasonally lowest points around July and then rise to their highest levels sometime between November and January.
• Humanitarian assistance:  Based on information about currently planned, funded, and likely humanitarian assistance, FEWS NET assumes that cereal distributions by WFP will continue through December 2016 at a 75 percent ration. As funding for other programs are confirmed, FEWS NET will update assumptions on humanitarian assistance accordingly.

Most Likely Food Security Outcomes

• Due to the rapidly evolving political and security situation, there is considerable uncertainty about future food security outcomes in Yemen. However, based on FEWS NET’s most-likely scenario outlined above, FEWS NET expects that the current food security emergency will continue into at least the beginning of 2017.  Western areas of Yemen worst affected by conflict will in general continue to face Crisis (IPC Phase 3 or 3!), with the exception of Ta’izz governorate which will face Emergency (IPC Phase 4). Similar to the current situation, IDP populations will likely face some of the worst food security outcomes. Meanwhile, livelihoods in Hadramaut and Al Mahrah will continue to be less disrupted compared to other areas of the country, resulting in better food access and outcomes. In the areas, Stressed (IPC Phase 2) outcomes are expected.
• FEWS NET’s most-likely scenario assumes the continuation of WFP humanitarian assistance in many areas through the end of 2016. However, if there was a disruption in these assistance flows, for example due to intensified conflict and/or restricted humanitarian access,  Hajjah, Sa’dah, Sana’a, Amran and Ad Dali’ would decline in Emergency (IPC Phase 4).
• According to the IPC, urgent humanitarian action is strongly recommended for areas that are classified as in Crisis (IPC Phase 3) or higher in order to protect livelihoods and reduce food consumption gaps. With this in mind, additional humanitarian assistance and continued humanitarian access are needed, particularly in the western governorates of Yemen. Additionally, data collection efforts to better understand current food security outcomes would strengthen future food security analyses and enable the development of more precise food insecure population estimates.

For more information on the outlook for specific areas of concern, please click the download button at the top of the page for the full report.