Purchasing power is at a seasonal peak, though acute food insecurity remains

• Food access has improved significantly since January, increasing faster than food prices. Average national labor-to-wheat flour terms of trade increased more than 20 percent between September and October, and are double their levels of January. Sheep-to-wheat flour terms of trade are also high.

• Voluntary and facilitated returns due to the 2011-12 conflict in the South are very high. Acute food insecurity due to lingering impacts of displacement, return, and insecurity may remain. 

• Humanitarian assistance is significantly above average, despite occasional security constraints. 

Wheat flour prices stabilized in October near pre-conflict levels (Figure 1). Despite Yemen’s overwhelming dependence on wheat flour imports, Yemeni markets tend to be relatively less sensitive to global food price trends due to its market structure: low competition among importers with high storage capacity and high competition among distributers and retailers (Oxfam). Though new increases reflecting high global wheat prices are still possible, price stability in October, combined with low inflation rates relative to similarly poorer countries (significantly less than 10 percent) may be a sign that these price adjustments may already be complete in Yemeni markets.

Income potential for poor households from casual labor and the sale of livestock has increased more than prices. Labor-to-cereal terms of trade are high at more than 20 kg of wheat flour per day of labor. This is 20 percent above the labor-to-wheat flour terms of trade for September and double the terms of trade in January 2012. Similar—though less robust—increases in labor-to-wheat flour terms of trade occurred in port areas of Somalia, which are part of the same, larger market basin for migrant labor, and where labor-to-wheat flour terms of trade are consistently approximately one-third of those in Yemen. Despite the slightly below-average harvests (90% of average), this improvement in terms of trade may reflect seasonal demand for harvest, threshing, and transportation labor. It may also reflect an improvement from the extremely poor conditions of late 2011 in the greater Horn of Africa, as well as possibly a restoration of livelihoods in Yemen and a demand for additional labor for post-conflict cleanup and restoration. Given this context, the record high inflows of migrants from the Horn of Africa in 2012 (9,877 in October 2012) are not expected to have a significant, negative impact on the demand for Yemeni labor in the short term.

Though sheep-to-wheat flour prices peaked in October with the Eid holidays, these terms of trade have remained relatively high since January 2012. The average sheep-to-wheat flour terms of trade were approximately 270 kg/sheep in January and February 2012 compared to 263 kg/sheep in September 2012 and 365 kg/sheep during the peak of the Eid holiday purchases in October 2012. Though strong historical data is lacking, these terms of trade are considered very high.

These purchasing power indicators, as well as macro-economic indicators like the relatively low  running average for annual inflation in 2012 (<10%, low compared to other poor countries), large assistance allocations to the government of Yemen for FY 2013, and high port traffic do not support previous statements that national foreign currency reserves are low. Additional information is needed.

In short, conflict-driven acute food insecurity is much improved due to improved security and humanitarian assistance among the displaced and returning populations. Approximately 80,000 internally displaced persons have returned to Abyan governorate alone between July and November, though some conflict-affected populations may remain in Crisis (Phase 3, IPC 2.0). Insufficient information is available at this time to determine the extent to which the displaced or returning are receiving humanitarian assistance sufficient to change their food security severity classification. Though harvests in the western plains were below average, seasonal acute food insecurity is unlikely before March.