Global Food Security Index shows slight increase in food affordability
Global food commodity prices fell in the third quarter, improving food affordability in all but nine countries covered in the Economist Intelligence Unit’s (EIU) Global Food Security Index (GFSI), according to the EIU recent analysis. Each quarter, the Index is adjusted to reflect the impact of global food price fluctuations on each country’s food security.
In the quarter that just ended (September 2013), global food commodity prices fell by an estimated five percent, according to the Food and Agriculture Organisation’s (FAO) Food Price Index. This was the third quarter in the last four that aggregate prices have fallen, and according to the EIU, a welcome development after a surge in the FAO index during the third quarter of 2012 following bad crop-growing weather in a number of countries. In addition to lower prices, affordability in the third quarter was also helped by a small average rise in global per-person income—around 0.5 percent from the prior three months, according to EIU estimates. The improvement in food security from lower prices and higher incomes was, in some countries, partly offset by currency depreciation, which according to the EIU can be an important headwind for countries that import a significant share of their food.
The price of food purchased most often by the food insecure—cereals or staple crops—dropped significantly, by 16%, as farmers responded to the higher commodity prices and increased production during the quarter, according to the FAO index. The EIU’s outlook is for continued declines in 2013, which should further improve food affordability. Generally, falling prices are a reflection of ample supply, sufficient to meet demand for most major food commodities. Accordingly, the EIU expects average prices for rice, soybeans, and wheat to drop by 12.8 percent, 2.8 percent and 3.7 percent, respectively, in 2013 from the year before.
“Global food production this year is rising for most major food groups,” said Leo Abruzzese, Global Forecasting Director for the EIU. “This increased supply will make food more affordable. Prices are facing further downward pressure as demand from major emerging economies, notably China and India, continues to soften.”
The quarterly affordability updates of the Global Food Security Index are meant to highlight the vulnerability of countries to food price shocks, especially countries that are already undernourished. The EIU’s quarterly adjustment incorporates global price changes as measured by the FAO’s widely used Food Price Index. The EIU modifies the FAO price change for each country by examining the historical relationship between global and national food price inflation. The country’s score is further adjusted for the estimated changes in national income and its exchange rate during the quarter. This provides a top-level assessment of price changes that might help or hurt a country’s food security.
Key findings of the EIU update
- Food affordability improved globally in the third quarter. The global average affordability score at the end of September climbed to 54 from 52.8 in July 2013 (where 100 equals the best result). Food affordability improved in all but nine of 107 countries included in the Index. Food became less affordable, on average by 1.7 points, in Syria, Malaysia, Chile, Philippines, Peru, Cambodia, Japan, Norway, and Singapore.
- Syria’s food security continued to deteriorate. Syria experienced the largest decline in food security in the third quarter, according to the EIU index. Many factors continue to undermine the environment. The country’s exchange rate continues to plummet, having lost more than 25% of its value over the quarter, and income per head fell another 3.8 percent. In addition to the rapid rise in prices, food availability is also decreasing because of the sustained military conflict. A joint Rapid Food Security Needs Assessment mission by the FAO and the UN World Food Programme recently estimated that more than 1.5 million people will require urgent food aid during the next few months.
- Botswana had the greatest improvement in food affordability among undernourished countries. Botswana ranks 43rd for overall food security out of 107 countries in the Index. Botswana’s affordability rank rose six positions this quarter. Significant appreciation of the pula, Botswana’s currency, against the US dollar, along with robust income growth per head, drove the increases in scores.
The Index, commissioned by DuPont to deepen the dialogue on food security, is prepared annually and evaluates the affordability, availability and quality of food across 107 countries. To explore the Global Food Security Index online, visit http://foodsecurityindex.eiu.com/.