YEMEN MONTHLY MARKET WATCH JUNE 2012

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1 Highlights In May 2012, the country general inflation was 11.24% and food inflation stood at 10.53%, based on 12 months moving average. Between January and June 2012, the average wholesale price of 50 kg of wheat flour has generally been around 5,000YR while that of wheat stayed at the level of 4,000YR. Retail prices for wheat during June 2012 were lowest in Sa ada (103YR/kg) and highest in Hajja (140YR/kg). During the reporting month, the lowest retail price for wheat flour was reported in Hodeida (90YR/kg) while the highest price was recorded in Amran market (160YR/kg). The supply of staple food commodities in most monitored markets has continued to be normal in June Some Governorates located in the South and North parts of the country with recently deteriorated security situation have continued to be affected by lower supply of essential food commodities. During the reporting period, the terms of trade (TOT) between wages and wheat flour has shown improvements in Amran, due mainly to lower prices of wheat in that market. In all other markets except Hodeida, have seen deterioration of the TOT as a result of both - lowered wage rates and increased wheat flour prices within these markets. The TOT between sheep and wheat flour has improved in Sana a market due to higher prices of sheep; in Hajja and Amran as a result of lower prices of wheat flour and in Hodeida because of the combined effect of better prices of sheep and cheaper prices of wheat at the same time. Aden and Sa ada markets, on the other hand, saw deterioration of TOT between sheep and wheat flour. The FAO Food Price Index (FFPI) averaged 201 points in June 2012, down 4 points (1.8%) from a slightly revised (up) May value of 205 points and still the lowest since September The FAO Cereal Price Index averaged 221 points in June, unchanged from May and down 45 points (16.8%) from its peak of 265 points in April Grain prices were very volatile in June, with weather as the main driver, particularly in extended dryness in US, which resulted in International wheat prices to start going up between May and June If the current increase in wheat prices continues, it may reverse the positive outlook anticipated last month that was hoped to create favourable conditions on the supply as well as affordability of the staple food items at local markets of Yemen. A. Consumer Price Index (CPI) In May 2012, the country general inflation was 11.24% and food inflation stood at 10.53%, based on 12 months moving average. The general consumer price index during the month was recorded to be while the food CPI was and that of cereals stood at , all increased by 11.2%, 10.5% and 2.5%, respectively, compared to the levels in May Figure 1: Trends of consumer price index While the index for sugar remained almost similar compared to May last year, indices for all of the other food items have increased between 11% (for fish) and 21% (for vegetables). Compared to April 2012, however, the CPI has generally remained unchanged or a slight decline was observed for all components of the CPI (Figure 1). B. Wholesale Prices of Wheat and Wheat Flour The wholesale prices of wheat and wheat flour have consistently stayed stable since January Between Source: Central Statistics Organization January and June 2012, the average wholesale price of 50kg of wheat flour has generally been a little lower than 5,000YR while that of wheat stayed almost at the For further comments/inquiries please contact Ahmadshah.Shahi@wfp.org or Endalkachew.Alamnew@wfp.org Page 1 of 5

2 level of 4,000YR (Figure 2 and 3). However, wholesale prices of wheat and wheat flour have dropped slightly (both by about 5%), according to the wholesale prices that are collected from the main urban trading centres that serve as distribution hubs for the various districts and governorates located at their proximity. Figure 2: National average Wheat flour price (YR/50kg) Figure 3: National average Wheat price (YR/50kg) Source: Ministry of Trade and Industry Source: Ministry of Trade and Industry Except for the whole prices of cooking oil which has increased by 9.4%, most of the commodities have shown some decline in June 2012 compared to that of May including sugar which has seen even higher reduction (close to 8%) during the same period. C. Retail Prices of Wheat and Wheat Flour In June 2012, the average nominal retail prices of wheat and wheat flour across the monitored markets have showed some decline from their levels during last month and reached the lowest record since last year June. During the reporting month (Figure 4 and 5), the average retail price of wheat has become 120YR/kg and that of wheat flour was a little over 130YR/kg. In June 2012, retail prices for wheat were lowest in Sa ada (103YR/kg) and highest in Hajja (140YR/kg), while the retail prices for wheat flour were lowest in Hodeida (90YR/kg) and highest in Amran (160YR/kg). The price variations between different markets depend mainly on variations in quality, their relative distance from port and on transportation costs. Figure 4: Trends of wheat retail price (YR/kg) Figure 5: Trends of wheat flour retail price (YR/kg) D. Supply to Markets Except in few areas in the southern and northern parts of the country where the security situation has deteriorated in recent months, the general supply of staple food commodities within most of the monitored markets was normal during June As a result of relatively improved stability in the country and smooth operation of public transport due to better availability and relatively cheaper prices of fuel since the second quarter of 2012, many traders in main markets have found to have sufficient stocks of food commodities during the month under review. For further comments/inquiries please contact Ahmadshah.Shahi@wfp.org or Endalkachew.Alamnew@wfp.org Page 2 of 5

3 E. Terms of Trade (TOT) 1 YEMEN MONTHLY MARKET WATCH JUNE 2012 The terms of trade (TOT) are proxy indicators of the purchasing power of households relying on livestock and/or casual labour as main income to purchase cereals from the market. Terms of trade are important components of food security analysis, more importantly for countries like Yemen where over 90% of the food is imported and the majority of the population is market dependent. Hence, analyzing the terms of trade across different markets between wage labour and commodities is an indicative of the trends in purchasing power of cash wages and of income from livestock sales as well as impact on food security. TOT for wage labour to wheat flour During the month under reporting, the nominal average daily wage rates in the monitored markets have been the same like recorded in May 2012 (2,111YR), with some variations among markets. The wage rates in June 2012 have ranged between 2,000YR (Aden, Hajja and Amran markets) and 3,000YR observed in Hodeida market. In June 2012, the average terms of trade between cash wage and wheat flour stood at 16.6kg/day. Although there was similar trend of the TOT during June compared to May 2012, a mixed pattern has been noted from the different markets. Accordingly, improvements on the TOT was recorded at Amran market with 6.3% increase in June compared to that of May 2012, due mainly to lower prices of wheat flour during the comparison period. All the other markets except Hodeida, have seen deterioration of the TOT by between 2.8% (Hajja) and 7% (Aden and Sa ada) as a result of both lowered wage rates and increased wheat flour prices (Figure 6). TOT for sheep to wheat flour The average price of a two-year old male sheep was found to vary from a minimum of 30,000YR in Hodeida to as high as 40,667YR in Sa ada market in June Compared to May 2012, prices of sheep have declined in Sa ada (by 9%), while price increases were seen in Sana a and Hodeida by 16.7% and 11.1%, respectively. Sheep prices remained unchanged in Aden, Hajja and Amran markets. The terms of trade for livestock producers have improved between May and June 2012 in Sana a (by 12.8%) due to higher prices of sheep; in Hajja (16.7%) and Amran (by 6.3%) both as a result of lower prices of wheat flour; and in Hodeida (by 72.8%) because of the combined effect of better prices of sheep and cheaper prices of wheat at the same time. During the same period of comparison, was registered deterioration of TOT between sheep and wheat flour with decline of 7.1% and 15.5%, in Aden and Sa ada markets respectively. The highest TOT of the month was recorded at Hodeida and the lowest was observed at Amran market (Figure 7). Figure 6: Wage labour to wheat flour TOT Figure 7: Sheep to wheat flour TOT 1 The terms of trade (TOT) is a measure of the relative value of one commodity to another (or the inverse of their relative prices) and thus a measure of the exchange value of the good or service to be traded. Wage to cereal terms of trade is a standard indicator for purchasing power. The livestock to cereal ratio gives an indication of the purchasing power of households selling livestock and purchasing staple foods. Purchasing power is a measurement of the relative value of money in terms of the quality and quantity of goods and services it can buy. It represents the ability of a household to acquire goods and services based on its access to money or other forms of wealth. For further comments/inquiries please contact Ahmadshah.Shahi@wfp.org or Endalkachew.Alamnew@wfp.org Page 3 of 5

4 F. Global Food Prices YEMEN MONTHLY MARKET WATCH JUNE 2012 The FAO Food Price Index (FFPI) averaged 201 points in June 2012, down 4 points (1.8%) from a slightly revised (up) May value of 205 points and still the lowest since September After the third consecutive month of decline, the June value of the FFPI is 15.4%, below the peak reached in February Continued economic uncertainties and generally adequate supply prospects kept international prices of most commodities under downward pressure, although growing concerns over adverse weather sustained prices of some crops toward the end of the month. Nonetheless, the price indices of all commodity groups composing the FFPI averaged below May, with the largest drop registered for the Oils/Fats. The FAO Cereal Price Index averaged 221 points in June, unchanged from May and down 45 points (16.8%) from its peak of 265 points in April Grain prices were very volatile in June, with weather as the main driver. After a generally subdued situation during the first half of the month, markets moved up in the second half amid deteriorating crop prospects, most notably for maize in the United States. The increase in maize prices underpinned wheat values, which were already experiencing some increases on downward adjustments to production forecasts in the Russian Federation. Rice prices remained largely steady, with large differences persisting across origins. Wheat prices have even showing an alarming increase between May and June The graph on the right clearly indicates the trend which does not seem promising as it is heading towards the February-March 2012 peak levels. All these indications on the international food and grain/wheat prices may reverse the positive outlook anticipated last month that was hoped to create favorable conditions on the supply as well as affordability of the staple food items at local markets in Yemen. As the rate of transmission of international market prices into Yemen s domestic prices is very high, any changes positive or negative will have similar impact on the food security situation of the population in the country (as the country is over 90% dependent on imports). The effects of high global food prices in the past few months have still been felt by local markets to the extent that they have not adjusted so quickly with the declining international food market price trends in April and May 2012, due to the time lag between the global and domestic level market movements. For further comments/inquiries please contact Ahmadshah.Shahi@wfp.org or Endalkachew.Alamnew@wfp.org Page 4 of 5

5 Important Remark: The market price data contained in this report should be interpreted with caution as they do not capture the impacts of long term trends in food prices. This approach does not measure or indicate the severity of the likely impact that changes may have on different households due to different income and food basket variations by wealth, by livelihood groups and households capacities to cope with changes. For further comments/inquiries please contact or Page 5 of 5