Amid Food Shortages, Venezuela’s Grain Production to Fall

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Venezuelans have endured food shortages and hyperinflation. Forecasts for production and imports of basic foodstuffs for the 2018/19 marketing year don’t inspire hope for improvements in the near term.

Corn production is forecast at 700,000 tonnes, an increase from last year’s 600,000 tonnes because of favorable growing conditions, but well below the 1 million tonnes produced in 2016/17, a USDA report shows. Area harvested in corn has shrunk significantly, as producers switch to other crops that aren’t subject to government price controls, such as soybeans. And with corn imports shrinking, total supply of the staple grain will be lower this year than last. Rice supplies also will be down this year—to 697,000 tonnes from 717,000 tonnes last year—as both production and imports decline. And total sorghum supplies will be less than half that of last year, at 35,000 tonnes.

Hyperinflation has reduced the purchasing power of Venezuelans, which has noticeably cut meat consumption as many consumers opt for cheaper protein sources. Corn and sorghum produced in Venezuela is primarily used for poultry and swine feed, but declining demand for expensive meat has also reduced demand for feed grains. Chicken and egg production are expected to fall 50 and 25 percent, respectively, in 2018/19, while swine production has dropped 65 percent since 2014.

Venezuela is currently operating under a price control policy whereby the government dictates the maximum price that certain goods—including corn, rice, and sugar—can be sold at to make food more affordable to consumers. Some producers have switched to higher-paying crops that are not capped and shied away from crops that require expensive inputs such as fertilizers and pesticides.

The South American country has historically funded much of its food imports using its lucrative oil revenue, but falling oil prices have rendered import-reliance financially unsustainable. Now, a decline in domestic grain production risks exacerbating an already rocky food-security situation. Venezuela has recently introduced a new currency and has raised the minimum wage to control inflation, but it's unclear how much this will alleviate the worsening situation. In August, the government announced a series of economic policy changes, including raising the minimum wage and replacing the currency, to increase the currency’s value and control inflation. But it's unclear how much these moves will alleviate the worsening food shortages.

The chart on the left shows production of Venezuelan corn (green line), rice (red line), and sorghum (blue line). Grain production has declined precipitously since 2005 when the government introduced price controls to make food more affordable. The chart on the right shows declines in area harvested in corn, rice, and sorghum. Reliance on expensive imports of agrochemicals have spurred producers to harvest more profitable crops not subject to price controls.

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