Food Security in Focus: North America

A report from The Economist Intelligence Unit

Food security in focus:

North America 2014

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© The Economist Intelligence Unit Limited 20141

Food security in focus: North America 2014

Food security in focus: North America 2014 is an Economist Intelligence Unit (EIU) report commissioned by DuPont. The report discusses the major findings in the 2014 Global Food Security Index (GFSI) for the three countries of North America included in the index.

About the GFSI The GFSI considers the core issues of affordability, availability, and quality & safety across a set of 109 countries. The index is a dynamic quantitative and qualitative benchmarking model, constructed from 28 unique indicators, that measures the drivers of food security across both developed and developing countries. Food security is defined as the state in which people at all times have physical, social and economic access to sufficient and nutritious food that meets their dietary needs for a healthy and active life, based on the definition established at the 1996 World Food Summit. The overall goal of the study is to assess the vulnerability of food systems to security and insecurity by looking at drivers of the Affordability, Availability, and Quality & Safety of food. The 2014 GFSI is the third annual index in this series.

Acknowledgements

Lucy Hurst, associate director of custom research for the Americas, was the project director. Joshua Grundleger, analyst, was the project manager. Katherine Stewart, research associate, was the editor of the Food security in focus series. Martin Vieiro, analyst, provided research and analytical support. Leo Abruzzese, global forecasting director and global director of public policy, served as senior adviser. William Shallcross designed and constructed the benchmarking model, and Mike Kenny was responsible for layout and design. John Xenakis and Joseph Lake, global economist, provided regional expertise.

PrefaceContents

A regional analysis of food security 2

Regional results and comparisons 3

Food security in North America 6

The countries of North America 10

Appendix 12



The Food security in focus regional reports identify both similarities and differences between countries in each region and highlight regional areas of strength and weakness, providing regional analysis and context to the results in the 2014 GFSI.

Food security is a complex and nuanced issue, which can be analysed through many viewpoints and from many geographical perspectives—national, regional and global. To facilitate greater insight into the primary elements of global food security, and to develop a common standard against which all countries and regions can be measured, The Economist Intelligence Unit (EIU) created the Global Food Security Index (GFSI). The index is a tool to be used by a wide range of organisations and individuals working to address food security and the smooth functioning of food systems at a variety of levels. Some of the major elements of food security and, in particular, the deficiencies that may lead to greater food insecurity, differ across the globe. The regional reports seek to facilitate a deeper analysis of food

security through a unique lens. Specifically, these reports seek to:

l Examine regional challenges, strengths and issues surrounding food security to gain greater insight into the study’s measures.

l Provide a point of comparison between the regions to understand the dynamics of food security and the mechanisms that may be employed to address the unique issues that are experienced within a region.

l Explore the role of regional commonalities—countries within a region tend to have similar environments, problems, solutions and, in some cases, may share common institutions.

l Create more accurate country comparisons and a more nuanced understanding of food security by narrowing the frame of analysis.

l Offer insight into the economic, political and social context of the results of the 2014 GFSI.

A regional analysis of food security



OverviewOn a regional level, structural elements, which are generally more similar within regions than across the globe, tend to play an extremely important role in determining food security. Also, in regions that include countries with different economic systems, policy environments, agricultural infrastructures and nutritional standards, the gap in food security between best and worst performers is wider. These structural elements tend to change little year on year; however, when changes do occur, they have a greater impact on food security than other factors explored in the index.

l Economic development has the largest impact on food security, as shown by the strong correlation between food affordability and food security. The top performers in the index are rich countries with developed economies; these tend

Regional results and comparisons

Ranking/score table of all regions

Overall Rank Region 2014 GFSI Score

1 North America 80.0

2 Europe 75.4

3 Middle East and North Africa 57.4

4 Central and South America 56.0

5 Asia and Pacific 55.0

6 Sub-Saharan Africa 36.1

to have relatively high levels of GDP per capita and low shares of household expenditure on food. Although emerging economies are experiencing rapid GDP growth, resulting in increased Affordability scores and greater urban absorption capacity, the gap between developed and developing countries is still great.

l The most food-secure countries also tend to have developed infrastructures, including advanced agricultural infrastructures and facilities and systems that support agricultural investment and research and development (R&D). Transport infrastructure, including road and port systems, and adequate crop storage facilities drive food availability and are underdeveloped and undersupplied across food-insecure countries owing to underinvestment.



l A stable, efficient and functional policy environment is crucial for food security. More food-insecure regions, as well as countries, frequently have higher political stability risk and corruption levels, alongside weaker institutions that fail to provide appropriate government regulation and oversight. By contrast, the more food-secure regions have robust policy environments that facilitate food accessibility through stable supply chains, and affordability through food safety-net programmes.

l Nutrition plays an important role in determining food security. Highly food-secure countries have diversified diets and a high quality of protein. Their diets contain a high level of micronutrients, including iron and vitamin A. More food-insecure countries are often deprived of nutritious diets and lack organisations that regulate nutritional standards.

Regional results

North America and Europe, which collectively encompass 29 of the 109 countries in the index, recorded the strongest performances in the GFSI, driven by the developed countries’ dominance of those regions.

l As two regions comprised primarily of rich countries, Europe and North America have high levels of GDP per capita at an average of US$32,462 measured in terms of purchasing power parity (PPP), compared with an average of US$9,900 at PPP in the other four regions, while an average of 17.7% of household expenditure goes on food—just over half the global average of 34.5%.

l Wealth corresponds with high sufficiency of food supply, developed agricultural infrastructure, strong diet diversification, relatively low political stability risk and low corruption levels (Ukraine and Russia are exceptions). These factors contribute to North America’s and Europe’s first and second place rankings respectively in the overall index and in each of the categories.

Availability

Rank Region Score


2 Europe 69.8





Affordability

Rank Region Score


2 Europe 80.3







The next three highest-ranked regions—the Middle East & North Africa (MENA), Central & South America and Asia & Pacific—together account for 52 countries in the index. They all fall within a range of 2.4 points and share several common factors:

l They are comprised of a mixture of developed and developing countries that vary in terms of economic and political structures.

l MENA’s strong Affordability score (third overall), which is 2.3 points ahead of Central & South America, and its third-place tie in Quality & Safety with Central & South America account for its overall third-place regional rank in the index.

l Asia & Pacific’s comparatively high percentage of the population under the global poverty line and low diet diversification explain its lower scores in the Affordability and Quality & Safety categories.

Sub-Saharan Africa (SSA) has the lowest regional score in the 2014 GFSI, with an overall score that is just two-thirds that of the Asia & Pacific region.

l It also scores the lowest in each of the Affordability, Availability and Quality & Safety categories, owing to the large percentage of low-income countries in the region; of the 28 countries included in the region, 18 are low-income, according to World Bank income classifications.

l Low agricultural import tariffs and commitment to agricultural research and development, while still weak, are areas of relative strength in comparison with select regions, but underdeveloped agricultural infrastructure, low income levels and poor diet diversification drive the region’s poor results.

Quality & Safety

Rank Region Score


2 Europe 78.9

=3 Central and South America 59.5

=3 Middle East and North Africa 59.5





North America, which is comprised of Canada, Mexico and the United States, contains two high-income countries and one upper-middle-income country, all with relatively high personal income levels, a developed agricultural infrastructure, high diet diversification and comprehensive access to both safe and nutritious food. Higher disposable incomes, as all three countries are gradually recovering from the effects of the global financial crisis, have reduced the share of household income spent on food and resulted in increased food affordability and improved food security across the region. But despite having the highest overall score in the 2014 GFSI, North America still has room for

improvement and is still vulnerable to risks to food security.

Food price inflation, which has been rising globally owing to spikes in energy prices, weather and climate events, the global financial crisis and political instability, poses a threat to North American food security. Food price inflation is on track to return to historical norms, but with a severe drought in the US, a deteriorating political situation in eastern Europe and a slowing Chinese economy prices could tighten throughout the year.

Assuming normal weather conditions, the US Department of Agriculture (USDA) anticipates that the rate of national food price inflation will return to 2.5-3.5% in 2014; however, the drought that

Food security in North America

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United States Food price inflationJan 2005=100

Source: Economist Intelligence Unit; FAO.



has been affecting the country since 2012 has not yet abated. Canada, the second-largest importer of US agricultural products after China, has not escaped the consequences of the drought in the US. This, coupled with a weakening Canadian dollar, has driven the recent rise in food prices in Canada. Higher import prices are being passed on to consumers in grocery stores across the country.

Mexico, as a developing country, has historically shown greater sensitivity to price fluctuations in food, since spending on food accounts for a greater share of household expenditure than in Canada and the US. Mexican food price inflation has recently slowed after a spike earlier in the year caused by a new tax on junk food and soft drinks aimed at curbing obesity. Suffering from the same drought that has been plaguing the US, Mexicans should expect to see similar effects on their food prices. This will have more of an impact on their wallets than on those of their northern neighbours. If the drought continues and food prices rise, it could blunt government efforts to jump-start the economy.

Regional highlightsNorth America has maintained its top ranking (with a score of 80.0) from the 2013 GFSI, with each country showing improvement in its overall score. The US and Canada, ranking in the top ten in each

of the three categories, drove the strong performance across the board. Political stability in all three countries, especially as the global economy began to emerge from the financial crisis, helped to support this improvement. The US and Canada led the biggest regional increase, which was in Affordability. This improvement was driven by a decline in food consumption as a share of household expenditure, which reflects both the fall in global food prices and the region’s improved agricultural tariff environment. This improvement was slightly constrained by the fact that regional GDP per capita remained flat from the previous year, with only the US showing an improvement.

The resurgence of the US economy over the past year resulted in an increase in its score for urban absorption capacity, buffering a declining Mexican performance and resulting in a slight regional increase in Availability. This, combined with an improvement in the score for public expenditure on agricultural research and development (R&D) in the US, helped to maintain the region’s top ranking in this category.

The only category to decline from previous years was Quality & Safety, and although the region still maintained the top overall score, the individual scores of all three countries declined. Downward revisions to the latest available estimates for the percentage of the population with access to

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Mexico Food price inflationJan 2005=100

Source: Economist Intelligence Unit; FAO.



potable water had serious ramifications for North America in this category, with the US and Mexico the primary victims.

Regional strengths: Rich, stable and innovativePolitical security is closely tied to food security, as it ensures that the systems that make food accessible to populations are secure and effective. American political institutions are well established, stable and generally respected by the majority of the population, although each branch of government is periodically subject to criticism. However, despite the frequent bitterness of US politics, its institutions are unlikely to come under serious threat in the foreseeable future. Transfers of power are carefully delineated in the federal and state constitutions and are carried out with little controversy. Canada is a strong, stable country which, like the US, enjoys high levels of political stability. Federal-provincial relations became tense in 2013, but a defeat of the Parti Québécois, formed to promote Quebec’s independence, at the polls in early 2014 ensured Canada that will remain united. In Mexico, the dynamism of Enrique Peña Nieto’s administration has been surprising. The reform agenda has advanced very rapidly after 12 years of legislative gridlock. The “Pact for Mexico” reform addresses the structural weaknesses in the business environment and tries to reinforce the country’s competitiveness. Greater willingness by the government to take action against entrenched interest groups has sent a strong signal that it is determined to regain the ability to direct national policy. The escalation of the crisis in Ukraine is likely to prevent Europe, which is the second-ranked region in this indicator, from closing the gap.

North America’s public expenditure on agricultural R&D as a percentage of agricultural GDP, led by initiatives in the US, showed a year-on-year increase. Although spending on agricultural R&D remained fairly constant between the 2013 and 2014 indices, the US has focused its research on areas of critical importance. For instance, the USDA National Institute of Food and Agriculture

partnered with universities in 2013 to study the effects of weather and climate variability on beef and dairy cattle, owing to the severe draught that has plagued the region since 2012.

Regional weaknesses: Volatile and vegetal North America has experienced high volatility in agricultural production, where it ranks third behind Central & South America and Asia & Pacific. One of the worst droughts in decades has yet to abate. According to the US Drought Monitor in April 2014, 49% of the contiguous US was experiencing drought conditions that have damaged or destroyed portions of the major field crops in the US, including field corn (used for animal feed) and soybeans.

The region’s weak urban absorption capacity scores are mainly attributable to low levels of real GDP growth, despite coinciding lower urbanisation rates, which means that developing regions (where workers flock from rural to urban areas in search of jobs), including Asia & Pacific, Central & South America and Sub-Saharan Africa (SSA), outperformed North America. In 2013 Canada, Mexico and the US experienced GDP growth of 1.9%, 2.8% and 2.4% respectively, much lower than the over 7% growth recorded by eight of the ten top-scoring countries in the urban absorption capacity indicator. Although Canada and the United States have lower urban absorption capacity scores than Mexico, economic recovery led to

Urban absorption capacity, North America2014 score, 0-100 where 100=best

Canada

Mexico

US

59.7 60.4

66.8 62.4

60.3 63.2

Source: Economist Intelligence Unit

2013 2014



year-on-year improvements for these two countries, while Mexico experienced a score decline, which, coupled with a small score decline in volatility of agricultural production, drove its overall decline in Availability.

The North American region has a low score in the dietary availability of vegetal iron in the average daily diet, given the relatively larger percentage of meat and dairy products in the diets of US and Canadian consumers. Globally, the SSA and the Middle East & North Africa (MENA) regions have the highest dietary intake of vegetal iron for economic and cultural reasons. Eight of the ten

top-scoring countries in this indicator fall within the low- to lower-middle-income bands¬, and of the two high-income countries in the top ten, one—the UAE—is in the MENA region. Citizens of countries with lower income levels typically have diets that consist mostly of vegetables and other sources of vegetal iron, such as cereals. While Mexico is a wealthier nation than most countries in the SSA and MENA regions, it is poorer than Canada and the US. Unsurprisingly, a higher percentage of the average Mexican diet consists of items with high levels of vegetal iron.

Dietary availability of vegetal iron—top performers and North American countries2014 score, 0-100 where 100=best


Burkina Faso

Niger Nigeria Rwanda Chad Mali Greece Egypt Malawi United Arab

Emirates

Mexico Canada United States

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The countries of North America

Comprised of three countries, North America can be divided into high-income and upper-middle-income nations. Canada and the US have consistently ranked in the top ten in each category in every edition of the GFSI and are two of the world’s wealthiest and most stable nations. Both countries perform well in most indicators, boasting strength in food consumption as a share of household expenditure, GDP per capita and political stability risk. Economic recovery, and the accompanying steady job creation and lower household debt, which collectively boosted disposable income across the rich world after the global recession, have further enhanced food security in these countries.

Mexico’s performance looks quite poor compared with its northern neighbours. Lower rankings in GDP per capita, food consumption as a share of household expenditure, agricultural import tariffs and presence of food safety nets reflect the income disparity in the region. Still, as an upper-middle-income nation, Mexico’s relatively poor regional performance is expected, since it is more in line with other nations at a similar stage of economic development.

Country highlightsThe US is the driver of regional performance in the GFSI: North America’s score on each indicator is directly correlated with that of the US—it is only when the US does not receive a high score on a particular indicator that North America fails to

register the highest regional score. However, the indicators on which the US does not score well—urban absorption capacity, volatility of agricultural production and dietary availability of vegetal iron—are those that have a very low or negative correlation with food security. By contrast, the correlation between the US’s strengths, such as the percentage of household expenditure on food, and food security are high.

Food security successesThe US and Canada, the region’s two developed countries, are also its best-performing countries. The US outperformed Canada in the overall index and across each category. The US scores significantly better in public expenditure on agricultural R&D (the US spends approximately three times more than Canada), agricultural import tariffs (Canada’s agricultural tariffs are almost four times higher than those of the US) and GDP per capita. There are, however, areas where Canada outperforms the US. Canada’s access to potable water, probably caused by less exposure to the drought that is affecting the US, gave Canada a higher score in food safety. Canada’s ranking in agricultural infrastructure is also higher owing to its top score on port infrastructure, and it boasts lower levels of corruption than the US. Despite some small differences between the two countries, both are strong, developed economies whose citizens experience two of the best food security environments in the world.



Food security challenges

Mexico is often the laggard in the North American region, owing primarily to its status as an emerging, upper-middle-income economy. In the US and Canada the percentage of the population below the global poverty line is negligible, and although it has shown improvement since 2012, Mexico drags down the regional score in this indicator. Mexico also struggles with access to food safety net programmes and access to financing for farms. Although Mexico has programmes such as PROGRESA, which provides conditional cash transfers, it still depends on non-governmental organisations (NGOs) and other actors to fill the gaps.

Wealth impacts the performance of the countries in this region in a number of indicators, including corruption, political risk, food consumption as a share of household expenditure and agricultural infrastructure, which are all measures where Mexico trails. When compared with countries at the

same income level, however, Mexico has the fourth-highest overall score out of 27 countries, and scores well across all three index categories. Mexico has the highest micronutrient availability of the upper-middle-income countries (owing to the high dietary availability of vitamin A and vegetal iron and moderate access to animal iron) and scores above average in every indicator except agricultural import tariffs, corruption, urban absorption capacity and food loss. When compared with two of the most stable and wealthiest nations in the world, Mexico often looks as if it was underperforming, but when compared with countries in its relative income bracket, its performance is strong. Economic recovery is a priority for the Mexican government, and if its measures are successful, the country could show accelerated improvement that could catapult it to the top of the upper-middle-income countries ahead of Hungary, Brazil and Malaysia, which currently occupy the top three ranks.

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Upper middle income countries overall score2014 score, 0-100 where 100=best


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ARGE

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CHIN

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IA

ROM

ANIA

PAN

AMA

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TH A

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RUS

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A

THAI

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ARIA

COLO

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A

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ISIA

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INIC

AN R

EPU

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ADOR

KAZA

KHST

AN

JORD

AN

AZER

BAIJ

AN

ALGE

RIA

ANGO

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Appendix

Asia & Pacific Central & South America

Europe Middle East & North Africa

North America Sub-Saharan Africa

Australia Argentina Austria Algeria Canada Angola

Azerbaijan Bolivia Belarus Egypt Mexico Benin

Bangladesh Brazil Belgium Israel United States Botswana

Cambodia Chile Bulgaria Jordan Burkina Faso

China Colombia Czech Republic Kuwait Burundi

India Costa Rica Denmark Morocco Cameroon

Indonesia Dominican Republic Finland Saudi Arabia Chad

Japan Ecuador France Syria Congo (Dem. Rep.)

Kazakhstan El Salvador Germany Tunisia Côte d’Ivoire

Malaysia Guatemala Greece Turkey Ethiopia

Myanmar Haiti Hungary United Arab Emirates Ghana

Nepal Honduras Ireland Yemen Guinea

New Zealand Nicaragua Italy Kenya

Pakistan Panama Netherlands Madagascar

Philippines Paraguay Norway Malawi

Singapore Peru Poland Mali

South Korea Uruguay Portugal Mozambique

Sri Lanka Venezuela Romania Niger

Tajikistan Russia Nigeria

Thailand Serbia Rwanda

Uzbekistan Slovakia Senegal

Vietnam Spain Sierra Leone

Sweden South Africa

Switzerland Sudan

Ukraine Tanzania

United Kingdom Togo

Uganda

Zambia

Country selection table



Appendix These tables list the rankings and scores for North America in the overall index and across the three categories (Affordability, Availability and Quality & Safety).

Overall Ranking Affordability

Overall Rank Country Score Rank Country Score

1 United States 89.3 1 United States 94.8

2 Canada 83.7 2 Canada 88.8

3 Mexico 67.1 3 Mexico 67.1

Availability Quality & Safety

Rank Country Score Rank Country Score

1 United States 85.5 1 United States 85.7

2 Canada 79.4 2 Canada 83.2

3 Mexico 65.3 3 Mexico 71.9

These tables list the year-on-year score changes, 2014 v 2013, for North America in the overall index and across the three categories (Affordability, Availability and Quality & Safety).

Overall Ranking Affordability

Country Y-o-Y change Country Y-o-Y change

United States 1.7 United States 3.1

Canada 1.0 Canada 2.8

Mexico 0.4 Mexico 1.5

Availability Quality & Safety

Country Y-o-Y change Country Y-o-Y change

United States 1.3 Mexico -0.3

Canada 0.1 Canada -0.5

Mexico -0.4 United States -0.7



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