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Food Prices and Food Security in Trinidad and Tobago Christian Romer Løvendal, Kristian Thor Jakobsen and Andrew Jacque esa working Paper No. 07-27

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Food Prices and Food Security in Trinidad and Tobago

Christian Romer Løvendal, Kristian Thor Jakobsen and

Andrew Jacque

ESA Working Paper No. 07-27

September 2007

Agricultural Development Economics Division

The Food and Agriculture Organization of the United Nations

ESA Working Paper No. 07-27

Food Prices and Food Security in Trinidad and Tobago

September 2007

Christian Romer Løvendal* Kristian Thor Jakobsen

Agricultural Development Agricultural Development

Economics Division Economics Division

Food and Agriculture Organization Food and Agriculture Organization

Italy Italy

e-mail: e-mail:

Andrew Jacque

Adviser to the Ministries of Agriculture of Trinidad and Tobago and of Grenada e-mail:


The economy of Trinidad and Tobago is booming, in particular as a consequence of increased energy production and the historical high oil prices. Whilst general inflation has remained relatively low for much of the present economic boom, substantial increases in retail food prices have been observed, in particular since 2005. This paper looks at the development of retail food prices, its causes, the potential impact thereof in terms of food security and possible policy options for addressing this. It concludes that whilst households with low income are the groups most affected by the food price increases and will continue to be so in the wake of increasing international prices, it is unlikely that the price increases in isolation will throw off Trinidad and Tobago’s path towards meeting the MDG 1 hunger target and bringing the share of undernourished people down to 6.5% by 2015. However, food security problems will remain, in particular related to overweight and obesity caused by unbalanced diets. Analysing the food marketing systems according to domestic production system (export versus domestic consumption), product type (fresh versus frozen and processed) and origins (imported versus domestic), the paper identifies potential causes of price increases. These include increases in price margins, international price changes and market conditions that vary greatly for different commodities, ranging from competitive to oligopolistic. Finally, the paper identifies areas of potential interventions related to direct price interventions, social protection, agricultural investment and trade facilitation.

Key Words: food security, inflation, price, vulnerability, Trinidad and Tobago, markets. JEL: E64, Q17, Q18, O20.

* For any questions or comments, please contact

This paper was prepared in support of the food security assessment work conducted by the FAO Caribbean Regional Food Security Programme and in particular the project “Improving Food Security in CARICOM/CARIFORUM countries (GTFS/RLA/141/ITA)”. The project started in late 2004 and is being implemented by FAO in collaboration with the Caribbean Community (CARICOM) Secretariat with the financial support of the Government of Italy.

The authors are grateful to the Regional Management Unit of the project as well as to staff of the FAO Representation, Trinidad and Tobago, for support, documentation and comments provided during the preparation of this document. Comments on earlier versions of this paper were gratefully received from Lisa Martinez, Margarita Flores, David Dawe, Gregg Rawlins and Sharon Hutchinson.

The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever of the part of the Food and Agriculture Organization of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

1 Introduction

In the midst of an economic boom, Trinidad and Tobago is grappling with how increasing inflation rates and in particular rising food prices will affect food security and the broader welfare of its population. Initially, the boom created only limited inflationary pressure, but this has changed in the past few years. In 2006, with the annual economic real growth rate being pushed towards two-digit, the overall inflation rate reached 10% and the year to year change in retail food prices moved beyond 20% during certain months.

The economy of Trinidad and Tobago is dominated by the petroleum industry and energy prices have had a determining impact on its development. The first oil boom (1974-1981), induced by an almost quadrupling of crude oil prices, resulted in average annual nominal gross domestic product (GDP) growth rates up to 27%, a fall in the unemployment rate from 15.3% to 9.9% and an inflation rate of 14% (Central Statistical Office, Trinidad & Tobago). With oil prices falling after 1981, the country saw a reversal of economic prosperity, partly resulting in the introduction of structural adjustment programmes.

Undernourishment has largely followed the general macro-economic trends during and between the oil booms. The seventies saw a decline in the share of undernourished1 to a historical low level, followed by a steady increase up to the mid-nineties. Since then, both the number and the share of undernourished have steadily been declining and if the trend of the last 10 years can be maintained, Trinidad and Tobago will comfortably meet the Millennium Development hunger target of halving the proportion of undernourished by 2015 to 6.5%.

At the same time, the present level of inflation, largely driven by increases in the food component of the retail price index, is the source of concern to consumers and policy-makers. The concerns relate in particular to two issues: Are specific lower-income groups becoming less food secure in a period of strong economic growth and national prosperity? And secondly, is there a risk that the broader economic impact of inflation derails the national long-term objective of achieving GDP per-capita equal to that of developed countries by the year 2020?

This paper looks mainly at the first question, examining the reasons for recent increases in food prices in Trinidad and Tobago, the potential impact in terms of food security and possible policy options for addressing this. Following a review of food price developments, a brief overview of the socio-economic situation of Trinidad and Tobago, including an assessment of the overall food security situation, is provided. Section 3 discusses the links between food prices and food security. Section 4 seeks to locate the parts of the food system driving food price increases as well as the potential impact of these on low income groups. In the final section, potential policy implications for dampening food price increases and promoting food security are discussed.

2 Economic overview of Trinidad & Tobago

Trinidad and Tobago has a total population of 1.3 million people (2004) with around 95 percent of the total population living on the larger island, Trinidad. Its population consists of East Indian and African Descents together with a large group of mixed ethnicity. The

Defined as the share of population eating less than 2100 Kcal/capita/day.


population is concentrated in urban areas and less than 10% of the land area is used for agriculture.

The overall economic performance has for several decades largely and increasingly been driven by the performance of the energy sector. Whilst the petroleum industry contributed 28 percent of the Gross National Product (GDP) in 1995, the corresponding share in 2006 was 41 percent. Measured in values (2000 prices), the output of the energy sector has increased by 260 percent since 1995. The increasing importance of the energy sector is both a result of increased production and processing of natural gas and increasing world energy prices (Central Bank of Trinidad & Tobago, 2006). Figure 1 illustrates the national economic dependence on international energy prices: GDP per capita has generally been going up with world energy prices (1974-1981 and 1993-) and shrunk with the contraction in global oil prices.

Figure 1: Oil prices (2005 prices) and GDP per capita, 1965-2005





160 145 130 115 100 85


300 200 100

220 205 190 175 160

Source: World Development Indicators, 2007 and BP, 2007

Whilst consumer prices have remained relatively stable during much of the present economic boom, the inflation rate has been increasing since 2005. Looking at the different components of the retail price index, it is clear that the development in different commodities has varied significantly. Thus, since 1994, food prices (making up 18% of the retail price index) have systematically increased faster than the price of other main items. Whilst the overall costs of the basket of goods included in the retail price index has less than doubled since 1994, food prices have increased five fold, as seen from Figure 2. More recently, the faster growth of food prices has become even clearer. From March 2006 to March 2007, the food component of the retail price index increased by 19 percent whilst the overall price index increased by 8 percent in the same period.


Figure 2: Changes in the Retail Price Index in Trinidad & Tobago, 1994-2007



500 400 300 200 100

Source: Central Bank of Trinidad & Tobago Data Centre

Another indicator of price stability is the extent to which prices vary between months. Figure 3 shows the development in the price variance for the overall retail price index as well as for food and housing2. The price variations in the overall index since 1994 have remained fairly stable, and this has also been the case for the food price index up to the beginning of 2003. Since then, food price instability has increased, suggesting that apart from increasing faster (which cause part of the increased variance), prices may also have become increasingly unstable.

The price variance is calculated as the variance in the retail price index for the past 12 months.


Figure 3: Variance in the Retail Price Indexes in Trinidad & Tobago, 1995-2007

180 160 140 120



60 40 20














Source: Central Bank of Trinidad & Tobago Data Centre, own calculations

With an overall contribution of only 0.65 percent of the total GDP in 2006, agriculture -including the sugar industry - plays a minor role in the economy3. The contribution from agriculture has been decreasing in value (measured in 2000 prices) from 623 million Trinidad and Tobago dollars in 1995 to 569 million in 2006. Notably, export oriented agriculture and the sugar industry are the only sectors where output value actually fell over the past 10 years (Table 1).

Table 1: Sector-wise GDP in values (millions of TT$) and share of total, 1995-2006 (2000 as base year)




Actual Share



Actual Share

Overall agriculture

-Export agriculture

-Domestic agriculture

-Sugar industry

Petroleum industries


Distribution services


Finance, insurance and real estate

Transport, storage and communications





9 ,953



2 ,814



2% 0% 1% 1%

28% 8%

15% 8%

12% 7%











1% 0% 1% 1%

31% 7%

16% 7%

14% 9%

5 69










1% 0% 1% 0%

41% 7%

11% 8%

15% 7%

Source: Central Statistics Office, Tr

inidad &


Whilst the economic importance of agriculture is limited in terms of its contribution to GDP, it remains important in terms of employment. The relative share of the agricultural labour force has diminished over the past 40 year, although more because of the doubling of the

This does not include the agro-processing industry, which makes up a little under half the manufacturing GDP.


overall labour force than because of dramatic falls in the absolute number of people working in agriculture. Thus, the agricultural labour force consisted of 47.000 people or 8 percent of the total labour force in 2005, only 13.000 less than 40 years earlier.

Table 2: Labour force (in 1,000), 1965-2005

1965 1975 1985 1995 2005


In agriculture

Agriculture as a share of total

299 364 456 520 610

60 54 50 51 47

20% 15% 11% 10% 8%


Looking at the agricultural sector from a landholding perspective, the latest agricultural census suggests that there were 19,143 farmers in 2004, the vast majority (95 percent) being on Trinidad. Around 75 percent of these were engaged in crop activities, while only around 10 percent of the farmers concentrated fully on livestock. Most holdings are relatively small: a little less than one third had access to less than one hectare of land and only 12 percent had access to more than 5 hectares (Central Statistics Office, Trinidad & Tobago, 2005).

Trinidad & Tobago’s GDP per capita was 9,321 USD in 2004 (2000 prices), only slightly below that of Barbados. The country has a significant surplus on the current account balance, unique for the countries presented in Table 3 and more broadly the countries in the region. Trinidad & Tobago ranks 57 out of 177 in the Human Development Index, below Barbados (30), but above Jamaica (98) (UNDP, 2005).

Table 3: Economic indicators for Trinidad and Tobago, Barbados, Belize, Guyana and Jamaica, 2004

Trinidad and Tobago





GDP (US$ bn)

GDP per capita (current US$) Consumer price inflation (in %) Current account balance (% of GDP) External debt, total (DOD, US$ bn)






2.8 10401 1.4 -12 0.7
















Source: World Development Indicators, 2007

The prevalence of undernourishment4 in Trinidad & Tobago has varied from 16 percent of the population to around 6 percent during the past 35 years. It reached its lowest level in 1980 as GDP per capita was peaking, only to steadily increase simultaneous with the economic downturn of the eighties. The start of 1990s saw a prevalence around 13 percent that continued to increase until it peaked in the mid 1990s at 15 percent or around 0.2 million people.

In order to reach the hunger target of the Millennium Development Goal 1, Trinidad and Tobago needs to reduce the proportion of undernourished to 6.5 percent by 2015. If the trend from 1996 continues, the goal could be reached before 2008, as evident from Figure 4. A

4 Defined as the share of the population with a food intake that is insufficient to meet dietary energy requirements continuously (


more conservative estimate based on the trend since 1990-92 shows that Trinidad & Tobago will still more or less reach the goal in 2015.

Figure 4: Prevalence of undernourishment in Trinidad and Tobago and the Millennium Development Goal 1 Hunger Target

18 16 14 12 10 8 6



Path to MDG ■ ■ ■ Trend from 1995-97 Trend from 1990-92

^^^~ Actual



\ *

* * *

% * % *

MDG base period 1990-1992













The undernourishment measure is closely linked to food availability. Reductions in the prevalence of undernourishment in Trinidad and Tobago have been caused by a significant increase in food supply and in particular imported food. Measured in the amount of calories available for human consumption per day per person, the food supply has increased by 6 percent since 1995, even if it still remains below its peak level from 1979/81. As seen from Figure 5, the average level of energy available has remained constantly above the recommended level (1860 Kcal/capita/day in 1969/71 and 1950 kcal in 2002/2004), pointing to the fact that at national level, total food available is more than sufficient to keep everyone food secure. It should also be noted that given the aggregate nature of this measure and its calculation, it does not pick up the effects of short term inflation5.

5 FAOSTAT is currently in the process of re-estimating the undernourishment figures. The data used here are pre-adjustment data.













Figure 5: Daily Energy Consumption in Trinidad & Tobago, 1969/71 – 2001/03











Figure 6 provides information on the dietary composition of the overall food consumption in Trinidad and Tobago for the period of 2003/05. The largest contributors to daily calorie intake were cereals (41%), sugar crops (22%), oil crops (9%) and milk (7%), which in combination provide more than three-quarters of calorie intake. Fruits and vegetables make up only 3% and 1% of the food consumption, well below recommended levels.

Figure 6: Supply of Calories per caput, Trinidad and Tobago, 2003/05

Fruits, 3% Vegetables, 1%

Cereals, 41%

Oilcrops, 9%

Pulses, 4%

Milk, 7%

Animal fats, 1% Meat, 8%

Sugarcrops, 22%

Fish, 1%

Starchy roots, 3%



Food security goes much beyond the question of energy intake. Individuals require a balanced diet in terms of macro- and macro-nutrients to maintain a healthy nutritional status. In many middle-income countries, the food security challenge shift from insufficient energy consumption towards ensuring balanced diets to prevent the range of non-communicable diseases that poor nutritional status can cause.

Anthropometric measurements such as stunting and wasting (measuring chronic malnutrition), have remained on a relative low level since the 1980’s. At that time, prevalence of stunting among 0-5 years old children 6 was found to be low (under 2 percent) and the prevalence of wasting for the same age group7 was found to be at a moderate level of around 6 percent (FAO, 2003).

At the other end of the scale, however, obesity and overweight is affecting larger proportions of the population. In 1999, 16.8 percent of the population above 20 years were obese8 with the prevalence among women being twice as high as for men. Another 31.4 percent of the adult population were overweight, the prevalence being slightly higher among women. Interestingly, overweight and obesity seems less of a problem amongst the younger population. In 1999, 4.6 percent of people between 13-19 years were found to be overweight and another 6.3 percent were found to be at risk to become overweight.

Another study on the nutritional transition in Trinidad and Tobago (Gulliford et al, 2002) confirmed the high rates of obesity, suggesting that around 55 percent of the male population and 62 % of the female population were either overweight or obese. Using the US food security measurement9, the study also suggested a food insecurity level of 25 percent, with food insecurity being associated with low household income, physical limitations of the household and low educational attainment. Furthermore, the study found that food insecure people were less likely to be frequent consumers of fruits, green vegetables and salad.

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