Sunday, November 7, 2010

IHMA to Hondurans: What Emergency

Beans are sky high. Today's price is $1.26 a pound, or 120 lempiras for 5 pounds. You will recall that in July, beans sold for $0.47 a pound.

When we last checked in on the bean crisis in Honduras, it was to report that the Finance Minister, William Chong Wong, had not, more than 30 days after the declaration of a crisis by President Lobo's Council of Ministers, released the money to the Instituto Hondureño de Mercadeo Agricola (IHMA) to purchase beans on the international market to improve supplies and drive the price back down. That was the goal of the emergency decree.

Yesterday, the head of IHMA, Carlos Girón Ayala, announced that Chong Wong had released 20 million lempiras to IHMA, more than authorized in the decree, to buy 60,000 quintals of beans and 100,000 quintals of corn to guarantee the national supply of both foodstuffs.

Girón Ayala announced that the corn purchases had already started last Friday, and that the bean purchases would begin in 15 to 20 days, when producers begin the new harvest in Honduras. Girón Ayala announced he already has 30,000 quintals of beans which he is distributing to BANASUPRO. That should be more than enough to keep BANASUPRO supplied until the new harvest comes in.

So, the money will go to national bean producers, not international grain merchants, which makes sense as part of a national economic plan. However, it is also misleading. IMHA would be buying those beans anyhow as part of its mission. IMHA buys beans every year during the postrera harvest, so there's nothing extraordinary about it. It's business as usual, not an emergency purchase.

This purchase will have no impact on the elevated prices people are paying for beans, which was one of the announced goals of the emergency decree.

It won't increase supplies; the postrera harvest will do that by itself. From an economic standpoint, this is actually the worst time for IHMA to make a purchase in the domestic market, at the high side of a predictable downward curve. Bean prices will be starting to come down as the harvest begins to appear on the market, but they'll still be much higher than they will be in a few weeks, once the harvest is finished. The purchase will serve, IHMA hopes, to guarantee supplies to BANASUPRO over the coming year.

So the message of Girón Ayala's announcement today is, if you're Honduran and you eat beans, you'll continue to suffer high prices until the harvest of the postrera crop improves the supply and brings the market price down. The government isn't going to do anything to solve the problem; instead it is waiting for the harvest to do that. There is no emergency to be solved that time alone won't deal with well enough.

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