Food Security and Mealie Food Security and Mealie Meal Prices Dynamics - Meal Prices Dynamics -

(What are the Medium and (What are the Medium and Long Term Solutions?)Long Term Solutions?)

Presented by Eric Chipeta, Presented by Eric Chipeta, FAO Representation in ZambiaFAO Representation in Zambia

Presentation OutlinePresentation Outline• Introduction :Introduction :Historical Perspective and Status of Historical Perspective and Status of

Maize Stocks in ZambiaMaize Stocks in Zambia• Maize Meal Price Spikes and Maize Pricing Issues Maize Meal Price Spikes and Maize Pricing Issues

in Zambiain Zambia• Production costs/ Supply sideProduction costs/ Supply side• Demand Side FactorsDemand Side Factors• Transparency in Millers’ Pricing ModelTransparency in Millers’ Pricing Model• Role of FRA Role of FRA • Policy implementation on maize exports and Policy implementation on maize exports and

importsimports• Solutions- Medium Term and Long TermSolutions- Medium Term and Long Term• ConclusionConclusion

Introduction :Introduction :Historical Perspective and Historical Perspective and Status of Maize Stocks in ZambiaStatus of Maize Stocks in Zambia

Food security dimensions are physical and Food security dimensions are physical and economic access, frequency, quantity economic access, frequency, quantity

Fluctuations in prices have been common since Fluctuations in prices have been common since 1980s1980s

Mealie meal Price decontrol in 1987 resulted in Mealie meal Price decontrol in 1987 resulted in increases in prices and riotsincreases in prices and riots

Liberalization policies in the 90s brought its own Liberalization policies in the 90s brought its own challenges and opportunitieschallenges and opportunities

Government responded to challenges by setting Government responded to challenges by setting up FRA. up FRA.

Introduction :Historical Perspective and Status of Maize Status of Maize Stocks in ZambiaStocks in Zambia

Zambia has the stocks of maize according to the balance sheet (1,661,626 metric tones)

The maize stocks at the time of reporting could carter for the national requirements (1,300,000 metric tones) and leave a good surplus (361,626 metric tonnes).

Bumper harvests have been recorded for the past 3 consecutive seasons (2009/2010, 2010/2011, 2011/2012) 2,795,483, 3,020,380 and 2,839,157 metric tons respectively (CSO Bulletin 2009 and 2012).

Maize Meal Price Spikes and Maize Maize Meal Price Spikes and Maize Pricing Issues in ZambiaPricing Issues in Zambia

Demand and supply affect pricing.

During times when maize is in short supply mostly between November and April, prices are higher.

Notably, last quarter of 2012 there was an increases far beyond the seasonal price changes from about ZMK40,000 to about ZMK80,000 which was close to 100% increase

This has been a source of concern The government finds itself in an awkward position as it makes

effort to give farmers a good price while striving to ensure that consumers access the Mealie meal at a low price.

This has resulted in substantial hemorrhaging of huge financial government resources.

Production costs/ Supply side

50kg maize bag pricing could be comfortably pegged between K40,000 and K45, 000

Evidence from FSRP/IAPRI indicates that setting of floor price has not benefitted from national farm survey evidence on production costs.

It is also notable that production costs vary from one area to another which makes it more costly in certain places to produce maize than in others.

For instance, while FRA price was pegged at ZMK65, 000 per 50 kg bag in 2010, the average production cost of maize in Eastern and Northern Province was at ZMK 34,000 while Copperbelt and Western Province stood at ZMK 53,000.

It therefore goes without saying that the pan territorial pricing that FRA sets need to benefit from evidence generated by surveys carried out by research institutions.

Huge investments through FISP not bearing as much fruit given that most small scale farmers still remain at productivity of about 2 mt per ha

Demand Side FactorsDemand Side Factors Use of grain as stock feed, breweries and Use of grain as stock feed, breweries and

other products has exerted pressure on the other products has exerted pressure on the maize stocks. maize stocks.

In spite of the third successive bumper In spite of the third successive bumper harvest with about a million metric tonnes harvest with about a million metric tonnes above the national requirement, the strong above the national requirement, the strong demand from neighboring countries such as demand from neighboring countries such as DRC and Tanzania supported by gradual DRC and Tanzania supported by gradual depreciation of the Kwacha has put upward depreciation of the Kwacha has put upward pressure on prices. pressure on prices.

This has been reported several times through This has been reported several times through the media over the years and particularly this the media over the years and particularly this season (2012/2013)season (2012/2013)

Role of FRA in the market FRA has consistently gone beyond its mandate

to ensure that the strategic grain reserves are maintained at 300, 000 at any given time as strategic reserves

Offloading of FRA maize as a price stabilization mechanism tends to distort the market prices to some extent

Benefit transmission to consumers of the offloaded maize is not assured

Untimely/Unclear pronouncements by government in some cases, millers decide to hold on to their stocks of maize since offloaded maize from FRA could be cheaper which could bring confusion to the millers

Medium Term and Long term Medium Term and Long term Solutions/Way forwardSolutions/Way forward

Government to work with stakeholders on floor price setting for maize. Government to work with stakeholders on floor price setting for maize. When the option of leaving price to be determined by demand and When the option of leaving price to be determined by demand and

supply equilibrium, safety nets should be in place to safeguard the part supply equilibrium, safety nets should be in place to safeguard the part of the population that would be negatively affected based on the of the population that would be negatively affected based on the vulnerability assessment. vulnerability assessment.

There is need to have a strong mechanism that encourages FRA, There is need to have a strong mechanism that encourages FRA, millers and other stakeholders to report maize and Mealie meal millers and other stakeholders to report maize and Mealie meal stocks.stocks.

FRA’s offloading of its grain on the market to be according to agreed FRA’s offloading of its grain on the market to be according to agreed guidelines and triggers that do not stifle private sector participation in guidelines and triggers that do not stifle private sector participation in the market. the market.

Maize export predictability in the context of good estimates of Maize export predictability in the context of good estimates of expected export levels to determine export quota allocations, expected export levels to determine export quota allocations, enforcement and M & E. enforcement and M & E.

The demand in neighbouring countries is an opportunity that Zambian The demand in neighbouring countries is an opportunity that Zambian farmers can exploit by increasing production and productivity that farmers can exploit by increasing production and productivity that supplies local markets as well as export markets.supplies local markets as well as export markets.

Medium term solutions Medium term solutions cont...cont...• Coordination mechanism that facilitates dialogue of Coordination mechanism that facilitates dialogue of

different players and government in maize market sector.different players and government in maize market sector.

• Private sector including cooperatives to be given more Private sector including cooperatives to be given more space in maize market in the country space in maize market in the country

• FRA to restrict its operations to areas where private sector FRA to restrict its operations to areas where private sector participation is not profitable. participation is not profitable.

• In addition, pan territorial pricing need to be removed to In addition, pan territorial pricing need to be removed to ensure pricing reflects different average production costs ensure pricing reflects different average production costs that obtain in different regions.that obtain in different regions.

• Millers to enhance their storage capacity through Millers to enhance their storage capacity through mechanism that include PPP. mechanism that include PPP.

• Stock management and information system that provide Stock management and information system that provide real time and credible information on request to be real time and credible information on request to be developed and deployed.developed and deployed.

• There is need to promote resilience in the farming There is need to promote resilience in the farming systems through use of conservation agriculture, crop systems through use of conservation agriculture, crop diversification and early warning systems. diversification and early warning systems.

Long Term SolutionsLong Term Solutions Work of FRA operations to be within the mandate of Work of FRA operations to be within the mandate of

procuring the strategic grain reserves to avoid procuring the strategic grain reserves to avoid market distortions and crowding out of private sector market distortions and crowding out of private sector FRA to incrementally reduce its marketing activities to FRA to incrementally reduce its marketing activities to

allow private sector respond to emerging opportunitiesallow private sector respond to emerging opportunities

There is need to have a coordination mechanism There is need to have a coordination mechanism that facilitates dialogue on actions that need to be that facilitates dialogue on actions that need to be taken by different players in the maize market sector taken by different players in the maize market sector especially on matters such as export bans, offloading especially on matters such as export bans, offloading of FRA maize to the market and benefit transmission of FRA maize to the market and benefit transmission mechanisms to ensure that lowly priced maize mechanisms to ensure that lowly priced maize reflects in consumer prices. reflects in consumer prices.

Long Term Solutions cont. There is need for more transparency and coordination in the manner that FRA makes its decision.

Strengthen cooperatives to effectively participate in the marketing of grain in Zambia

Promotion of substitute cereals apart from maize driven in part by promotional campaigns to support processing & consumption of other food crops

Processing and value addition of other crops to reduce postharvest losses and increase the wealth creation opportunities.

Enhanced cross border maize trade surveillance protocols and programme/system

There is need to develop and introduce compulsory market and trade information reporting for all market players

Private sector including the cooperative movement to be given more space in maize marketing space in Zambia

Long Term Solutions cont..Long Term Solutions cont..

FISP to be reformed to address targeting, governance, FISP to be reformed to address targeting, governance, complimentary extension service, timeliness in delivery of complimentary extension service, timeliness in delivery of inputs and participation of more goods and service providers. inputs and participation of more goods and service providers. This could be facilitated using e voucher as an input delivery This could be facilitated using e voucher as an input delivery mechanism, involvement and empowerment of local leaders, mechanism, involvement and empowerment of local leaders, updated farmer registers.updated farmer registers.

Government and private sector to move from adversarial Government and private sector to move from adversarial relations to partnerships that foster trust and predictability in relations to partnerships that foster trust and predictability in the markets the markets

Productivity needs to be enhanced for small scale farmers to Productivity needs to be enhanced for small scale farmers to be competitive so as to achieve food security, wealth be competitive so as to achieve food security, wealth creation and access to financing opportunities to graduate to creation and access to financing opportunities to graduate to higher levels and modernize agriculturehigher levels and modernize agriculture

Invest in infrastructure on storage and roadsInvest in infrastructure on storage and roads

Concluding RemarksConcluding Remarks The problems and solutions are by and large The problems and solutions are by and large

understood and agreed by stakeholders. understood and agreed by stakeholders. There is need to take decisions that will assist There is need to take decisions that will assist

move the country from vulnerability (food insecurity move the country from vulnerability (food insecurity shocks) to prosperity and stability. shocks) to prosperity and stability.

Stakeholders and government need to work Stakeholders and government need to work together to address the issues in the sector so that together to address the issues in the sector so that food security and wealth creation is optimized. food security and wealth creation is optimized.

Politicization of the issues surrounding food Politicization of the issues surrounding food security must be set aside so that beyond political security must be set aside so that beyond political affiliations, actions that support progress are taken. affiliations, actions that support progress are taken. Time to act is now!Time to act is now!

Thank you for your attentionThank you for your attention

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