Maize grain prices rise as regional supplies tighten

• Regional food security is stable and there is mostly Minimal (IPC Phase 1) food insecurity conditions in most parts of southern Africa following main season harvests. There are pockets of acute food insecurity in parts of Angola, Lesotho, Malawi, Mozambique, and Zimbabwe due to reduced harvests in some areas affected by drought or floods and above-average cereal prices. Areas of concern are currently experiencing Stressed (IPC Phase 2) and Crisis (IPC Phase 3) levels of food insecurity.

• Projected demand for South African maize is expected to exert pressure on the country’s maize supply this year.   From June until mid August SAFEX prices for maize rose sharply in response to U.S. maize price increases due to deteriorating weather conditions. More recently prices have declined and stabilized, though at higher levels and still in response to world market prices which have also stabilized.  However, there is the possibility that maize prices could still increase in the coming months as local supplies begin to dwindle.

• The climate outlook for the 2012/13 rainfall season issued by the Southern Africa Climate Outlook Forum (SARCOF-16) predicts that most parts of the region are likely to receive normal to above-normal rainfall. However, some localized areas in South Africa, southern Mozambique, southern Zimbabwe, eastern Botswana, Lesotho and Swaziland which experienced dryness during the 2011/12 season are likely to experience normal to below-normal rainfall in 2012/13 season.

Food security is stable in most parts of southern Africa following main season harvests. Across the region there is mostly Minimal (IPC Phase 1) food insecurity conditions. However, reduced harvests in some areas affected by drought or floods and above-average cereal prices have resulted in pockets of acute food insecurity in parts of Angola, Lesotho, Malawi, Mozambique and Zimbabwe. In these areas the lean season is expected to start early (August/September), rather than the normal start of October/November.  Current regional maize demand/ supply projections suggest that the surpluses produced by the main maize producing countries of  Malawi,  South Africa, Tanzania, and Zambia are just sufficient to cover the import requirements of grain deficit countries in the region if strategic grain reserves (SGR) are replenished according to current plans (Table 1). This level of surplus is much lower this year due to  overall lower harvests compared to previous years, and in particular in the main maize producing countries of Malawi, Mozambique, and Zambia; and due to lower levels of carryover (opening) stocks in South Africa. However, it should be emphasized that the exclusion of some desired grain reserve stocks would place the projected regional maize supply at a much larger surplus.  

Many rural households in areas where crop production was not affected by weather related shocks are still accessing food from their own production and local markets. Within these areas markets remain adequately supplied and prices affordable---enhancing access for market dependent households.  However, in the areas with pockets of acute food insecurity, conditions are expected to worsen as the lean season begins.

The specific areas of concern monitored by FEWS NET include southern Malawi, where food insecurity severity in 15 districts ranges between Stressed (IPC Phase 2) to Crisis (IPC Phase 3). In Zimbabwe food insecure populations have been identified in Matabeleland South, Matabeleland North and Masvingo provinces, southern parts of Manicaland province, western parts of Mashonaland West province and northeastern parts of Mashonaland East province. FEWS NET estimates that from August/September, these areas are likely to experience Stressed (IPC Phase 2) food insecurity conditions. Additional areas in southern and western parts of Zimbabwe could begin to experience Stressed conditions starting in October if food assistance is not made available.

In Mozambique, districts with households facing Stressed (IPC Phase 2) acute food insecurity conditions in the July – December period include parts of Chigubo, Chicualacuala, Funhalouro, Panda and Machanga districts. Poor and very poor households in Magude, Chemba, Chiuta and Mutarara districts are also at high risk of acute food insecurity and close monitoring is required when the lean season starts in October. The Southern Africa Development Committee (SADC) Regional Vulnerability Assessment Committee (RVAC), through the national vulnerability assessment committees (NVACs), has also identified populations that will experience acute food insecurity conditions during the 2012/13 consumption period in Lesotho, Angola, Namibia and Swaziland. The RVAC has estimated that about 7.3 million people (including 1.83 million assessed for Angola) will be food insecure in the 2012/13 consumption period. 

The regional maize supply/demand position has increased slightly following an upward revision of production in South Africa. The projected maize production of 12.13 million MT (which is 7 percent higher than last year and 5 percent higher than the five-year average respectively), has resulted in a small overall regional balance (after stock replenishment) of 67, 000 MT. Since this surplus is inclusive of high levels of planned national government strategic grain reserves, reductions to national levels of grain reserves in order to meet domestic requirements would result in a much larger regional maize supply/demand surplus (Table 1). While governments in Malawi, Zambia and Tanzania stated that they intend to maintain their strategic grain reserve, it is possible that for cereal deficit countries including Zimbabwe, grain reserves will not be fully replenished this consumption year.    

South Africa’s surplus is already supplying structurally maize deficit Botswana, Lesotho, Namibia and Swaziland (BLNS) and other neighboring States (like Mozambique). Tanzania’s surplus is expected to flow mostly into East Africa since Tanzania is also integrated to the East African Community; more of this surplus is expected to meet the commercial and humanitarian needs in the Greater Horn of Africa. The Zambian Government announced a temporary maize export ban on September 5^th due to recent exports of large quantities of maize by foreign traders. In order to safeguard the country’s food security, the government decided to revoke all export permits previously issued at the district level so that the national export permit process can be centralized. The World Food Program (WFP) Office in Lusaka and the Ministry of Agriculture and Livestock are holding talks on how WFP can continue purchasing humanitarian maize grain for Zimbabwe and the Horn of Africa. The Food Reserve Agency (FRA) is currently buying maize grain from the 2012 harvest.  While the Zambian Government has increased the required strategic reserves to 1 million MT, current estimates suggest that the FRA stock stands at 500,000 MT.  In Malawi it is not clear how much of the projected surplus is exportable surplus in view of the large shortages prevailing in the southern region. Furthermore, the prevailing export ban effectively prevents any flows of maize out of the country.

This means that demand for South Africa’s maize surplus (which is one of the lowest since 2008/09 – figure 3) will remain very high, both from neighboring countries and abroad. The increased demand from international markets (like Mexico) is of concern for the region because traders may prioritize shipments to the more lucrative markets outside of southern Africa. By mid September, total exports by South Africa amounted to 779,011 MT, of which 556,238 MT (71 percent) went to Mexico; and only 210,621 (27 percent) to the BLNS and Mozambique. Although no exports have been made to Zimbabwe so far, this could soon change given Zambia’s recent restrictions on exports. Already, over 64 percent of the projected exportable maize surplus of 1.22 million MT has been shipped out of the region (Figure 3). More exports to international destinations are expected, especially in view of the reduced production following the drought in the U.S. The projected demand for South African maize is expected to exert further pressure on the country’s average exportable maize surplus.  Prices on the South African Futures Exchange (SAFEX) tend to move in line with world prices of maize. From June until mid August, SAFEX prices for maize rose sharply in response to U.S. maize price increases due to deteriorating weather conditions. More recently prices have declined and stabilized - though at higher levels – still in response to world market prices which have also stabilized. But there is the possibility that they could still increase in the coming months as local supplies begin to dwindle.

Although prices on main reference markets continue to follow seasonal trends, in the areas of concern prices are unusually high compared to normal price trends and well above the five-year average. For example, in Malawi, August maize grain prices in the southern markets varied from MKW56/kg to MKW79/kg, while the national average stood at MKW56/kg. In Zimbabwe, maize grain prices in areas experiencing acute food insecurity ranged between USD 0.40/kg and USD 0.57/kg in August compared to USD 0.20/kg in surplus producing areas, and USD 0.29/kg at the Harare market. With many households relying on food purchases in food deficit areas of Malawi and Zimbabwe, the high prices mean poorer households’ access to food is highly compromised, calling for immediate integrated response by humanitarian organizations to save lives and protect livelihoods assets.  

The Sixteenth Southern Africa Climate Outlook Forum (SARCOF-16) was held in Harare, Zimbabwe by the SADC Climate Services Centre (CSC) in August. Climate scientists from the SADC National Meteorological and/or Hydrological Services, produced a rainfall outlook .Two seasonal forecasts were issued at the SARCOF, covering the periods October to December (OND) 2012, and January to March (JFM) 2013 (Figure 5).

 For most areas, the forecast is consistent for the both forecast periods. Much of the SADC region is likely to experience normal to above-normal rainfall for both forecast periods (light blue colors, Figure 5), with the exception of (1) north-eastern Tanzania, which is forecast for above-normal to normal rainfall; (2) western parts of Angola, Namibia and South Africa, which are forecast for normal to below normal rainfall; (3) northern and central DRC, which is forecast for normal to below normal rainfall; (4) south-eastern parts of the region, which are forecast for normal to below normal rainfall – these areas include Swaziland, southern Mozambique, southern and western Zimbabwe, eastern Botswana, western Zambia, northern/central South Africa and north-eastern Lesotho; and (5) south-western Madagascar. Many of the areas that were affected by a dry spell last season are currently forecast to have increased chances of normal to below-normal rains during the 2012/13 season.

Figure 6 shows the combined OND-JFM forecast, overlaid with some of the areas affected by dryness during the 2011/2012 season, shown in brown. These delineations are approximations based on FEWS NET analysis of rainfall estimates, crop water balance models, energy balance models, and reports from the countries. Many of the areas that were affected by dryness during the 2011/12 agricultural season (South Africa, southern Mozambique, southern Zimbabwe, eastern Botswana, Swaziland, and Lesotho), are likely to receive normal to below normal rainfall this season. These areas face one or several consecutive years of poor crop performance and reduced pasture, which could negatively impact the livelihoods of those households that have a higher dependence on crop production and agro-pastoral activities.

Monitoring of the development of an El Nĩno event continues, and a recent ENSO (El Nino Southern Oscillation) consensus forecast (issued 6 Sep 2012) by two major global forecasting centers NOAA Climate Prediction Center (CPC) and International Research Institute (IRI) for Climate and Society gave a 69 percent chance for the development of El Nĩno during the August-October 2012 period. The CPC/IRI analysis indicates that the consensus of models issued by major climate monitoring centers is predicting the development of a weak El Nĩino. An El Nĩno event is generally associated with increased chances of below normal rainfall in some of the southern parts of the region. However, it should be noted that many weather and climate-related factors (such as sea surface temperatures in the Indian Ocean, and the tropical cyclone incidence and location, among others) other than El Nĩino can also affect the seasonal rainfall outcomes.

Users should note that the SARCOF forecast is a consensus forecast designed for a regional audience. Users requiring higher accuracy and/or national level forecasts are encouraged to contact their respective national meteorological agencies for downscaled national seasonal forecasts, as well as updates to those forecasts, which can increase in accuracy as the lead time to the forecast decreases. The SADC CSC will issue an update on the JFM forecast towards the end of December.