Good rains support crop production, but food prices remain high

• Rainfall has largely been cumulatively average to above average across much of the country; however, there were some cumulative rainfall deficits before the rainfall in late December in southern areas of Mafeteng, Mohale's Hoek, and Quthing. The largely well-distributed rainfall is likely to support crop production, but low liquidity among better-off households and high agricultural input prices are likely to lower labor opportunities. Additionally, high market prices likely impact purchasing power and diet diversity for poor and very poor households. The lower-than-normal income from agricultural labor opportunities will probably lower household access to their non-food needs, driving Stressed (IPC Phase 2) outcomes through May 2024, with the worst-affected households in Crisis (IPC Phase 3).
• The forecast below-average rainfall through the remainder of the rainy season will likely impact the green harvest in February and March and agricultural labor opportunities at the start of the main harvest in April and May. However, cumulative rainfall totals and distribution must be carefully monitored throughout the rainy season. The harvest period is typically associated with high agricultural labor demand, but agricultural labor opportunities will likely remain lower than normal if the harvest is impacted by erratic and cumulatively below-average rainfall in January and February, with below-normal access to income likely to impact household purchasing power.
• In November, the headline inflation rate in Lesotho increased to 6.8 percent from 6.5 percent in October. The inflation rate in November is the highest recorded since May 2023, primarily attributed to elevated prices in food and non-alcoholic beverages (9.2 percent compared to 7.3 percent in October). In November, a 12.5-kilogram bag of maize meal price is retailing at 96 LSLS (5.14 USD), approximately 27 percent higher than the five-year average and 5.5 percent higher than last year. The high food prices are likely impacting household purchasing power in the lean season. 

In December, average to above-average rainfall erased prior deficits, resulting in cumulatively average to above-average rainfall compared to the 40-year average (Figure 1). Much of the mountain regions have cumulatively received 110-125 percent of rainfall as of December 31, while most of the agriculturally productive areas of Lesotho have cumulatively average to slightly above-average rainfall. The good rainfall is likely supporting crop growth, with the water requirement satisfaction index (WRSI) for maize indicating that crops are likely in very good condition as of December 31, 2023 (Figure 2), supported by the cumulatively average to above-average rainfall and largely timely start to the rainy season. However, in southern Mafeteng, Mohale's Hoek, and Quthing, rainfall deficits have been erased by rainfall received in the latter half of December and crop conditions are still expected to be very good. Crops across the country are largely in vegetative crop stages but are emerging in the southern Mafeteng, Mohale's Hoek, and Quthing, where there was a delay in effective rainfall at the start of the season.  

The delay in land preparation and planting in localized areas likely resulted in reduced casual labor opportunities for the very poor and poor households who normally depend on these activities for income during the start of the agricultural season. However, the largely average to above-average rainfall is likely improving labor opportunities for weeding in agricultural areas and supporting livestock body conditions and mohair and wool production in the mountains. Nevertheless, limited access to agricultural inputs and low liquidity among better-off households will likely limit increased engagement in agricultural labor opportunities and wage rates during this period. Additionally, there remains a high probability that rainfall during the December to March period will be below average, which is likely to impact crop production, particularly if there is a prolonged dry spell in January or February, which are typically water-critical periods for crop production in Lesotho.

In November, a 12.5 kg bag of maize meal in Maseru retailed for around 96 LSL (5.14 USD), with prices around 5.5 percent higher than last year and around 27 percent higher than the five-year average (Figure 3). However, maize meal prices did decline by around 5 percent from October to November 2023. The high staple food prices are likely keeping household purchasing power lower than normal through the lean season. 

In November, headline inflation rose to 6.8 percent, the highest rate since May 2023, and was primarily attributed to elevated prices in food and non-alcoholic beverages (9.2 percent compared to 7.3 percent in October), along with increases in the price of alcoholic beverages and tobacco; housing, water, electricity, and gas; clothing and footwear; education, and miscellaneous goods and services. The consumer price index (CPI) increased by 0.5 percentage points month-on-month in November 2023. In the third quarter of 2023, Lesotho's domestic economy recorded a rebound, driven by increased demand and improved performance in construction and services, especially in the transport sector. However, deterioration in growth for the manufacturing sector due to a shortage of skilled labor, lack of access to finance, and high costs moderated overall growth. The second phase of the Lesotho Highlands Water Project (LHWP II), through reinvestment of the royalty income and operation of the infrastructure, likely provide more than 5,500 new jobs, of which nearly 60 percent are classified as skilled and semi-skilled, along with direct and indirect labor opportunities associated with the project. The LHWP II will also enable the country to earn external revenue and save foreign exchange by developing hydropower locally, reducing Lesotho's dependence on imported energy. This is expected to be a significant driver of medium-term economic growth. The temporary jobs created through this project will also be a source of income for poor households. Additionally, infrastructure development will ease access to health centers and the transportation of agricultural products to main markets.

Good rainfall over the past two years and through the 2023/24 rainy season has improved pasture conditions, with livestock body conditions likely to be fair and good. The good rainfall has likely supported kidding rates over the past few years, with good kidding rates ongoing during the rainy season. This has likely increased herd sizes, improved household income access, and supported mohair and wool production. However, other income sources, such as domestic work and self-employment opportunities, remain below normal due to lower-than-normal liquidity among better-off households, likely to prevail through the lean season. 

Overall, the good rainfall from October to December is supporting crop production, but high food prices are likely keeping household purchasing power lower than normal. The lower-than-normal household purchasing power is likely to keep poor and very poor household diet diversity low and impact the household's ability to purchase their non-food needs, driving Stressed (IPC Phase 2) outcomes through May 2024. However, global acute malnutrition (GAM) prevalence rates for all districts are likely to remain Acceptable (GAM <5 percent).