Elevated food prices drive Stressed (IPC Phase 2) outcomes

• Following a near-average national harvest in 2023, markets are well supplied with maize meal at the start of the lean season. However, market prices remain higher than last year and the five-year average. The high prices are likely impacting household purchasing power. Staple food prices will likely remain high through the lean season as market demand increases food prices amid high transportation costs. However, vegetable production and the good winter wheat harvest are expected to support household access to food and income in December and January. Nevertheless, very poor and poor households will likely be Stressed (IPC Phase 2) through the scenario period as high food prices limit their access to their non-food needs. 
• Wheat harvesting is ongoing under favorable conditions, and the season will conclude in November and December. Planting of main season cereals is also beginning, and initial conditions are favorable. There was an effective start to the rainy season in mid-to-late October across much of the country, but there is yet to be an effective start to the rainy season in most of the agriculturally productive areas of southwestern Mafeteng, southern Mohale's Hoek, and the western edges of Maseru and Berea. The Ministry of Agriculture bought fertilizer and seeds to offer at reduced prices for the 2023/24 farming season, which is expected to boost farming activities and income for the start of planting. Cumulative rainfall at the end of October ranged from 60 to 110 percent of the 40-year average across the country, but early season deficits are highest in the high-production lowlands where there is yet to be an effective start to the rainy season. 
• Most households are preparing land and beginning to plant for the 2023/24 agricultural season, providing agricultural labor opportunities for poor households following an effective start to the season across much of the country. However, the El Niño is expected to lead to lower-than-normal agricultural labor opportunities as better-off households plant less land than normal to save their seed and minimize potential losses. The Lesotho Meteorological Services (LMS) anticipates that El Niño will result in drier conditions, including a late onset of rainfall and warmer than normal conditions across the country during the October to December 2023 period, and this will likely continue through much of the agricultural season. 
• The September annual inflation rate increased to 5.8 percent from 5.2 percent in August. Prices increased mainly for Food and Non-alcoholic Beverages (2.1 ppt), Alcoholic Beverages and Tobacco (1.6 ppt), and Housing, Water, Electricity, and Gas (0.7 ppt). The annual headline inflation rate increase was moderated by an 8.2 percent reduction in the cost of passenger transport services and a 14.2 percent reduction for restaurants and cafes. However, the cost of food in Lesotho remains 6.2 percent higher than last year, which is likely continuing to impact household purchasing power. 

In October, cumulatively below-average to average rainfall was recorded across much of Lesotho, with below-average rainfall in most of the agriculturally productive areas of western Lesotho (Figure 1). However, the recorded rainfall did provide adequate soil moisture to start land preparation for the 2023/24 cropping season. Typically, most households plant their crops in November and December, but planting is already ongoing in the mountains following an effective start to the rainy season (Figure 2). 

Ahead of the 2023/24 rainy season, the Lesotho Meteorological Services' seasonal climate outlook forecast that most of the country will receive 40 mm and 60 mm of rainfall monthly from October to January, except for the northern highlands and along the Maloti range, where more than 60 mm of rainfall monthly is expected. This would likely result in rainfall being cumulatively around 50 to 75 percent of the 2000-2018 average. However, rainfall from December to March in the Mountains, Senqu River Valley, Mohale's Hoek, and Mafeteng is forecast to range from 70 to110 mm each month, which is higher than normal, while the rest of the country is expected to receive more than 110 mm each month. Additionally, the mean 

temperatures for October to March are expected to be above normal and will likely result in higher evapotranspiration during the 2023/24 agricultural season. The forecast below-average rainfall is likely to lower agricultural labor opportunities as better-off households reduce the area planted to save their seeds and minimize potential losses due to the impact of El Niño. However, the government and other donors are distributing subsidized seeds and fertilizers across the 10 districts of the country to boost production and improve farmers' access to inputs. Around 132 MT of seed and 8,140 MT of fertilizer were procured for distribution under this program. Subsidized inputs will likely improve access for very poor and poor households.

In October, the distribution of maize and beans purchased from farmers by the government has yet to start as milling is still ongoing. The government is working with the World Food Program (WFP) to assist in the milling, fortifying, and packaging of cereals. The government plans to distribute maize and beans across 80 constituencies, with 120 vulnerable households targeted in each constituency. 

In October, some households are still consuming their food stocks from the 2023 harvest, although most households, including some middle and better-off households, are dependent on market purchases for food as the lean season begins. However, market prices for key staples remain higher than the five-year average and prices last year. The increased market dependence through the outlook period is expected to keep food prices high, particularly as fuel and transportation costs remain high and are often passed onto the consumer. 

In September 2023, monthly and annual changes in the prices of staple foods in the Maseru market were mixed. Maize and wheat flour prices in September decreased, but prices remain higher than last year and the five-year average due to higher production costs (Figure 3). Similarly, in September, prices of mixed beans and yellow split peas declined by around 3 and 10 percent, respectively, but remained around 4 and 14 percent higher than prices last year. Edible oil prices continue to decline and are around 19 percent lower than last year but remain around 35 percent higher than the five-year average. In general, the price decline in September is likely to improve household access to food, but food prices remain elevated, and household purchasing power is lower than normal, particularly for very poor and poor households. Maize meal prices in Maseru are projected to increase through May 2024 seasonally and remain higher than last year and the five-year average (Figure 4). Although El Niño may result in below-average production, reduced market demand due to the consumption of green crops should stabilize prices around the start of the 2024 harvest in April.

According to S&P Global, Lesotho's wheat grain imports in 2023 are estimated to be around 50,858 MT, higher than the five-year average of 31,950 MT but lower than the 77,523 MT imported in 2022 following the good 2023 wheat crop. Additionally, 28,000 MT of wheat flour imports are expected in the 2023 calendar year. The 2023 annual export prices ($428/MT) to Lesotho are slightly lower than in 2022 ($455/MT) because of the global reduction in wheat prices. This sustained reduction in export prices of wheat contributes to lower consumer prices of bread and moderates staple food price inflation. Bread is an alternative staple in Lesotho and a key substitute for maize.

Although maize harvests have trended upward over the past few years, the share of maize imports in total country supplies has remained larger than domestic supplies. From May to September 2023, Lesotho imported just 14,000 MT of maize, which is a much slower pace compared to the past five years due to the elevated domestic supplies this year. Given the large share of South African exports in Lesotho's market, any increase in prices in South Africa will likely be fully transmitted to the domestic markets in Lesotho.

In October, pastures and water conditions for livestock were in good condition and readily available following the cumulatively above-average rainfall recorded during the 2022/23 rainy season. By the end of October, the satellite-derived eVIIRS normalized difference vegetation index (NDVI) indicates that vegetation conditions are over 105 percent of the 2012-2021 average, likely keeping livestock body conditions fair to good. Additionally, income from mohair and wool is expected to improve with increased production and marketing support from the government.

Households normally start accessing green harvests in February, improving access to foods such as beans, sweet potatoes, and green mealies; however, the anticipated average to below-average rainfall will likely delay household access and availability of these green foods. However, erratic and cumulatively below-average rainfall is expected to lead to lower-than-normal agricultural labor opportunities and income, impacting household purchasing power. Poor households will likely increase their dependence on coping strategies indicative of Stressed (IPC Phase 2) through the lean season, such as relying on less preferred and less expensive foods, purchasing food on credit, and limiting portion sizes at mealtimes. In April and May, the start of the 2024 harvest is expected to improve household access to food and income from agricultural labor opportunities. However, earnings may be below normal due to increased competition and lower-than-normal labor opportunities. Poor households are also likely to increase their reliance on remittances from family and friends in South Africa. Overall, area-level Stressed (IPC Phase 2) outcomes are expected, with the worst-affected households expected to be in Crisis (IPC Phase 3).