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Maize prices rising even more than expected in southern Malawi

  • Food Security Outlook Update
  • Malawi
  • September 2012
Maize prices rising even more than expected in southern Malawi

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  • Key Messages
  • Updated food security outlook through March 2013
  • Key Messages
    • Limited household food access has resulted in a food insecurity Crisis (IPC Phase 3) in southern Malawi.  Based on August analysis, FEWS NET estimates that 1.76 million people are in need of humanitarian assistance between October 2012 and March 2013. Response plans remain inadequate and may be exhausted by November/December 2012.  If funding is not ramped up immediately, Emergency (IPC 4) acute food insecurity conditions are likely by December 2012.

    • Current maize prices are double those of 2011 and have continued to rise on most local markets in the south, exceeding recent FEWS NET price projections in several areas. 

    • ADMARC outlet markets in the south continue to maize at subsidized prices but have begun to ration due to very low stocks. During ADMARC stock outs poor households have limited purchase options because local market prices are so high. 

    • Compared to the previous year, August cross-border maize imports from Mozambique declined by 90 percent due to diminishing household purchasing power in maize deficit areas of southern Malawi.


    Updated food security outlook through March 2013

    As indicated in the August Outlook through March 2013, FEWS NET’s updated Household Economy Approach (HEA) outcome analysis has confirmed that during the 2012/13 consumption year, substantial survival food deficits ranging between 13 and 20 percent are likely to exist among poor households in the Lower Shire (Nsanje and Chikhwawa districts), Middle Shire (Balaka and Blantyre districts), Lake Chilwa-Phalombe (Zomba, Machinga and Phalombe districts), Thyolo and Mulanje Tea (Thyolo and Mulanje districts), and Shire Highlands Livelihood zones (Thyolo district). Middle wealth groups in Blantyre, Chiradzulu, Thyolo and Mulanje districts will also experience deficits because these areas are more reliant on the cash economy. Although poor households in Rift Valley, Phirilongwe Hills, and Southern Lakeshore livelihood zones have adequate income to cover their basic survival needs during the outlook period, they will still need livelihood support, especially during the lean season (November-March). Households in these three zones could still lose their livelihood assets, which could lead to considerable food consumption gaps in the medium to longer-term. Based on the August updated analysis, FEWS NET estimates that 1.76 million people are in need of humanitarian assistance between October 2012 and March 2013 (Table 1). Higher than expected price increases (see below) could result in an even larger food insecure population. Updated HEA analysis will be released in October. Response plans remain inadequate and may be exhausted by November/December 2012.  If funding is not ramped up immediately, Emergency (IPC 4) acute food insecurity conditions are likely by December 2012.

    Consumer purchasing power continues to decline as a result of the devaluation of the local currency in May, subsequent depreciation, rising inflation, and fuel costs. As the value of the local currency has dropped further from MWK 167/1 USD to almost MWK 300/1 USD, food commodity prices and transportation costs remain very high. In comparison to August 2011 prices, August 2012 retail maize prices in southern Malawi have increased by about 180 percent. Current maize prices in southern Malawi range from MWK 55.5/kg in Liwonde to MWK 79.41/kg in Phalombe. Average maize prices in the southern region (MWK64/kg) continue to be the highest when compared with the central (MWK 51.86/kg) and northern (MWK 49.83/kg) regions. 

    Wealth Group

    Lower Shire (MW05)

    Lake Chilwa-Phalombe (MW04)

    Middle Shire (MW06)

    Shire Highlands (MW14)

    Thyolo Mulanje Tea Estates (MW16)

    Total

    Population

    Poor

    296,189

    419,249

    412,063

    43,424

    311,243

    1,482,168

    Middle

    0

    0

    0

    0

    272,338

    272,338

     

     

     

     

     

     

    1,754,506

    As of the end of August, maize stock levels in ADMARC (the Government of Malawi owned grain marketing board) markets across the southern region are at varying levels. Because stocks are running out fast in some locations, several markets have started rationing maize at 20kg or 25kg per person. In the absence of ADMARC’s low fixed selling price of MWK 60/kg, the only available maize in local markets in the region is sold by private traders sourcing their maize from central Malawi markets, moving it 400-500 km to southern Malawi and selling at higher prices which are largely inaccessible to the poor.

    According to the government, the Strategic Grain Reserve (SGR) holds 145,000 MT after drawing down 25,000 MT for the purpose of humanitarian assistance in southern Malawi. An attempt to restock ADMARC markets through an August SGR non-humanitarian draw down was not approved by the government.

    Based on field observations by FEWS NET in early September, most households in southern Malawi depleted their own produced maize and other cereal stocks in July.  Poor households have been relying on income from extremely limited local ganyu opportunities, ganyu in Mozambique, and charcoal sales in order to access food in markets for the past few months. Better-off and middle wealth group households who received some income from livestock sales are mainly able to access food through local markets.  Some middle wealth group households in highly cash dependent communities like Thyolo, Mulanje, Blantyre, Chiradzulu, Zomba and Machinga are unable to purchase adequate maize quantities and are likely to be unable to meet food needs within the next few months.

    Currently, humanitarian food assistance has started in only three districts (Nsanje, Chikhwawa and Machinga) and funding levels are only a third of what is needed in order to fully implement the government response plan. The current food assistance distributions are expected to end in late November or early December. Malawi is considering cash interventions in some districts affected by food insecurity in southern Malawi. Given the current unseasonably high price trends, there is a risk that the availability of cash in these areas could allow traders to profit by raising food prices even further, especially if ADMARC supplies are low.

    Markets and Cross Border Trade

    • National average maize prices have increased by 10.4 percent over the past two months, reaching MWK 55.53/kg by the end of August.
    • Maize prices have increased faster than expected and August maize price averages in PHA, SHI, RFT, and TMT livelihood zones are currently higher than FEWS NET’s July-September maize price projections (Figure 3). This means that in addition to seasonal price increases, a combination of rural inflation, the remaining effects of the May 2012 currency depreciation, and increasing transport have contributed to a retail price increase of 20 percent and higher in certain areas.
    • Average national rice prices were at MK 281.86/kg, up 1.67 percent since July. Bean prices were at MK 299.35/kg, up 2.40 percent since July. Cassava prices decreased by 2.99 percent from MK 66.19/kg in July to MK 64.21/kg in August. Cassava prices in all areas decreased slightly because August is a major cassava harvest month.
    • Overall, informal cross border trade of maize between April and August decreased by 22 percent. Most maize imports to southern Malawi are coming from neighboring Mozambique. Compared to the previous year, August cross-border maize imports levels from Mozambique were reduced by 90 percent due to diminishing household purchasing power in maize deficit areas, which has lowered demand in local markets and a lower supply of maize on the Mozambican side in Milange district. 
    Figures Seasonal Calendar

    Figure 1

    Seasonal Calendar

    Source: FEWS NET

    Comparison of observed August 2012 maize prices with FEWS NET most likely and worst case price projections for the July-Septe

    Figure 2

    Comparison of observed August 2012 maize prices with FEWS NET most likely and worst case price projections for the July-September 2012 period in livelihood zones of concern

    Source: FEWS NET

    This Food Security Outlook Update provides an analysis of current acute food insecurity conditions and any changes to FEWS NET's latest projection of acute food insecurity outcomes in the specified geography over the next six months. Learn more here.

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