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Maize prices atypically rise in the north as foreign traders increase purchases

  • Food Security Outlook Update
  • Zambia
  • August 2012
Maize prices atypically rise in the north as foreign traders increase purchases

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  • Key Messages
  • Updated Food Security Outlook through December 2012
  • Key Messages
    • Current food security conditions in the country are favorable following a good harvest which produced another large maize surplus of 1.04 million MT. In general, most rural households have adequate food stocks and are searching for markets in which to offload their maize and other produce. No staple food shortage has been reported in areas of concern in the southern region. Nominal retail maize price trends in these districts were generally stable between May and July.

    • Increased buying by foreign traders in the northern and southern provinces resulted in an increase in maize prices in markets in Kasama, Isoka, Nakonde, Kazungula and Kalomo districts. This price increase is being linked to a large outflow of maize from the country and the situation has created concern over how this could compromise the food security situation. As a result, the Food Reserve Agency (FRA) has intensified maize purchases for the strategic grain reserves through its annual maize purchase program.  


    Updated Food Security Outlook through December 2012

    Similar to the 2011/12 consumption year, current food security conditions in the country are favorable following a good harvest which produced another large maize surplus of 1.04 million MT. In general, most rural households have adequate food stocks and are searching for markets in which to offload their maize and other produce. The assumptions and the projected food security scenario reported in the July Outlook are still valid.   

    In parts of the south where erratic rainfall resulted in a reduced harvest, the food security situation has remained stable as these areas benefit from the large production in neighboring areas. Currently, no staple food shortage has been reported in these areas of concern in the southern region. Nominal retail maize price trends in these districts have generally been stable since May. Most rural households are still consuming from their own harvest which includes seasonal foods such as sweet potatoes and pumpkins. Additionally, maize stocks at the household level remained high because purchases by the Food Reserve Agency (FRA) began later than usual this marketing season. 

    Markets and Prices

    Up until June, maize and maize meal prices in districts across the country were stable and declining according to the expected seasonal trends in a surplus marketing season. However, during July there were reports of an unusual increase in the number of foreign traders in Zambia that were buying maize from small scale farmers, especially in the northern province bordering Tanzania and the southern province which borders Zimbabwe. Following these reports maize prices began to atypically increase in a few markets, especially those in northern (Kasama, Isoka and Nakonde districts) and southern areas (Kazungula and Kalomo districts). This price increase is being linked to a large outflow of maize from the country (see Figure 3). There is general concern by the government that this large maize outflow could jeopardize the country’s food security situation despite the large maize surplus attained this agricultural season.

    Through visits to public markets in Lusaka, discussions with traders and cross border monitors, and price analysis, FEWS NET found that the sudden price increases witnessed in a few districts in July and August were not entirely linked to grain supply levels. Grain traders within the Southern Africa region are aware of the fact that after accounting for strategic grain reserves, Zambia’s maize surplus is one of the largest in the region. As a result, maize traders around the region would like to purchase maize from here.

    FEWS NET was able to establish that the informal maize flow at the Democratic Republic of the Congo (DRC) border (the biggest market for informal maize trade) was typical for this time of the year and that prices were within their normal levels up until June. While some trade disruptions occurred in early July at Kasumbalesa, the main DRC border crossing, trade flow was able to normalize in August. However, in the southern province there has been an unusual increase in the number of Zimbabwean traders buying maize from small scale farmers and transporting it into Zimbabwe through the Chirundu border since June.  Similarly in the northern region, an unusually high number of traders from Tanzania are buying maize from small scale farmers in villages, especially in Nakonde, in order to sell to East African markets beyond Tanzania.

    Purchases from small scale farmers have resulted in significant price increases because traders are offering a minimum of ZMK 60,000 per 50 kg in order to entice the farmers to sell. This may account for the 33 percent maize price increases (from ZMK 45,000 to ZMK 60,000 per 50 kg) that occurred between late June and late July. Another factor that may have contributed to this situation is the fact that the FRA maize purchase program was delayed and consequently farmers were anxious to start selling their maize.

    In view of the increasing maize purchases by foreign traders in Zambia, the Revenue Authority and other responsible government departments have been directed to curb illegal maize exports. In addition to this there are calls for the FRA to purchase upwards of more than 500,000 MT of maize from small scale farmers. The FRA had initially announced its intention to purchase 500,000 MT of maize for strategic reserves from July to October at the price of ZMK 65,000 per 50Kg (ZMK 1,300 per kg). This maize purchase program is an annual exercise aimed at securing strategic grain reserves, while also providing a market for small scale farmers. This program was set to being in June, but began in late July instead.  

    Despite the surplus maize production, informal maize imports from Mozambique and other countries has increased since June. A maize import increase of 60 percent was recorded between June and July (see Figure 4). While increases are typical during this period, such large increases are unusual during a surplus season and can be attributed to the attractive maize price of ZMK 65,000/50 kg that is being offered by the FRA. In the past this high buying price has encouraged traders to purchase maize in neighboring countries at lower prices for resale in Zambia to the FRA. This marketing season, maize on the Mozambique side near Chikalawa area was selling as low as ZMK 20,000/50 kg in July (see Figure 5).

    Update on Food Security Scenario

    The areas of concern (Mazabuka, Chikankata, Mambwe, Chavuma and Gwembe) are expected to have stable food security conditions up to September. During this period they will have access to surplus food supplies from neighboring communities and districts. The food security situation is expected to remain Minimal (IPC Phase 1). Poorer households in these areas of concern will be mostly selling their labor in order to earn food and income. In addition to this, households will be intensifying off season activities including fishing, beer brewing and petty trading.   

    As the FRA maize purchases get underway, the agency is likely to buy more than the initially targeted 500,000 MT of maize by October. There is general concern that the reduced maize harvest in the United States due to drought conditions will result in a global increase in maize prices, particularly in Southern Africa. In an effort to safe guard the country’s food stocks, the government hopes to retain adequate maize stocks while also trying to stabilize the staple food prices. Maize prices are likely to remain at average to below average level up until September. Between November and December, maize meal prices are expected to remain stable as the FRA begins to supply most of its maize at much lower prices to millers during this period.

    Labor demand is expected to increase towards late September and early October as land preparation gets underway. These labor opportunities should help poorer households. Since the main planting season is between November and December labor opportunities will continue to increase. The annual fish ban will still be in effect during December, so poorer households will increase labor sale to make up for income loss from fishing activities. With anticipated staple food prices remaining relatively stable as the lean season starts and progresses, most market dependent households are likely to meet their basic food needs.  

    Figures Seasonal Calendar and Critical Events Timeline

    Figure 1

    Seasonal Calendar and Critical Events Timeline

    Source: FEWS NET

    Nominal retail maize prices for selected districts  (ZMK/18 Kg)

    Figure 2

    Nominal retail maize prices for selected districts (ZMK/18 Kg)

    Source: Central Statistics Office/ FEWSNET

    Recorded volumes of informal maize trade (MT) from July 2011 to July 2012

    Figure 3

    Recorded volumes of informal maize trade (MT) from July 2011 to July 2012

    Source: FEWS NET

    Maize price trend at selected borders ( ZMK/Kg )

    Figure 4

    Maize price trend at selected borders ( ZMK/Kg )

    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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