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Maize prices start to decline and food security remains stable

  • Food Security Outlook Update
  • Zambia
  • June 2012
Maize prices start to decline and food security remains stable

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  • Key Messages
  • Updated Food Security Outlook through September 2012
  • Key Messages
    • The food security situation is generally stable following the good 2011/12 harvest. The availability of staple food supplies has increased at the household level, as has access to improved food variety. The country is expected to remain in the minimal food insecurity (IPC Phase 1) classification for the remainder of the Outlook period.

    • In accordance with seasonal trends, maize prices have started to decline with significant price decreases observed in low producing districts. This is a general indication of improved staple food supply. 

    • The Food Reserve Agency (FRA) has maintained a buying price of ZMK 65,000 per 50Kg for the 2012/13 maize purchase program. This price is significantly higher than the market price, yet poorer farmers in need of immediate cash have started selling their commodity to private traders at prices ranging from ZMK 650 to ZMK 900 per kg, which is the prevailing market price based on the maize supply and demand situation.. The FRA‘s level of involvement in the maize market will determine the extent to which the private sector will participate in the coming months. 

    • Preliminary results of the vulnerability assessment committee (VAC) assessment completed in April/May indicates that five districts were negatively affected by the erratic rainfall earlier this year and food security is mainly a chronic problem. Part of the population in these districts may require food assistance. However, this need will be met with in-country stocks.

    Updated Food Security Outlook through September 2012

    Zambia’s food security situation remains stable with the start of the 2012/13 marketing and consumption year. Household maize stocks are good and improving following another maize surplus production of 2.85 million MT. Consequently, many rural households are accessing their own maize and other seasonal foods as markets remain well supplied with staple foods. In southern districts that experienced prolonged dry spells, food security conditions are stable as households access the little harvest from the 2011/12 production season and low-priced maize from the market. Surplus maize production combined with a large carryover stock has increased national maize availability. Relatively stable and declining prices have improved the food security situation for market dependent households across the country. In general the food security situation in the country is currently favorable and can be classified as falling in the minimal acute food insecurity category (IPC Phase 1).

    Markets and Prices

    Following the good harvest, maize and maize meal prices have either remained stable or declined (see Figure 3).

    Districts such as Kasama (Northern Province) and Livingstone (Southern Province) recorded notable maize price reductions of 20 and 10 percent, respectively, in May when compared to the month of April. In most markets, maize prices were below the five-year-average and the previous season’s prices. At this time of the year, most households in rural areas rely on their own production, so market demand for staple food has been low. On the other hand, low income urban consumers usually access relatively cheap maize and take it to local hammer mills for processing, thus reducing market demand for industrially processed maize meal.

    In an effort to create room for storage of the new harvest, the Food Reserve Agency (FRA) has continued selling last season’s maize on the market at fixed prices ranging from $135/MT to $170/MT. In order to allow traders to actively participate in the maize market as the marketing season gets underway, it has been recommended that the FRA withdraw from the market soon. It is not yet clear at what point the FRA will withdraw from selling maize on the market, but what is clear is that as long as government market interventions remain unpredictable there will be limited private sector participation on the market.

    Meanwhile, the FRA announced its intention to purchase 500,000 MT of maize for strategic reserves from July to October at ZMK 65,000 per 50Kg (ZMK 1,300 per Kg). This price has been maintained for the past three years and is no longer based on the prevailing market conditions. Poorer farmers in need of immediate cash have started selling their commodity to private traders at prices ranging from ZMK 650 to ZMK 900 per kg, which is the prevailing market price based on the maize supply and demand situation. The FRA purchase price is at least 44 percent above the current market price, but small scale farmers in outlying areas are likely to sell to middlemen at prices far below ZMK 65,000/50Kg as maize floods the market and farmers become desperate to dispose of their maize because of insufficient storage and the need for income.

    The export of 300,000 MT of commercial maize to a company in Zimbabwe has been contracted through the Government of Zambia and will be transported once payment has been received. Meanwhile smaller contracts are in place and maize is currently moving into Zimbabwe and Malawi from FRA depots in the Southern and Eastern Provinces, creating some storage space for the new harvest. Another major export opportunity for Zambia during the current marketing season is the World Food Program (WFP) regional relief maize purchase for the Horn of Africa and Zimbabwe. According to WFP, 27,000 MT of maize have so far been purchased from Zambia for East Africa food assistance programs this year while another 27,700 MT has been purchased for Zimbabwe. The main challenge is the inadequacy of transport for large tenders within Zambia. As a result, WFP has extended a tender within the Southern Africa region for transport services. An aggressive national maize export program will help firm up local prices to the advantage of producers, while also reducing maize wastage in the current marketing season.

    Informal cross border maize trade volumes started increasing in May due to increased supply as the 2012/13 marketing season started. Maize exports to the Democratic Republic of the Congo (DRC) increased by 16 percent from the previous month, while maize imports from Mozambique and Tanzania increased by 45 percent. The increase in imports from neighboring countries is similar to the situation which prevailed in the 2011/12 marketing season. During the previous marketing season there was an increase in informal maize imports despite the large surplus in response to the high maize purchase price offered by the FRA. The above market price continues to encourage traders to purchase maize in neighboring countries for resale to the FRA in Zambia.  Both export and import volumes are expected to increase as the 2012/13 marketing season progresses.

    Update on Food Security Scenario

    As anticipated, the large harvest and reduced reliance on local markets for foodstuffs continues to contribute to the favorable food security situation in most parts of the country and is expected to remain favorable up to the end of the Outlook period in September. Preliminary results from the VAC in-depth assessment conducted in April/May established that five districts were most affected by the erratic rainfall out of the eighteen total districts assessed. These include: Chavuma (North western), Chikankata (formerly part of Mazabuka district), Mazabuka, Gwembe (Southern Province) and Mambwe (Eastern Province). Within these particular districts, crops were negatively affected by dry spells, resulting in significantly reduced harvest in localized areas. VAC results clearly indicated that the food insecurity in parts of the identified districts is mostly a chronic problem exacerbated by the erratic rainfall.  Preliminary results show that in the identified districts, part of the population may require food assistance. However, this need will be met with in-country stocks and, in an effort to avoid disrupting the oversupplied maize market, they have recommended use of cash or food vouchers.

    Generally, food security is expected to remain favorable, with households employing normal off-season livelihood strategies to meet their basic food needs up until the end of the Outlook period in September.  The acute food insecurity level is expected to remain minimal (IPC Phase 1).

    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

    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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