Maize prices falling as new supply reaches the market

• Given the good harvest, and falling staple food prices, acute food insecurity outcomes are expected to remain Minimal (IPC Phase 1) during the June to September period.
• Maize prices are expected to decline as the new harvest increases market supply and as rural households access more food from own production/labor. These lower prices will benefit market-dependent households, though prices are expected to remain above the five-year average, due to increases in fuel costs.
• Zambia’s export potential for its record harvest may be limited, as good production elsewhere in the region has reduced demand and provided abundant regional supply. However, informal maize flow into Tanzania has started increasing as demand from Tanzanian traders picks up, and increasing demand from Zimbabwe is expected later in the season.

Acute food insecurity remains Minimal (IPC Phase 1) in June, as the new harvest increases household food stocks and variety in the rural areas and starts to reach the market. Maize production for the 2013/2014 agricultural season reached a record 3.3 million MT, resulting in a large surplus of 1.15 million MT.

Farmers have harvested their crops and are busy preparing for the market, while some crops are already on the market. Maize sales by small scale farmers has commenced and the fact that farmers are transporting the grain to markets and milling companies is an indication of large supply as they compete for the market. Demand for labor (threshing, packing, and off-farm work) is generally good, and poorer households in the rural areas are mostly working for the better-off in order to increase access to food.

Maize markets and prices
• Small traders in Lusaka have started stocking up maize which they are buying from farmers bringing to the main market from mostly Central, Southern and Eastern Provinces with the intention of later selling to large traders, millers and other processors. The maize which had been selling at 60 ZMW/50 kg in May has since dropped by 8 percent to 55 ZMW/50kg in June (the current wholesale market price). Maize in Eastern Province is also selling at or near 55 ZMW/50kg.

• Generally, maize grain prices are on the decline to the advantage of market-dependent households, as expected given the large harvest, with most rural households taking advantage of their harvests for own consumption. However, maize grain prices are at least 40% above the five year average.

• Despite recent maize grain price decreases, maize meal prices are still high and mostly remained stable in May and June with respect to April and on average 42 percent above the five-year average as millers run down their old stock purchased at high prices.

• The government plans to purchase 500,000MT strategic grain reserves through the FRA, but has yet to enter the market to purchase maize. The purchases are likely to start by early July. The purchase price has been increased to 70 ZMW/50kg from the 65 ZMW/50kg, which had been maintained for the past five years despite prevailing market conditions.
In an effort to create space for the new purchases, FRA recently floated a tender for 100,000 MT maize sales targeting grain exporters. This suggests that the government is competing with traders for a market at the start of the marketing season, when market supplies are large and the regional market is limited. In view of this, increased private sector participation on the market will be highly dependent on the government’s predictability given past experience of high maize market interventions at short notice. Maize producers are currently competing for a limited market and this is pushing prices down, increasing access to staple food for market-dependent households.
 

Maize flows and trade

• Although the removal of maize export restrictions and large in-country supply have increased maize trade activities at the DRC (Kasumbalesa) border, the large volumes reaching the border are outstripping demand, resulting in continued price decreases (~100 ZMW/50kg in June vs  145 ZMW/50kg in May).

• At the northern border with Tanzania (Nakonde), informal maize outflow volumes and prices are increasing (90 ZWW/50kg when, and compared 78 ZMW/50Kg) as demand from Tanzanian traders increases.

• Despite the import restrictions in Zimbabwe, reports from the field and private sector suggests that formal maize exports by large Zambian traders to that country have started.

• While the WFP is fulfilling the last part of the last season’s humanitarian assistance through maize inflow into Zimbabwe, they are waiting for new humanitarian maize requests from the region and beyond before embarking on new purchases. These demands may l provide a further market for the large surplus, which could  reduce on possible wastage given limited good grain storage available in Zambia, and may contribute to prices remaining above the five-year average.
 

Livestock conditions

• Despite livestock condition in most parts of the country being generally stable, there has been renewed outbreak of the swine fever in Kasempa district and fresh outbreak in neighboring Mufumbwe district of Northeastern Province. The Ministry of Agriculture is bringing the situation under control through the spraying and slaughter of affected animals. 

The current situation has not changed the assumptions used to develop FEWS NET’s most-likely scenario for the April-September 2014 outlook period. A full discussion of the scenario is available in the Zambia April Food Security Outlook. 

• Given the good harvest, increased food variety, and falling staple food prices, Minimal acute food insecurity (IPC Phase 1) is expected to remain throughout the June to September period. Rural households will continue to benefit from increased food supply and increased food variety. While poorer households will benefit from good employment from the better-off whose production increased, they will still be facing staple food prices above the five-year average through September. Food insecurity problems for poorer households mostly of chronic nature will be felt after the outlook period, as they run out of their little harvest and the lean season approaches when staple food prices start rising with increasing market demand. 

• Although staple food prices will continue falling, maize meal prices are unlikely to fall to the levels of the five-year average given the high prices sustained in the 2013/14 marketing season and the increased marketing costs. The private sector is likely to actively participate in the maize market if Government restricts its purchases through FRA to strategic reserves. The private sector is also likely to increase its exports to mostly Zimbabwe once the current restriction is removed and demands from that country pick later in the season. Informal exports into Tanzania through Nakonde are expected to continue as long as prices there remain above those on the Zambian side. Informal exports to the DRC will be typical, low up to August and picking up towards the end of the year.