Maize meal prices expected to be exceptionally high at peak lean season

• Between October and December, the food insecurity situation is likely to deteriorate to Stressed (IPC Phase 2) in a few areas in the southeast and southwest as poor households fail to meet non-food essentials without resorting to irreversible coping strategies. Minimal (IPC Phase 1) food insecurity outcomes are likely to continue across most of the country during the outlook period. Given the expected high level of maize prices in the coming months, household purchasing power will continue to reduce from now until the start of the main harvest.

• The export ban continues, but has instead promoted informal export of the commodity using unusual and unmonitored routes. Large traders are holding large volumes of maize in anticipation of exporting to the broader region once the export ban is lifted. Part of the maize in the hands of the large traders is likely to be sold to the World Food Program (WFP) for humanitarian assistance in neighboring countries.

• Despite the current weak La Niña to borderline ENSO neutral conditions, typical La Niña impacts are expected for Zambia in the upcoming season and a normal start of season is likely. Since many farmers benefited greatly from the good prices that they received from their 2015/16 crop sales, they were able to acquire agricultural inputs for the upcoming season early and are likely to cultivate more for the 2016/17 cropping season. 

Current Situation

Following average maize production during the 2015/16 season, maize supplies in Zambia are adequate to meet national requirements and an exportable surplus of 643,600 MT. To account for informal export demand to the DRC and Malawi, another 200,000 MT of maize was factored into the National Food Balance Sheet similar to previous years.

During a recent field assessment in September, FEWS NET observed large volumes of maize going into Malawi and the DRC. The DRC sources maize/meal from the Northern, Central, and Copperbelt Provinces, while the Eastern Province has been supplying Malawi this marketing season.

In the current season, the private sector has atypically been the market leader, while the Food Reserve Agency (FRA) has had little or no impact on the maize market. A substantial number of farmers sold directly to large local traders as opposed to middlemen, which has benefited the producers greatly through increased income and early acquisition of agricultural inputs.

At the start of the marketing season in May, the government announced that the export of newly harvested maize would only begin after September 2016 in order to allow the FRA adequate time to purchase maize for the strategic grain reserves and additional maize for price stabilization during the lean season. The export ban continues, but has instead promoted informal export of the commodity using unusual and unmonitored routes. Large traders are holding large volumes of maize in anticipation of exporting to the broader region once the export ban is lifted. Part of the maize in the hands of the large traders is likely to be sold to the World Food Program (WFP) for humanitarian assistance in neighboring countries. Recently 48,600 MT of maize committed to WFP was allowed to be exported, of which 21,000 MT had already been transported to Zimbabwe and Malawi by the third week of October.

Prices at which traders are buying maize peaked in July and dropped in August/September. This drop has resulted in some medium scale farmers holding back stock in anticipation of improved prices in the lean period. Additionally, farmers are keeping some stock to use as labor payment for land preparation and weeding activities. 

The attractive maize prices have to a certain extent enticed farmers to sell more maize than usual which will make them look to the market atypically early by which time prices of maize meal would have shot up significantly. While traders have continued purchasing maize, some have met their target while others have stopped buying in response to the extended export ban.

Currently, rural households are consuming their own food stocks from the previous harvest. Market demand for maize remains lower than initially anticipated in drought-affected areas, however prices remain high. Food security outcomes across most of the country for the October 2016 – January 2017 period will be Minimal (IPC Phase 1) and a few areas in the southeast and southwest will be Stressed (IPC Phase 2) for the first half of the February-May 2017 period, improving when the harvest begins in April. 

Approximately 975,738 people have been identified as requiring food assistance between August 2016 and March 2017. The government will provide assistance to households using FRA maize stocks and the Disaster Management and Mitigation Unit (DMMU) will coordinate this relief effort. The relief distribution has not yet started.

Livestock conditions are moderately poor due to reduced water and pasture availability since streams have dried up and river water levels are low. In some instances, households are sharing domestic water with livestock. Generally, the reduced ground as well as surface water remains of major concern.

Land preparation has started and better-off households are increasingly hiring casual labor. Farmers are busy acquiring inputs (seed and fertilizer) while waiting for the rains to start for planting. Based on recent information from the field, farmers have better access to inputs this season due to better returns from the previous harvest. In addition to this the price of fertilizer has reduced by an estimated 30 percent in comparison to the previous season. The Government input support program is underway and is targeting 1.6 million small scale farmers with a combination of physical inputs and e-vouchers. This figure is up by 60 percent from the previous season.

Local currency has remained relatively stable hovering around ZMW 10: US $1 since May 2016, an improvement over the September/ October 2015 period when the rate reached almost ZMW 13: US$ 1 (figure 1). However, the appreciation of the local currency had not translated into lower commodity prices and inflation rate remained relatively high at 18.9 percent in September before significantly dropping to 12.5 percent in October (figure 2).

Red locust populations have been reported in the breeding areas of Kafue Flats. Annual spraying is required but is yet to be carried out. 

The October 2016 to May 2017 Food Security Outlook report is based on the following national-level assumptions:

Staple food availability: Given the average production for maize (2.87 million MT) and moderate carryover stock (667,000 MT), staple food will meet national cereal requirements (2.9 million MT) for the remainder of the marketing season (October 2016 – April 2017). Increased market demand is expected from November to February as more households deplete their own stocks and start depending on the market for staple food. By March, the green harvest will improve food availability at the household level and reduce dependency on the market in April and May. 

Maize market and prices:  Given the record maize purchasing prices, both maize grain and maize meal prices are expected to trend at very high levels during the October to March period. Using both technical and fundamental analysis, maize retail prices are likely to trend steadily upwards between October and November and then more steeply up to the peak lean period (January-February). During the months of October-February, prices are likely to remain above previous season levels and at least 60 percent above average, decreasing between the months of March-May with the arrival of the green harvest in March and the main harvest in April/May (Figure 3). During the remainder of the 2016/17 marketing season, private traders will continue dominating the market given the failure by the FRA to secure much maize. Consequently, the large traders will hold most of the stocks and therefore drive the market for the remaining duration of the outlook. 

Medium scale farmers who are holding some maize are likely to offload some stocks by end of October to enable them purchase inputs and due to limited storage. The government is likely to release funds to allow the FRA secure the remaining maize needed to meet the 500,000 MT SGR, part of which may be purchased from the traders. It is unlikely that the government will subsidize millers with maize during the outlook period given their low stock position. Millers will need to source most maize directly from traders, therefore maize market interventions (including FRA’s supply of subsidized maize to millers) will remain lower than usual.

Maize flow and trade: Informal exports to the DRC and Malawi will continue throughout the outlook period given the large deficits in those countries, however volumes are expected to decrease once the rainy season begins in November due to reduced physical access and reduced source supplies. Given the below average levels of FRA stocks, there is likely to be a delay in lifting the ban on maize exports until the end of the year. Once lifted, it’s likely that a quota system may be used as a cautionary measure to ensure enough maize remains in country to meet local needs.

Water availability: With the onset of rains by November, both ground water and surface water levels are expected to start rising from their current low levels as the season progresses improving water access. However, increase in water levels at Kariba Dam (main hydro power supply) will not be adequate to generate adequate power during the outlook period and therefore, load shedding is likely to continue but with some reduction.   

Livestock conditions: Conditions of livestock will remain moderately poor in the October to November period due to low water availability and poor pasture. However, this is likely to improve by December as the rains establish and the water and pasture conditions improve increasing livestock value.

Inflation rate and exchange rate: Given the increased fuel prices and anticipated increase in cost of electricity which will trigger increased food prices due to transport and processing costs, the rate of inflation is expected to go up during the November 2016 and May 2017 period. This will further reduce the consumer purchasing power. The exchange rate is expected to remain relatively stable, but could see some level of depreciation when the IMF program implementation starts most likely in early 2017.

Rainfall forecast and seasonal progression: Weak La Niña conditions close to the ENSO-neutral threshold are currently prevailing. The latest forecasts suggest that ENSO is likely to remain in this state, with near-equal chances for either ENSO-neutral or weak La Niña conditions until the end of 2016. Neutral conditions are forecast to be more established by early 2017. Under the current weak La Niña to borderline ENSO neutral conditions, typical La Niña impacts may still nonetheless be felt over Southern Africa, especially through the end of 2016. For Zambia, the La Niña conditions tend to be associated with normal to above normal rainfall during the October to March period. Given this seasonal forecast, an average or above average green harvest is expected in March, followed by a main harvest in April/May. Livestock conditions during the December to May period will return to normal as water and pasture availability increases.

Agricultural Input Support: Input support will be provided to 1.6 million targeted small scale farmers, a 60 percent increase over the previous season. Out of 105 districts in the country, 66 will receive physical input for distribution and 39 districts will receive e-vouchers. Depending on efficiency, this is expected to support timely planting activities and increased input accessibility for small-scale farmers.  

Labor demand: Given the seasonal forecast and improved input access this season, land preparation activities will be advanced between October-mid November, and planting is likely to occur on time. Consequently, agricultural labor demand is expected to be at normal levels for the months of October – May. These labor opportunities will improve food access for poor households.  

During the outlook period, most areas across the country will experience Minimal (IPC Phase 1) acute food insecurity. Given the average production this year, most rural households are likely to continue consuming their own production up to October. However, many will be looking to the market to meet their staple food starting in November once their own stocks run out. Poor households will be earning most of their income from agriculture labor sale between October and May. Prices of staples on the market are expected to continue to be high during the November to March period based on current trends and expected increase due to the rise in fuel costs. Consequently, poor households will spend most of their earnings on food purchases between November and March. Areas in the southeast and southwest that were affected by the previous drought are likely to experienced Stressed (IPC Phase 2) acute food insecurity outcomes. They will minimally meet their food requirements and will not be able to meet their non-food needs without engaging in irreversible coping strategies. By April, national outcomes will be Minimal (IPC Phase 1) based on the seasonal forecast and average to above average crop production.