Food Security and Mealie
Meal Prices Dynamics (What are the Medium
and Long Term
Solutions?)
Presented by Eric Chipeta, FAO
Representation in Zambia
Presentation Outline
• Introduction :Historical Perspective and Status of Maize
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Stocks in Zambia
Maize Meal Price Spikes and Maize Pricing Issues in
Zambia
Production costs/ Supply side
Demand Side Factors
Transparency in Millers’ Pricing Model
Role of FRA
Policy implementation on maize exports and imports
Solutions- Medium Term and Long Term
Conclusion
Introduction :Historical Perspective and
Status of Maize Stocks in Zambia
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Food security dimensions are physical and
economic access, frequency, quantity
Fluctuations in prices have been common since
1980s
Mealie meal Price decontrol in 1987 resulted
in increases in prices and riots
Liberalization policies in the 90s brought its
own challenges and opportunities
Government responded to challenges by
setting up FRA.
Introduction :Historical
Perspective and Status of Maize
Stocks in Zambia
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Zambia has the stocks of maize according to the balance sheet
(1,661,626 metric tones)
The maize stocks at the time of reporting could carter for the
national requirements (1,300,000 metric tones) and leave a
good surplus (361,626 metric tonnes).
Bumper harvests have been recorded for the past 3
consecutive seasons (2009/2010, 2010/2011, 2011/2012)
2,795,483, 3,020,380 and 2,839,157 metric tons respectively
(CSO Bulletin 2009 and 2012).
Maize Meal Price Spikes and Maize
Pricing Issues in Zambia
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Demand and supply affect pricing.
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During times when maize is in short supply mostly between
November and April, prices are higher.
Notably, last quarter of 2012 there was an increases far beyond
the seasonal price changes from about ZMK40,000 to about
ZMK80,000 which was close to 100% increase
This has been a source of concern
The government finds itself in an awkward position as it makes
effort to give farmers a good price while striving to ensure that
consumers access the Mealie meal at a low price.
This has resulted in substantial hemorrhaging of huge financial
government resources.
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Production costs/ Supply side
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50kg maize bag pricing could be comfortably pegged between K40,000 and
K45, 000
Evidence from FSRP/IAPRI indicates that setting of floor price has not
benefitted from national farm survey evidence on production costs.
It is also notable that production costs vary from one area to another which
makes it more costly in certain places to produce maize than in others.
For instance, while FRA price was pegged at ZMK65, 000 per 50 kg bag in
2010, the average production cost of maize in Eastern and Northern Province
was at ZMK 34,000 while Copperbelt and Western Province stood at ZMK
53,000.
It therefore goes without saying that the pan territorial pricing that FRA sets
need to benefit from evidence generated by surveys carried out by research
institutions.
Huge investments through FISP not bearing as much fruit given that most small
scale farmers still remain at productivity of about 2 mt per ha
Demand Side Factors
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Use of grain as stock feed, breweries and
other products has exerted pressure on the
maize stocks.
In spite of the third successive bumper
harvest with about a million metric tonnes
above the national requirement, the strong
demand from neighboring countries such as
DRC and Tanzania supported by gradual
depreciation of the Kwacha has put upward
pressure on prices.
This has been reported several times through
the media over the years and particularly this
season (2012/2013)
Role of FRA in the market
 FRA has consistently gone beyond its mandate to
ensure that the strategic grain reserves are
maintained at 300, 000 at any given time as strategic
reserves
 Offloading of FRA maize as a price stabilization
mechanism tends to distort the market prices to
some extent
 Benefit transmission to consumers of the offloaded
maize is not assured
 Untimely/Unclear pronouncements by government in
some cases, millers decide to hold on to their stocks
of maize since offloaded maize from FRA could be
cheaper which could bring confusion to the millers
Medium Term and Long term
Solutions/Way forward
 Government to work with stakeholders on floor price setting for maize.
 When the option of leaving price to be determined by demand and
supply equilibrium, safety nets should be in place to safeguard the part
of the population that would be negatively affected based on the
vulnerability assessment.
 There is need to have a strong mechanism that encourages FRA,
millers and other stakeholders to report maize and Mealie meal stocks.
 FRA’s offloading of its grain on the market to be according to agreed
guidelines and triggers that do not stifle private sector participation in
the market.
 Maize export predictability in the context of good estimates of
expected export levels to determine export quota allocations,
enforcement and M & E.
 The demand in neighbouring countries is an opportunity that Zambian
farmers can exploit by increasing production and productivity that
supplies local markets as well as export markets.
Medium term solutions cont...
• Coordination mechanism that facilitates dialogue of different
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players and government in maize market sector.
Private sector including cooperatives to be given more space in
maize market in the country
FRA to restrict its operations to areas where private sector
participation is not profitable.
In addition, pan territorial pricing need to be removed to ensure
pricing reflects different average production costs that obtain in
different regions.
Millers to enhance their storage capacity through mechanism that
include PPP.
Stock management and information system that provide real time
and credible information on request to be developed and
deployed.
There is need to promote resilience in the farming systems
through use of conservation agriculture, crop diversification and
early warning systems.
Long Term Solutions
 Work of FRA operations to be within the mandate of
procuring the strategic grain reserves to avoid
market distortions and crowding out of private sector
 FRA to incrementally reduce its marketing activities to
allow private sector respond to emerging opportunities
 There is need to have a coordination mechanism
that facilitates dialogue on actions that need to be
taken by different players in the maize market sector
especially on matters such as export bans, offloading
of FRA maize to the market and benefit transmission
mechanisms to ensure that lowly priced maize
reflects in consumer prices.
Long
Term
Solutions
cont.
 There is need for more transparency and coordination in the manner
that FRA makes its decision.
 Strengthen cooperatives to effectively participate in the marketing of
grain in Zambia
 Promotion of substitute cereals apart from maize driven in part by
promotional campaigns to support processing & consumption of other
food crops
 Processing and value addition of other crops to reduce postharvest
losses and increase the wealth creation opportunities.
 Enhanced cross border maize trade surveillance protocols and
programme/system
 There is need to develop and introduce compulsory market and trade
information reporting for all market players
 Private sector including the cooperative movement to be given more
space in maize marketing space in Zambia
Long Term Solutions cont..
 FISP to be reformed to address targeting, governance,
complimentary extension service, timeliness in delivery of
inputs and participation of more goods and service providers.
This could be facilitated using e voucher as an input delivery
mechanism, involvement and empowerment of local leaders,
updated farmer registers.
 Government and private sector to move from adversarial
relations to partnerships that foster trust and predictability in
the markets
 Productivity needs to be enhanced for small scale farmers to
be competitive so as to achieve food security, wealth
creation and access to financing opportunities to graduate to
higher levels and modernize agriculture
 Invest in infrastructure on storage and roads
Concluding Remarks
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The problems and solutions are by and large
understood and agreed by stakeholders.
There is need to take decisions that will assist
move the country from vulnerability (food
insecurity shocks) to prosperity and stability.
Stakeholders and government need to work
together to address the issues in the sector so
that food security and wealth creation is
optimized.
Politicization of the issues surrounding food
security must be set aside so that beyond
political affiliations, actions that support
progress are taken. Time to act is now!
Thank you for your attention
References
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