2020/2021 Zambian Maize Outlook and Regional Analysis - IAPRI
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Indaba Agricultural Policy Research Institute
Zambian Maize Outlook
and Regional Analysis
2020/2021
By Brian P. Mulenga and Antony Chapoto Downloadable at http://www.iapri.org.zm
Executive Summary
COVID-19 pandemic shaped most of the conversations The 2020 Maize Outlook and Regional Analysis
around agricultural marketing and trade in 2020. summarizes the maize market during the 2020/2021
Luckily, the pandemic did not affect maize production market season in Zambia and presents insights
in Zambia as the first cases and restrictions to curb from the region; analyses government policy and
the spread of the pandemic were reported just stakeholder response and provides an initial forecast
before harvest. Thus, the major concerns regarding for next season’s harvest and recommendations for
the pandemic and the agriculturl sector had to do the upcoming maize season.
with harvesting and marketing. The rainfall during
Key findings: Analysing the Maize Market
the 2019/2020 agricultural season was good and
contributed significantly to improved production of 1. Similar to the previous season, the 2020/2021
maize and other field crops. Following two consectutive marketing season as at November 2020 was
seasons (2017/2018 and 2018/2019) with reduced characterised by high private sector participation.
maize harvest, Zambia recorded an above average Most private sector buyers entered the market as
maize harvest in the 2019/2020 agricultural season, early as April 2020 and were offering an average
with an estimated total production of 3,387,469 price of Zambia Kwacha (ZMW) 125-130 per 50kg
metric tons (MT) up from 2,004,389 MT in 2018/2019 bag by June in Eatsren, Copperbelt, Central and
production season (MoA and ZamStats, 2020). For the Southern province. An exceptionally high price was
past five agricultural production seasons (2014/2015 observed in Mpongwe district of the Copperbelt,
– 2018/2019), Zambia’s annual maize production has where traders were purchasing maize at ZMW 150
averaged about 2.7 million MT, X percent above local – 165/50 Kg bag between April/May. However,
national requirements. prices were relatively lower in Muchinga, Luapula
and parts of Northern province, hovering around
The 2019/2020 production represents a 69 percent
ZMW 100 -110/50Kg bag in, prompting farmers
increase from the previous season and 25.5 percent
to call for the FRA to announce its buying price in
from the five-year historical average. However, the
hopes of influencing traders to increase their buying
country’s opening stock at the beginning of the
price. .
2020/2021 marketing season was 79 percent from
the previous season. However, the above-average 2. The FRA announced its intention to procure
harvest during the 2019/2020 agrcultural season was 1 million metric tons (MT) of maize grain
enough to compensate for the low opening stock, thus partly as a contingency against COVID-19
the country remained food secure with 210,099MT and unpredictable weather pattern.
exportable surplus.
1
When the Food Reserve Agency (FRA) announced areas, thus eroding their purchasing power and
its purchase price of ZMW110/50 Kg bag, there access to food. This prompted government through
were concerns that prices will drop given that the the Ministry of Community Development and
FRA is a key player in the market. However, this was Social Services in partnership with UN agencies to
not the case as prices remained higher than ZMW implement emergency cash transfers to the affected
110/50 Kg bag in most parts of the country except households.
in Muchinga province where prices ranged between
7. Looking ahead, much of Zambia is likely to receive
ZMW 110- 115/50kg bag . The higher prices offered
normal to above-normal rainfall during the 2020/2021
by private sector contributed to FRA’s failure to meet
rainfall season, with a few places expected to
even half of the targeted 1 million MT of strategic
experience dry-spells between January and March.
grain reserves (SGR). Instead, by the end of the FRA’s
This forecast, combined with the early distribution
statutory buying season on 31 October, the Agency
of inputs under the Farmer Input Support Program
had only managed to procure about 350,000 MT –
(FISP), will most probably result in another above-
representing about 34 percent of the target.
normal maize harvest in 2021. However, COVID-19
3. Prices of maize and mealie meal started to drop still presents a risk mainly through disrupting labor
between March and May 2020 and this was driven supply and agricultural input supply. Another risk
mostly by the boost in domestic supply following is the migratory locusts, which were reported in
the above-average harvest. As at end of November the country in September 2020. The country has
2020, maize grain prices were averaging ZMW so far sprayed about 20,000 hectares of land
120 -130/50Kg bag in most parts of the country. against the locusts, but more remains to be done.
However prices were much higher in shang;ombo
and Kasumbalesa districts averaging ZMW 18- Recommendations
185/50Kg bag. Breakfast mealie meal prices were
Maize market development in Zambia continues to
averaging ZMW130/25 Kg bagBoth maize grain and
develop slowly because of continued inconsistent
mealie meal prices are lower compared to previous
and sometimes ad hoc maize marketing policy. The
season.
participation of FRA in the market continues to be
4. Despite the country producing a major surplus in expanded and as a results over burdening the National
2020, the government maintained the export ban Treasury. Private sector in Zambia has demonstrated
on maize and mealie meal until the FRA meets its that it has the capacity to effectively provide market
targeted 1 million MT. This ban has been in effect and associated sirvices to farmers particularly in
since May 2019 and continues to be in place. After accessible areas. Hence, the government should
protracted discussion with Zambia Farmers Union, provide the needed space and regulations for private
the government in July 2020 allowed exports of sector to sustainably investment in the maize sub-
maize and mealie meal only from early maize that sector. Purchasing an abnormally high strategic grain
was produced under an agreement with commercial reserve only discourages private sector-led agricultural
farmers. The early maize was exported under the marketing and trade. Another major concern has to do
government-to-government agreement to DRC with the imposition of export bans. Zambia has the
5. The export ban on maize grain and maize meal potential to become a reliable maize grain and maize
has not deterred informal trade with neighbouring meal supplier in the region but the stop and go approach
countries including DRC, Malawi, and Tanzania. on trade policy is squandering this opportunity. To help
Informal trade is taking place and continued to thrive bring about confidence in the maize sub-sector, reliable
throughout the season. Informal trade was driven by market information is key. Hence, there is an need to
price differentials with neighboring countries where expedite the operationalization of Zambia Agriculture
maize and mealie meal prices continue to be more Information System (ZAIS) that will help provide reliable
favorable than domestic prices. the stocks and prices information to guide informed
national grain marketing decisions.
6. Despite the above-average output at the national
level, there were localized deficits in some parts The production of early maize by commercial farmers
of the country, owing to droughts and fall army should continue to be supported because this can
worms in some parts of the Southern and Western enhance Zambia’s export position. Early maize
provinces, and floods in parts of the northern region. produced by commercial farmers is normally expensive
The Disaster Management and Mitigation Unit maize due to supplemental irrigation. Hence, it is very
(DMMU) and partners provided relief food directly important for the government to continue providing
to the most vulnerable households, but at much incentives and clear market signals for early maize
lower scale than in 2019. Further, the COVID-19 production by commercial farmers. Across the board
pandemic resulted in loss of business and wage export restrictions and/or ban discourages early maize
income for many people both in the rural and urban production by these farmers.
2
List of Acronyms
DMMU Disaster Management and Mitigation Unit
FAO Food and Agriculture Organization
FEWS NET Famine Early Warning Systems Network
FISP Farmer Input Support Programme
FRA Food Reserve Agency
GTAZ Grain Traders Association of Zambia
IAPRI Indaba Agricultural Policy Research Institute
MAZ Millers Association of Zambia
MoA Ministry of Agriculture
MT Metric Tonnes
SA RSMO Southern Africa Regional Supply and Market Outlook
SGR Strategic Grain Reserve
USD United States Dollar
WFP World Food Programme
ZAIS Zambia Agriculture Information System
ZAMACE Zambia Agrciculture Commodity Exchange
ZamStats Zambia Statistics Agency
ZMW Zambian Kwacha
ZNFU Zambia National Farmers Union
3
Introduction
Following two consectutive seasons (2017/2018 and Most private sector buyers who entered the market ear-
2018/2019) with reduced maize harvest, Zambia record- ly were offering a buying price ranging from ZMW120
ed an above-average maize harvest in the 2019/2020 – 130 per 50kg bag in most provinces, with a few areas
agricultural season, with an estimated total production like Mpongwe offering significantly higher prices aver-
of 3,387,469 metric tons (MT) up from 2,004,389 MT aging ZMW 160/50 Kg bag between May and June.
in 2018/2019 production season (MoA andZamStats, With the announcement of the Food Reserve Agency
2020). For the past five agricultural production seasons, (FRA) buying price of ZMW 110/ 50 Kg bag, similar to
from 2014/2015 to 2018/2019, Zambia’s annual maize previous season price, private sector buyers adjusted
production has averaged about 2.7 million MT based their price downwards but still outbidding the Agency.
on crop forecast estimates by the Ministry of Agriculture This situation made it difficult for the FRA to meet its
(MoA) and Zambia Statistical Agenecy. The 2019/2020 announced buying target of 1 million MT for 2020/2021
production represents a 69 percent increase from the marketing season.
previous season and 25.5 percentabove the five-year
historical average. The increase in production in the Although maize prices showed signs of retreating from
2019/2020 season was largely attributed to the fa- the 2019/2020 levels, as a result of increased produc-
vorable rainfall received in most parts of the country. tion, prices remained relatively high in the context of an
However, the 69 percent expected increase in maize above-average production (69 percent higher than the
production in 2019/2020 agricultural season from the previous season and 25.5 percent higher than the his-
previous season demonstrates the problems of heavily torical five-year average). This is mainly attributed to the
relying on rain-fed agricultural system. fact that the country opened the 2020/2021 marketing
season with very low carryover stock, thus moderating
Typically, with an above-average harvest, prices are total supply on the market. The receding maize grain
expected to be relatively low, however, the country prices have been transmitted to mealie meal prices,
opened the 2020/2021 marketing year with a low open- significantly reducing average nominal as well as real
ing stock of about 179,000 MT compared to 475,000 prices relative to the previous season.
MT the previous year, and way below the five-year av-
erage of about 780,000 MT. The low opening stock In terms of governement policy, the most significant
prompted the government to continue with the maize policy pronouncement was to do with export ban and
grain and mealie meal export ban that was imposed substantial increase in targeted SGR. Governemnt’s de-
back in March 019. cision to sustain export ban on maize and mealie meal
Besides Zambia, other countries in the region, experi- and FRA’s intentions to procure 1 million MT of SGR left
enced favorable weather leading to increased produc- private sector players on edge and highly cautious in re-
tion relative to the previous season. South Africa, the gards to purchasing maize grain. Historically, FRA par-
largest surplus country in the region, recorded a 21 per- ticipartion of this magnitude tended to destroy private
cent increase in production and a surplus of about 5.6 setor maize market as the Agency ended up offload-
million MT, while Malawi recorded a 25 percent increase ing highly subsidized maize to selected millers in the
in production, with a surplus of 583,000 MT. Mozam- year. With regards to exports, there was an exception.
bique’s production saw an uptick of about 9 percent, The government, through the tripartite agreement with
with a marginal surplus of 65,000 MT, whereas Tanzania commercial farmers (who produced early maize) and
to the east recorded a 3 percent production increase the DRC governement signed and executed a mem-
with a surplus of 750,000 MT. For Zimbabwe, despite orandum of understanding (MoU) for Zambia to export
recording a 17 percent increase in output relative to the up to 600,000 MT of maize grain and mealie meal to
revious season, the country recorded yet another sign- DRC. This was strictly for early maize and mealie meal
gificant deficit estimated at about 1.2 million MT, mainly produced from it. However, key informant interviews
attributed to severe drought conditions in some parts of with industry players revealed that there were reports
the country. of commercial farmers taking advantage of the MoU to
export maize from the normal harvest. These reports
In regards to marketing, the season kicked off relative- prompted government to halt the export by commercial
ly early, where player entered the market around early farmers to allow for further investigations. By the end
April. Like the previous season, private sector entered of November XXX MT had been exported under this
the market first, although the level of private sector par- agreement.
ticipation appeared to have been subdued by a number
of factors with the COVID-19 pandemic restrictions and
export ban being key among them.
4
Despite the sustained ban on formal exports of maize factors affecting maize market performance and their
grain and mealie meal, informal trade continues to thrive major outcomes. The analysis is based on the 2020/2021
between Zambia and neighboring Malawi, DRC, and marketing season and 2019/2020 production season.
Tanzania. Substantial price differential between Zambia Data for this report were drawn from various sources,
and neighboring countries has largely contributed to including the Ministry of Agriculture’s Crop Forecast
informal trade. For example, the price of a 50 Kg bag Survey (CFS), Zamba Statistics Agency, Food and
of white maize grain in the DRC at Kipushi border Agriculture Organization (FAO), and Famine Early
was fetching ZMW 350 in July and 410 in November , Warning System Network (FEWS NET), among others.
whereas the FRA was buying at ZMW 110/50 Kg bag. Data from these sources were used to construct key
A 25 Kg bag of breakfast meal was going for ZMW 185 trends and make assumptions about likely outcomes
at Kipushi border whereas the average price in Lusaka in the 2020/2021 marketing season. These data were
was at ZMW 117/25 Kg bag. This price differential has complemented by key informant interviews with industry
continued to attractflows of these major commodities players and government officials.
from Zambia into DRC, with mealie meal dominating
in terms of volumes exported to DRC. The bulk of the Maize Stocks Position
maize informally exported from Zambia was destined for
Malawi, followed by Tanzania. At the opening of the 2020/2021 marketing season in
May 2020, Zambia had an estimated opening stock
In regards to food security, the situation at national of 179,247 MT of commercially available maize, down
level remained favorable and stable compared to the from previous season’s 475,042 MT (Stocks Monitoring
previous season. This was mainly attributed to the Committee 2020), representing 62 percent decline from
above-average production for maize and other food previous season and about 77 percent from the five-
crops during the 2019/2020 agricultural season, which year historical average (Mulenga, Kuteya and Chapoto
resulted in increased food supply at both household 2020; FEWSNET, IAPRI and WFP 2020). It should be
and national level. However, there were still cases of noted that this stock level does not account for maize
localized deficits, but these were few mostly in parts of grain still held by smallholder farmers.
Western and Southern provinces as a result of drought
conditions and fall army worm. The northern region also The distribution of the opening stock was highly
experienced deficits in some areas due to the floods that skewed, with the FRA holding the highest stock at
affected crops and even displaced people, with about 82,982 MT, followed by Millers Association of Zambia
700, 000 people in 28 districts directly affected (Zambia (MAZ) with 42,020 MT, with Zambia National Farmers
Daily Mail, March 23, 2020). Owing to the above-average Union (ZNFU) holding 8,320 MT and about 45,000 MT
harvest, the demand for FRA maize was significantly of early maize. Grain Traders Association of Zambia
lower than previous season, with FRA having utilized (GTAZ) reported that they had no stock remaining at the
only about 4,000 MT by end of September compared beginning of the marketing season. With an estimated
to over 40,000 MT the previous season. national production of 3,387,469 MT, the country had
an estimated total supply of 3,566,716 MT against
Having presented an overview of the maize market for an estimated total national requirement of 3,356,617
the previous and current marketing season, this outlook (Figure 1 for distribution) Therefore, the country had an
provides deeper insights into the domestic and regional estimated exportable surplus of 210,000 MT.
Figure 1. Distribution of National Maize Requirements for 2020/2021 Marekting Year
Source: Stocks Monitoring Committee, 2019
5
Based on the above distribution, the country had a minor contribute towards enhancing crop market information
surplus of 210,000 MT, slightly less than the 218,000 availability on which stakeholders, both government
MT estimated the previous season. This low surplus at and private sector can base their decisions.
the heels of an above-average harvest should not come
as a surprise given the more than three-fold increase in As illustrated in Figure 2, FRA held the larger proportion
targeted SGR (from 300,000 MT the previous season to of stocks at the beginning of the season in May. This
1 million MT in the current season) and the low opening was despite the high demand for FRA maize by DMMU
stock. As at end of October 2020 -- when FRA was and other relief organizations responding to food
expected to close its marketing exercise-- the country’s emergencies duringt the previous season. For example,
commercially available maize stocks were estimated by August 2019, DMMU had drawn about 30,000 MT
to be at approximately 940,124 MT, similar to previous compared to less than 4,000 MT the current season
season’s 926,911 MT at the end of October 2019. This during the same period. As the season progressed,
estimate is based on the known stocks held by FRA private sector progressively held more stocks than
and registered members of MAZ, GTAZ, ZNFU. FRA, given the early market entry and higher price
offered to farmers by private traders, thus attracting
Figure 2 shows stocks held by various major players in more maize supply. However, the level of private sector
the market at different time points during the marketing participation was lower than the previous season mostly
season. As only FRA is mandated by law to report due to government decision to maintain the export ban
maize stocks held, the figures presented by other and the intentions by the FRA to procure 1 million MT
stakeholders in the Stocks Committee meeting are for the SGR. Combined, these factors discouraged
based on the stocks voluntarily reported by MAZ, GTAZ, private sector participation as the export ban meant no
and ZNFU. Hence, the stock figures are most likely only outlet beyond Zambia’s borders while the 1 million SGR
a conservative representation of total maize availability created speculation that the FRA will eventually offload
in the country, because not all millers are members of this maize at a price than the market price later in the
MAZ, nor do all farmers report their stock level to ZNFU, season. This presents a price risk for private sector
and not all grain traders belong to GTAZ. Further, these thus discouraging them from procuring large volumes.
figures do not account for grain held by smallholder In addition, the COVID-19 pandemic restrictions and
farmers and various small private traders. It is expected control protocols contributed to market uncertainities
that operationalization of the now established Zambia and increased cost of doing business for larger and
Agricultural Information System (ZAIS) will provide a formal traders, thus slowing down private sector
more comprehensive and accurate picture of stock participation in the market.
levels in the country at any given time point, and thus
Figure 2. Maize Stocks Held by Various Players between January and October 2020
Source: Stocks Monitoring Committee (2020).
6
Maize Production
Production in the 2019/2020 agricultural season surged Figure 3 presents a summary of harvest and opening
to 3,387,469 MT from 2,004,389 MT in 2018/2019 stock for the 2019/2020 and 2018/2019 production
– a 69 percent increase from previous season. The seasons, as well as the five-year average. Two key
increase in production was mostly driven by favorable points from the graph are: 1) production increased
weather that was experienced in most parts of the substantially relative to the previous season and five-year
country much of the season. Good weather, among average; and 2) carry-over stock significantly declined
other factors, contributed to improved yield, with the relative to previous season and five-year average. As
season recording an average yield of 2.07 MT/ Hectare earlier stated, the increase in production in 2019/2020
(Ha) compared to 1.29 MT/Ha recorded the previous production season was mainly driven by favorable
season. The increase in production was further boosted weather pattern in most parts of the country as well as
by an expansion in area planted to 1,634,874 Ha, a 5 area expansion relative to the previous season. Despite
percent increase from previous season’s 1,557,314 Ha. the significant increase in production, total supply was
The apparent correlation between rainfall and maize only slightly higher than the five –year average, owing
production highlights Zambia’s agricultural production to the low carry-over stock this season, as shown in
exposure and vulnerability to weather shocks. Figure 3. The low carry-over stock resulted from tight
maize supplies in the previous season due to drought
conditions.
Figure 3. Domestic Maize Supply Estimates
Source. MoA Crop Forecast Surveys and National Food Balance Sheets (2015 – 2020)
7
Figure 4. Provincial Maize Production Share to National Production - 2018/2019 and
2019/2020 Seasons
Source: MoA Crop Forecast Surveys (2019 and 2020)
Source: MoA Crop Forecast Surveys (2019 and 2020)
Favorable rainfall helped increase production in Unlike the previous season where maize grain prices
provinces that saw significant decline in production maintained an upward trend even during the main
previous season due to droughts. Figure 4 presents harvest, in the 2020/2021 marketing season saw maize
a summary of the contribution of all the 10 provinces grain wholesale prices declining between April and
to national output in the both the previous and current June, as the new crop was rolling in the market.
season. The graph reveals wide variation in terms of
provincial share to national total output in both seasons. At the end of May 2020, the FRA announced its crop
In the 2019/2020 production season, Central province purchase prices for maize, soybean, and rice. Maize
contributed the highest at 20 percent, followed by prices was ZMW110 per 50 Kg bag (ZMW 2.2/kg),
Eastern at 18 percent, and then Southern province with similar to the previous season. The price though at the
14 percent, while Western ranked lowest at 3 percent. same level as previous season was generally lower than
Compared to the previous season, the contribution of what private traders were offering for maize (ZMW 120
most provinces declined in the current season, whereas -130 per 50 Kg bag) in most parts of the country. As
that of Southern and Western province increased. at end of June, 2020, prices were highest in Eastern
Therefore, in general Southern province despite the province ranging between ZMW 2.5- and ZMW 2.6 per
changing rainfall patterns and some parts receiving kg (or 125- 130 per 50kg bag), followed by Central
erractic rainfall remains a major contributor to national province where prices were around ZMW 2.4 per kg ,
maize grain production. and the lowest being Muchinga, Luapula, and Northern
provinces with prices at ZMW 2.2 –ZMW 2.3 per kg (or
Maize Market Prices 110- 115 per 50kg bag),, almost matching the FRA
price.
The 2019/2020 marketing season experienced an
atypical trend in maize prices, where grain prices
continued to increase throughout including during and
after crop harvest (April –June).
8Figure 5. Maize Grain Wholesale and Mealie Meal Reatil Prices for the Period May
2019 – November 2020
Source: GTAZ reference prices, ZamStats, and IAPRI commodity price (2019 and 2020)
Figure 5 shows the trend in wholesale maize grain prices the lean season in October 2019, breakfast mealie meal
and mealie meal retail prices for the period May 2019 prices were 140/25 Kg, whereas in 2020 October they
to November 2020. The trend clearly shows a stark hovered around 129 – 135 per 25 Kg.
difference between the two seasons, with the current
season prices rising slower than the previous season. The current season’s increase in production, though
For example, in 2019, maize wholesale prices increased significant, did not appear to be sufficient enough to
by 11 percent between April and June (harvest period), depress domestic prices to a considerable level. This
whereas they declined by 17 percent in 2020 during the was partly due to the low opening stock the country had
corresponding period. Between August and October at the beginning of the 2020/2021 marketing season,
(peak marketing season) grain prices increased by which resulted in a low stocks-to-use (STU) ratio.1
about 43 percent in 2019, whereas they only went up
27 percent in 2020 during the corresponding period.
The slow rise in prices in the 2020/2021 marketing
season was mostly influenced by an improvement
in both domestic and regional market supply, which
contributed to moderating the increases.
As market activity slowed down at the end of October,
prices were 7 percent lower in 2020 compared with
prices during the same period in 2019. As maize grain
is the main input in mealie meal production, declining
maize prices were transmitted to mealie meal prices,
with both breakfast and roller meal prices retreating
from the 2019 levels and closely tracing the maize grain
price trends (Figure 5). For example, at the beginning of
1 Stocks to use ratio is a indicative measure of supply and demand interrelationships of commodities. The ratio indicates the level of carryover stock as a percentage of the total use
of the commodity. A lower ratio indicates tight supply and vice-versa. The ratio thus helps in estimating and predicting the direction of the price trend as well as the probable extent of
price change whether higher or lower.
9Figure 6. Trend in Carryover stock, Production, Usage and Stocks to Use Ratio
Source: Calculated from MoA Crop Forecast Survey and National Food Balance Sheet (2014/2015 – 2020/2021)
Figure 6 shows a seven-year trend in the STU ratio, towns, prices were relatively high in Kabwe, Kapiri
which clearly shows that the current season’s STU ratio Mposhi, and Mkushi (Central province), and lowest in
is similar to that of the previous two seasons, which Mpika (Muchinga province). The relatively higher prices
were characterized by droughts and tight supplies, and in Central province are not surprising as it was reported
contributed to rising prices. that most millers were sourcing their maize from Central
province, some entered the market as early as March
Figure 7 shows the prices at which the private traders 2020, thus exerting upward pressure on local prices.
were buying maize grain from farmers in selected The above FRA prices across the country is a sign
districts benchmarked against the FRA price of ZMW of competition that private sector could exert in the
110 per 50 Kg bag. Generally, the average market price market as long as the supply conditions appear to be
for maize grain in all the assessed districts was higher tight. Consequently, due to private sector competitive
than that of FRA. Despite the FRA being a big player in behaviour, the FRA failed to meet its target in these
the market, it appears the Agency’s price had very little provinces. It is important to note that this situation does
impact on the market, as other traders maintained a not translate to food insecurity because any maize
higher price. Kasumbalesa, the Zambian town bordering held by private sector is maize that can be utilised in
DRC, had the highest price (averaging ZMW 240 per the country. The situation on the ground points to the
50 Kg bag), driven by the high demand for Zambian urgent need for the country to offload some of the maize
maize and maize products in DRC. Away from border stocks in the country to the regional market.
Figure 7. Private Sector and FRA Maize Buying Prices in Selected Districts, October/
November, 2020
Source: IAPRI Rapid Market and Food Security Assessment October/November 2020.
10FRA Maize Purchase and Pricing
As is normally the case, the FRA announced its pan As a result of this realease, the FRA was unusually
territorial purchase price and intended SGR target at efficient in paying farmers who sold maize to the Agency.
the start of the marketing season. On May 29, 2020, Farmers were paid within 5 days of delivering their maize
the FRA announced a price of ZMW 110/50 Kg bag to the Agency, a move that was highly commended by
– the same price it offered in 2019. Further, the FRA stakeholders, and contributed to many farmers selling
announced that it intended to purchase 1 million MT of their maize to the Agency.
maize grain, more than threefold increase from previous
season’s target of 300,000. The 1 million MT target was Despite FRA’s price announcement, market prices
at wide variance with the budget as announced by the remained above ZMW 110/50 Kg bag in most parts
minister of finance during his National Budget address in of the country for much of the season. The efficient
October of 2019 (2020 National Budget Address), where payment system by FRA, might have somewhat created
Minister Bwlaya Ng’andu indicated that the FRA would competition for private sector buyers who in turn tried
purchase 300,000 MT of maize grain for SGR in 2020. to offer competitive prices possibly higher than FRA
The decision to increase the SGR purchases to 1 million to attract more supplies, as spot cash alone was not
MT was announced as part of government’s COVID-19 enough to incentivize farmers.
repsonse under the MoA COVID-19 contigency plan.
Another reason cited by the FRA for increasing the SGR Compared to 2019, FRA’s purchases started on a
was to boost the national stocks given the low stock good note, with the Agency setting up 1,200 satelite
carryover from the previous season. When Predisent depots across the country. Figure 8 shows the monthly
Edgar Lungu made the announcement that FRA should progression of FRA purchases from July to October. The
purchase 1 million MT of maize for SGR, he cited climate figure shows a significant increase in purchase between
change and weather unpredictability as reasons why July and August, after which the rate of increase declined
the country needed to increase its SGR, especially in a from September to October. Within the first month of
bumper harvest year like 2020 (Lusaka Times, April 30, entering the market, FRA had managed to purchase
2020). 98,000 MT compared to only about 51,311 MT of maize
purchased in the previous season during the first month
At the time FRA was announcing its ZMW 110/50 of market entry. By the end of October, 2020, which
Kg bag price, market price was way above this level, marks the end of FRA maize purchases, the Agency
hovering around ZMW 125 per 50Kg bag. Thus, there had procured a total of 349,405 MT, representing 34
were concerns from stakeholders, particularly farmers, percent of the targeted 1 million MT.
that FRA’s lower than market price will influence other
buyers to start buying at a lower price, considering that FRA’s failure to meet the targeted SGR of 1 million MT did
FRA is a major player in the market and was setting not come as a surprise, as most stakeholders predicted
a trend. This created fears in the market that private this outcome given the Agency’s bid price which was
buyers might exploit farmers by offering even lower than lower than that offered by the private sector. Normally,
the FRA price. Further considering that FRA does not FRA closes its maize purchasing exercise on October
pay spot cash, and in fact takes months to pay farmers, 31 of every year, however, the Agency has continued
there were concerns that farmers might be compelled to purchase maize beyond the statutory ending date in
to sell at a lower price to private traders who offer spot an attempt to mop up maize not procured by private
cash. sector.
Determined to purchase the 1 million MT, the government
through the Treasury Department of the Ministry of
Finance released ZMW 1 billion to FRA for purchase
of SGR (maize, soybeans, and paddy rice) purchases
(Ministry of Finance, 2020), with the bulk of it budgeted
for maize purchases.
11For example, in 2019/2020 marketing season, Zambia
experienced one of the worst food emergencies in
Figure 8. Cummulative FRA Maize Purchases
recent history, with more than 2 million people in 53
July to October 2020
districts requiring relief food.
Even under this worst case scenario, stock drawdown
from FRA to respond to food emergency was only
175,000 MT (Mulenga, Kuteya and Chapoto 2020).
Thus, with an SGR of almost 350,000 MT this season
as at end of October, FRA has more than enough maize
to respond to unforessen deficits.
Instead of worrying about the failure of the Agency to buy
the targeted 1 million metric tonnes,, the Governement
should ensure that the more than 300,000 metric tonnes
SGR it has is well managed by reducing the amount
of maize that is given to millers at subsidized prices as
was the case in the previous season. The reduction in
supplies of subsidized maize to millers is a step in the
right direction as processors should be encouraged to
procure their own stock during the marketing season or
buy stock held by private traders. This trend will help
Source: FRA and Stocks Monitoring Committee (2020) completely wean millers off of government subsidies,
as research evidence has shown that the subsidy to
millers is not effectively passed on to consumers. By
In terms of geographic distribution of purchased further improving its targeting and ending the practice of
volumes, the bulk of the maize FRA procured was from subsidizing millers, government can ensure food security
Central, Eastern, Muchinga, and Southern provinces. through a scaled back SGR of 300,000 to 350,000
Out of the total FRA purchase, about 30 percent was MT, including or supplemented by ‘virtual reserves’,
from Northern province, and in second place was which will create a win-win of reducing fiscal costs and
Luapula with about 17 percent, and in close third place crowding-in the private sector to boost productivity.
was Muchinga province accounting for 15 percent.
Lusaka and Western provinces contributed the least Owing to the above-average harvest this year, demand
at 1 percent and 0.9 percent respectively. The low for FRA maize is likely to remain low, as there are few
purchase by FRA in Western province is attributed to the localized deficit areas in need of relief food. This implies
low output experienced in the province due to drought that the Agency will enter the next marketing season
conditions and fall army infestation experienced in the with a relatively higher carryover stock. Thus, in the
2019/2020 production season. Even in high production next season, FRA should consider scaling back the
areas such as Central, Southern, and Eastern province, volume of SGR to be purchased, and concentrate on
FRA struggled to purchase maize due to competition procuring from remote areas to ensure with minimal to
from private sector who were offering a higher price than no private sector presence. However, the target should
the ZMW 110/50 Kg bag offered by FRA throughout the be kept within the recommended size of between
season. 300,000 to 350,000 MT. FRA can achieve this target
by: i) purchasing maize at market price and ensure
The failure by FRA to purchase the 1 million MT coupled efficient payment system as the case was this season;
with the low stock carryover from previous season ii) focus on purchasing maize from remote areas with
resulted in the Agency recording an SGR of less than very minimal or no private sector presence; and iii) FRA
500,000 MT in the 2020/2021 marketing season. The should consider purchasing and holding a grain option
349,405 MT of SGR secured by the FRA so far, though from ZAMACE or regional commodity exchanges
less than half of the targeted SGR, should not be cause ‘virtual stocks’ to be drawn upon when responding to
for concern as IAPRI research has shown that the FRA unforeseen deficits, rather than purchasing and holding
can ensure food security with stock levels not exceeding large physical stocks, as this has fiscal implications and
350,000 MT (see Mulenga, Kuteya, and Chapoto 2020; crowds-out private sector participation. This would
Kuteya and Samboko 2018). require an effective food security early warning system
to be put in place.
12Private Sector Participation In For example, in March 2020, Copperbelt province
Grain Marketing Minister Japhen Mwakalombe was quoted by the
media threatening to close down shops that were
Generally, the 2020/2021 marketing season was selling mealie meal at prices above ZMW 130/ 25 Kg
characeterized by low private sector participation bag (Zambia Reports, March 26, 2020).
comparable to the 2019/2020 season. However, similar
to the previous season, private sector started the season In regards to exports, governement only allowed early
with an early entry in the market around early April. The maize and mealie meal produced from it to be exported
private traders include aggregators for millers, animal under the tripartite agreement with the DRC. In the
feed manufacturing companies, medium- scale traders, previous season, government imposed an export ban
and a myriad of small-scale individual traders (popularly on the heels of a reduced harvest and the need to ensure
known as Briefcase Buyers). The pronouncement by the that there was enough maize domestically to meet the
FRA that it intended to procure 1 million MT discouraged national requirements and keep prices within affordable
private traders from engaging in the market to the extent range for majority Zambians. Unfortunately, this ban
seen in the previous two seasons. has remained into effect despite the country recording
a surplus and the prospects for a good harvest in 2021
The positive strides and momentum, in terms of private are high.
sector participation, that was witnessed the previous
two seasons when FRA confined its participation in the Despite the sustained ban on formal exports of maize
market to only purchasing the recommended level of grain and mealie, informal trade flows continued
SGR appear to have been hampered this season. This between Zambia and neighbouring Malawi, DRC, and
somewhat buttresses the evidence that FRA market Tanzania. Governement defense wings intensified their
interventions, when excessive, crowds out private security operations to curb illegal exports, with a number
sector participation. The heightened private sector of arrests recorded during the season. In March, seven
participation in the previous two seasons resulted (7) trucks laden with mealie meal destined for Malawi,
in increased economic activity, particularly in rural was intercepted in Chipata by officers from the Zambia
areas and possibly job creation, but equally important National Service (Zambia Daily Mail, March 24, 2020).
helped with fiscal savings for the governement. The And this was only among the many reported cases of
pronouncement by FRA to increase SGR far beyond the traders attempting to export maize and mealie meal
recommended level sent a signal to market players that across borders.
large quantities of maize will be offloaded on the market
by FRA later in the season, and thus depress domestic Informal trade was mostly driven by substantial price
prices. This discouraged traders from purchasing large differential between Zambia and neighboring countries.
volumes, and constrained private sector participation For example, in late August and early September, the
only in accessible areas. price of a 50 Kg bag of white maize grain in the DRC at
Kipushi border was selling for ZMW 350 while the FRA
Government Intervention in the was buying at ZMW 110/50 Kg bag. A 25kg bag of
breakfast meal was costing ZMW 185 at Kipushi border
Maize Sub-Sector while the average price in Lusaka was at ZMW 117/25
Kg bag. This price differential attracted flows of these
Unlike the previous season when government instituted
major commodities from Zambia into DRC, with mealie
several interventions, including exports ban, temporally
meal dominating in terms of volumes exported to DRC.
price controls (Mulenga et al. 2019) in an attempt to
For the most part of the season, the bulk of informal
moderate grain and maize meal prices owing to the tight
maize grain exports were destined for Malawi, followed
supplies, the 2020/2021 marketing season is different in
by Tanzania and DRC, whereas bulk of mealie meal
terms of number of interventions. In the current season,
exports were destined for DRC, followed by Tanzania
government’s key intervention was to do with banning
and Malawi.
exports, and almost no attempt to control prices, except
a few threats from government officials.
13
13Regional Maize Production and the 2020/2021 marketing season. In Malawi, opening
Trade stocks were well below average following strong informal
export demand from Tanzania during the previous
This section draws heavily from the 2020 Southern marketing season, mostly destined for the Greater
Africa Regional Supply and Market Outlook (SA Horn of Africa and low SGR procurement during the
RSMO) analysis conducted by FEWSNET, IAPRI and previous year. Maize opening stocks were average in
WFP. The Regional Supply and Market Outlook report typically self-sufficient Mozambique and below average
provides a summary of regional staple food availability, across the region’s other structurally deficit countries
surpluses and deficits during the current marketing such as Botswana, Lesotho, Namibia, and Eswatini. In
year, projected price behavior, implications for local and Zimbabwe and DRC, opening stocks were negligible
regional commodity procurement, and essential market
monitoring indicators. The report covers southern, On aggregate, the 2020 maize harvest for the region
central, and part of east Africa region. was 20 percent above the previous year and five-year
average. The above-average harvest in the region
Regional Maize Production was mostly driven by favorable weather experienced
Generally, the southern African region produced a during the production season. In most parts of the
surplus unlike the previous season when the region was region, the start of season was characterized by erratic
in deficit by about 0.69 million MT. An analysis of the and insufficient rains, however, the latter half of the
Southern Africa Regional Supply and Market Outlook season saw favorable rains in surplus-producing areas
conducted by FEWSNET, IAPRI and WFP (2020) which helped with crop recovery and improved crop
shows that at the start of 2020/21 marketing season, conditions. However, poor rainfall in structurally deficit
opening stocks across the region were significantly southern DRC and Zimbabwe coupled with chronically
below average.2 In surplus producing South Africa, limited extension and input services led to well below
opening stocks were near average and in Tanzania they average production (Figure 9) Countries which posted
were above average despite high export flows within large declines in their maize harvest compared to the
and beyond the region during the previous marketing five-year average were those which were particularly
year. However, in Zambia, one of the region’s largest affected by poor rainfall, namely: southern DRC (-60
producers and exporters, maize harvests during the percent), Lesotho (-56 percent), Zimbabwe (-23
previous season were more than 32 percent below the percent), Madagascar (-23 percent), and Namibia (-25
recent five year average for a second consecutive year, percent).
resulting in limited opening stocks for the country in
Figure 9. Cumulative precipitation as a percent of normal for October 1, 2019
to March 25, 2020
Source: USGS/FEWS NET (2020)
14
14Table 1. Regional Maize Balance Sheet for the Period of April 2020 – March 2021
Source: FEWS NET, IAPRI, WFP estimates based on SAGIS, SADC, FAO/GIEWS and Ministries of Agriculture data (2015 -2020)
Table 1 gives a summary of the regional maize balance Figure 10 shows maize self-sufficiency for countries in
sheet for the period of April 2020 to March 2021. the region. On the whole, the region is self sufficient, with
The region’s harvest was 20 percent relative to the key producing countries (South Africa, Zambia, Malawi,
2019/2020 marketing season and the 5-year average. Mozambique, and Tanzania) recording above-average
However, opening stock was down 22 percent and harvest. However, a number of countries remained in
21 percent relative to the 2019/2020 season and the a deficit state, and these include, Botswana, Namibia,
five-year average. The above-average harvest helped South DRC (Haut-Katanga), and Zimbabwe. These
to compensate the low opening stock, and boosted countries will rely on imports from the region and
maize during the 2020/2021 marketing season. possibly international markets to meet supply shortfalls.
South Africa, the leading producer in the region, saw its
total maize harvest for 2020 go up 27 percent above
Figure 10. Maize Self-Sufficiency Status
average, with white maize production reaching over 40
(2020/21 Marketing Year)
percent above average. As a result, there is more than
adequate supply of both yellow and white maize for local
and regional demand. South Africa has also continued
to export maize grain to international markets (e.g. East
Asia) since early 2020 (SAGIS 2020; Dhlamini 2020).
South Africa has also intensified exports to Zimbabwe
with the recent easing of its phytosanitary restrictions
and import duties (maize meal, wheat grain, and flour).
Zambia, the region’s second largest exporter historically,
has maintained its formal export ban on maize grain and
maize meal. Despite the export ban, Zambia exported
maize grain and maize meal to the DRC under a special
government-government arrangement. The maize
exported under this arrangement was strictly produced
as early maize under irrigation and mechanical drying
by large scale/commercial farmers in Zambia. Between
April and May 2020, informal maize grain and maize
meal outflows from Zambia to DRC intensified. Informal
maize grain exports from Zambia to Malawi continued
through much of the season, as Malawi’s Agricultural
Development and Marketing Coropration (ADMARC)
was purchasing maize at a price higher than the Source: FEWSNET, IAPRI and WFP estimates (2020)
prevailing market price in many places of neighboring
Zambia and Mozambique.
15
15Regional Maize Prices The majority of maize grain imports into Zimbabwe
As the 2020/2021 marketing season kicked off, were by private commercial millers. The majority of
maize grain prices in many countries remained above- those maize imports remain financially inaccessible
average levels, mainly due to the persistent effects to the country’s poor households. Furthermore, the
of the previous year’s tight supply (Figure 11). With government’s subsidized maize meal scheme was
the progression of harvest and marketing, prices fell not well funded or supplied, limiting the availability of
rapidly in Malawi, Mozambique, Tanzania, and Zambia, subsidized maize meal on the market.
although they remained above-average. In South Africa
prices declined in May after remaining unusually stable Strategic Grain Reserve Purchases
in April due to a combination of factors, including State agencies responsible for strategic grain reserves
strong regional export demand, a late start of season, continued their active participation in the markets within
and the epreciation of the South African Rand (ZAR). respective countries. In the case of Zambia, the FRA
announced that it would purchase 1 million MT of maize
– a significant increase from the original plan of 300,000
Figure 11. May 2020 maize prices compared MT. FRA’s buying price of 110 ZMW/50kg was initially
to 5-year average below prevailing market prices (ZMW 120 to ZMW 130
per 50 Kg bag) in May and early-June. Market prices
nevertheless decreased biut only marginally despite
FRA’s price announcement because it had not yet
started procuring. Prices rebounded slightly by early
July, after FRA purchases began and remain relatively
high throughout the season ranging between ZMW 120
– ZMW 140 per 50 Kg bag.
In Malawi, ADMARC, the state-owned agency involved
in grain marketing and storage, was purchasing
maize grain at MWK 200 per Kg, which was above
prevailing market prices across much of Malawi as
well neighboring areas of Mozambique and Zambia.
However, due to funding constraints, purchases were
erratic. The price differentials of the ADMARC purchase
prices attracted heavy informal maize flows into Malawi
despite the country’s above-average production.
The government of Zimbabwe’s Grain Marketing Board
(GMB) began purchasing maize and small grains in
May. Purchase volumes are currently higher than 2019,
Source: FEWS NET (2020) but well below average due to below average domestic
availability and strong imports from neighboring South
Africa. This is also despite a 77 percent increase in the
maize purchase price relative to 2019 coupled with a
In Zimbabwe, maize prices continued to increase, 30 percent top up incentive. By May 2020, prevailing
mostly driven by effects of the volatile macroeconomic market prices were 16 times higer than previous year
environment and low production levels. This is despite levels and 32 times the average levels. Due to limited
the recent reintroduction of a multicurrency system local maize grain availability, the GMB sales of subsidized
(approved among measures to ease the effects of maize meal have been limited.
COVID-19 on economic activities) and strong imports
from South Africa.
16
16South Africa’s 2020/2021 total maize surplus of 5.5
Figure 12. Projected Regional Maize Trade million MT is expected to help offset deficits in countries
Flows such as Botswana, Lesotho, Namibia, and Eswatini.
South Africa’s maize export volumes to Zimbabwe
are likely to remain significantly above average (SAGIS
2020). Due to sufficient regional maize supply this
year, South Africa is expected to continue exporting to
international markets (East Asia in particular), although
some imports of yellow maize for the livestock feed
industry are anticipated (Figure 12). Zimbabwe will
source both white and yellow maize primarily from
regional markets. Rice imports from international
markets will fill domestic supply gaps in consuming
countries such as Mozambique and Madagascar.
Production estimates for Zambia indicated that the
country’s total production was about 25 percent above
historical five-year average, but opening stocks were
over 70 percent percent below average. Thus, supplies
are expected to be near average. Since 2019, Zambia
has maintained a formal maize export ban, although
informal exports are ongoing. The FRA’s ambitious
goal to purchase 1 million MT implies that Zambia’s
exportable surplus will only be about 210,000 MT, which
is approximately 70 percent below-average. However,
Source: FESNET, IAPRI and WFP (2020)
informal exports from Zambia to neighboring countries
have been taking place and are projected to continue
throughout the season.
Projected Market and Trade Trends
For 2020/2021 Table 2 shows informal cross border maize grain trade
volumes for the period April 2020 to September 2020.
Owing to the combination of above-average regional Zambia’s informal exports were mostly to Malawi,
harvests and below average opening stock levels, Tanzania and the DRC, with informal exprts to Malawi
Southern Africa remains self-sufficient in terms of maize reaching a high of over 4,000 MT in the month of June.
supply. Zimbabwe and DRC (Haut Katanga) had an Malawi also exported a sizeable volumes of maize grain
estimated above-average deficits of about 1.1 million mainly exported to Tanzania. Mozambique’s informal
MT and 0.8 million MT respectively. After accounting for maize grain exports were mostly destined for Malawi.
regional requirements, the estimated regional surplus of Malawi appears to be a transit country for further export
4.5 million MT remains the largest since the 2010/2011 to Tanzania.
marketing season.
Table 2. Informal Regional Maize Grain Trade Volumes – April 2020 to September 2020
Source: FEWS NET and WFP
17
17Notwithstanding the maize export ban in Zambia, Rather, COVID-19 related lockdown measures and
informal maize trade thrived, with exports mainly movement restrictions have heavily affected population
destined for DRC, Malawi, and Tanzania. During the movement in Southern Africa. This has negatively
period June to September, Zambia informal maize impacted income earning opportunities especially
exports to the the aforementioned countries increased among daily-wage laborers and small scale cross
in 2020/2021 season compared to the previous season border traders. Unrelated to maize, domestic and cross
during the corresponding period, with the exception of border marketing activities of fresh horticultural crops
August when the 2020/2021 volumes fell behind the (e.g. tomatoes) and cash crops (e.g. tobacco) were
2019/2020 season (Figure 13). Besides maize grain, affected by border clearing delays necessitated by
informal mealie meal exports from Zambia also surged, intensified border screening protocols. Uncertainties
with DRC being the main destination. Similar to the regarding how neighboring countries will respond as
previous season, the increase in infomal exports for cases continue to rise presents a market challenge,
both mealie meal and maize grain was mainly driven where players are unsure how lockdowns and other
by the wide price differential between Zambia and contigent measures would impact exports and imports.
neighboring countries. For example, in June, a 50 Kg Thus market players are on edge cautiously weighing
bag of maize was fetching ZMW 130 on the Zambian the potential impact of the pandemic on regional food
side whereas on the Malawian side the same bag was markets.
trading at ZMW 273.
Several regional currencies were already depreciating
prior to the onset of the COVID-19 pandemic. However,
Figure 13. Zambia’s Informal Exports to between January and May 2020, the Congolese Franc
DRC, Tanzania, and Malawi – 2019/2020 and (CDF), ZAR, and ZMW, among others, depreciated
2020/2021 Marketing Seasons partly due to reductions in export earnings linked to the
contracting global economy.
In the East, Tanzania’s informal maize grain exports
to East African markets slowed since March 2020,
compared to 2019 when exports flows from Tanzania
reached very high levels. Border movement restrictions
resulted in delayed border clearing processes.
Government of Kenya, the main recipient of Tanzanian
maize, announced in March that it would import over
350,000 MT of maize grain from international markets
to offset any eventual COVID-19 related supply
disruptions, further contributing to declining exports
from Tanzania.
At a country level, COVID-19 pandemic in Zambia
Source. FEWS NET, IAPRI and WFP(2020) informal cross border resulted in loss of business and wage income for
trade monitoring system
many people both in the rural and urban areas, thus
eroding their purchasing power and access to food.
Impact of COVID-19 This prompted government through the Ministry
of Community Develoment and Social Services in
With regards to COVID-19, the regional maize partnership with UN agencies to implement emergency
production was not affected in any discernable way, as cash transfers to the affected households.
the regional maize harvests were already underway at
the onset of the pandemic in early March 2020.
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