Southern Africa - Assumptions for Quarterly Food Security Analysis, July 2014
To project food security outcomes, FEWS NET uses scenario development. Commonly used by planners and researchers to forecast likely events, this methodology takes a set of informed assumptions about the future and compares their possible effects. Scenario development cannot predict exact outcomes but it structures the analysis and helps minimize uncertainty. This report, developed by FEWS NET analysts based on current evidence, outlines assumptions at the regional level. Analysts also develop assumptions at the country level, which are specific to that country and likely to be more detailed. Together, the regional and national assumptions are the foundation for the integrated analysis reported in FEWS NET’s Food Security Outlooks and Outlook Updates. Learn more about FEWS NET and scenario development at www.fews.net.
FEWS NET’s Food Security Outlook reports for July to December 2014 are based on the following regional assumptions:
Markets and Trade
Given the above average 2013/14 seasonal harvest prospects in most parts of the region, cereal availability in the region is expected to be 10-15 percent above the previous year and above the five-year average as surplus-producing countries announced above-average harvest estimates and expect significant carryover stocks. This is expected to reduce household dependence on the markets for the July to September period as households will be consuming from their own production. Given significant seasonal food price drops between April and May, it is expected that prices of staple cereals will trend below 2013 levels, but will remain above the five-year averages given tight supplies over the previous 2012/13 and 2013/14 marketing seasons.
Intra and extra regional exports are expected to remain robust, given that regional exportable surpluses are projected to be at higher levels than the previous year. South Africa expects an exportable maize surplus that is approximately 11 percent higher than last season, despite significantly lower (by 64 percent) carryover stock as of May 1st 2014. This is on account of the above-average 13.55 million MT harvest expectation for the 2013/14 season. Structurally grain deficit neighboring countries will continue to access their maize import requirement from South Africa. However, competition with overseas import demand (mainly Asian countries) is expected to remain high as South African traders aggressively look for markets to off-load excess supplies. Export volumes to neighboring countries from July to December will be atypically low since domestic availability in most of these countries is good and should continue to provide supplies throughout the July-September period.
Zambia, another major maize producer, is projecting above-average exports due to favorable harvests that are twice last year’s levels. While the Government of Zambia lifted the export restrictions in April of 2014 to allow for more robust cross-border exports, actual exports have been limited since neighboring countries experienced good harvests this season. Average and above-average harvests in neighboring countries, and the suspension of import licenses in Zimbabwe – the main destination of Zambia maize exports -- is likely to reduce the amount of maize that Zambia can potentially export regionally from July-December.
Zambia’s Food Reserve Agency (FRA) is expected to start its purchase of 500,000 MT of maize for the strategic grain reserve in July at a price that is slightly higher (8 percent) than last year’s purchase price. Given the large surplus, the removal of the export ban, and FRA’s plan to enter the market only in July, along with the fact that they do not pay cash on delivery, farmers have already started selling to private sector participants at market prices that are below the FRA’s selling price of K70/50kg bag. Maize prices are expected to fall significantly between July and December, but will remain above average given the high prices maintained from last season, as well as high transport costs. During the FRA maize purchase period from July to September, informal maize imports from Tanzania, Mozambique, and Malawi are likely to increase because of the price differential since FRA is expected to continue offering above market prices.
Tanzania is the second largest cereal producer in the region and is expected to have ample availability of maize and rice at relatively low prices owing to significant carryover stocks from the May to August 2013 harvest and the ongoing May to August 2014 harvest. The highly productive southern region is expected to realize above average maize production with surplus production at levels similar to the 500,000 MT realized in 2013. Given the high demand from neighboring East African countries, Tanzania is expected to have unusually high exports between July and December, especially to the southeastern and coastal regions of Kenya as well as Rwanda.
Malawi is expected to have increased domestic cereal availability as compared to the 2012/13 season, but surplus stocks will remain limited on account of localized shocks of dryness and the early cessation of rains. These localized shocks, coupled with reports of good production in nearby traditional marketing areas across Malawi’s borders with Mozambique, Tanzania and Zambia, will likely lead to reduced informal outflows. Atypical drops in informal trade volumes were observed between April and May, at a time when historical trends indicate that volumes typically increase steeply because of the favorable price differentials across borders. This trend is likely to continue throughout the outlook period.
Maize prices on the South African Futures Exchange (SAFEX) are expected to fall steadily as the 2014 harvests boost available stocks. SAFEX Spot prices are expected to trend lower than their 2013 levels, following seasonal patterns, rising typically from October onwards. SAFEX maize price levels which have a bearing on regional food access will also continue to be influenced by global maize price trends (which are currently stable due to good global supplies). Additionally, the fluctuations in the local currency against major currencies, and the speculative behavior of grain exporters as they source for more lucrative markets further afield could influence SAFEX prices. Lower price levels during the July-December period might vary or fluctuate if the local currency continues to depreciate due to prevailing macro-economic conditions. This depreciation has happened in recent months, dropping 17 percent year-on-year since May 2013.
International crude oil prices, which are currently stable (according to the World Bank), are expected to decline slightly due to expanded output in non-traditional exporting countries. However, in FEWS NET countries, fuel price trends from the July to December period will vary depending not only on the international market conditions, but also on the evolution of local exchange rates in relation to the U.S. Dollar, as well as the design and implementation of local fuel import and price policies.
Start of season (SOS)/ Agroclimatology
There is an 80 percent chance that an El Niño will develop by the start of the 2014/2015 season. The El Niño phenomenon is generally associated with below average rainfall (40 percent chance) in many southern parts of the region. While El Niño increases chances of below average rainfall, the affected areas vary with every El Niño occurrence. Figure 2 shows the number of El Niño years (out of a total of ten) in which less than 80 percent of average rainfall was received during the October to December period. In Figure 2, the areas in yellow had below average October to December rainfall for 5-7 years out of the possible last ten El Niño events.
With the forecast, El Niño is expected to be in progress by the start of the season. It is expected that parts of Tanzania will likely receive above normal rainfall during the October to December period. The good rains in the bimodal areas of Tanzania will enhance recovery, especially in areas that were negatively affected by poor rains during the past Vuli and Masika seasons. Similarly, northern Malawi, northern Mozambique, and eastern Zambia may also receive above normal early season rains, in-line with observed El Niño trends; enhancing chances for early planting.
In contrast, southern and central Mozambique, southern Zambia, southeastern Zimbabwe, southern-most Malawi, and northeastern South Africa are more likely to receive below average October to December rainfall, as this is a more frequent occurrence in these areas during El Niño years.
As Governments and private traders embark on the importation of key agricultural inputs in the period leading up to the start of the new cropping season, it is likely that demand for foreign exchange will increase thereby exerting more pressure on available import cover, the value of local currencies, and potentially resulting in depreciation and high inflationary effect on food. This is more likely in Malawi, Zimbabwe, and to some extent Zambia where Governments are implementing large annual input subsidy schemes.
Farm and off-farm labor opportunities and remittances
In general, agricultural labor opportunities are expected to remain at levels typical for the July to September period. With the start of land preparation during the October to December period, given the El Niño conditions forecast, and the associated impacts on rainfall performance, it is likely that the start of season will be delayed, and/or erratic, thus affecting availability of labor opportunities at a time when these are typically expected to start increasing.
Migrant labor opportunities in South Africa are expected to remain constrained as labor costs continue to rise due to demands for increased minimum wages, and the protracted labor disputes in the farming and mining sectors. While most households typically rely less on remittances between July and September, it is likely that remittance levels from October to December to neighboring countries with significant migrant populations (Lesotho, Mozambique, and Zimbabwe) will fall below typical levels.
Pest Infestations and Disease Outbreaks
The May 2014 International Red Locust Control Organization for Central and Southern Africa (IRLCO-CSA) report, states that that armyworm outbreaks are not expected in Malawi, Mozambique, Zambia and Zimbabwe in the first half of the outlook period since it falls within the dry season. Only northern Tanzania will remain at risk as favorable climatic conditions for outbreaks will continue to exist until August.
The IRLCO-CSA also indicates that Red Locust swarm formation is expected to intensify in the period up to August in the outbreak areas of Tanzania, Mozambique, and Zambia due to widespread vegetation burning. The situation in all outbreak areas, including Malawi’s outbreak areas located in Lake Chilwa plains, is potentially dangerous as swarms, if not controlled, are likely migrate from the outbreak areas into adjacent or even further afield into neighboring countries.
In Madagascar - which has faced a migratory locust infestation crisis since April 2012 - the Food and Agriculture Organization (FAO) June 2014 Locust Situation Update reported that, with the rainy season coming to an end, weather and ecological conditions would soon be unsuitable for locust breeding. It is expected therefore that no further massive breeding will occur before the next rainy season, in October 2014. Following intensive and large-scale aerial control operations carried out in April and May, the number and size of the locust swarms has decreased significantly throughout the country, both in the invasion and outbreak areas. Nevertheless, conditions still require that monitoring of all locust populations, as well as limited control operations continues over the winter period.
Humanitarian assistance needs are expected to be Minimal (IPC Phase 1) throughout the region, especially during the July-September period, as most poor households will still rely on stocks from own production, food from labor exchange and reasonably priced food accessed from local markets. The ongoing vulnerability and food security assessments will determine the number of people likely to face (or already facing) acute food insecurity in the 2014/15 consumption period and the level of humanitarian assistance that may be required.
Opportunities for Local and Regional Purchases (LRP) for humanitarian food commodities will improve this 2014/15 consumption year given current national demand/ supply projections which show improved availability of tradable maize this year, especially from Zambia (the main source of LRP), and Tanzania. Based on levels of LRP purchases of non-GMO maize in the recent past by the World Food Program (WFP), the available after trade surpluses will be more than sufficient to cover any local procurement requirement that WFP may have for its programs in the countries that have strict policies on GMO maize.