Malawi

FEWS Malawi Food Security Report mid-May to end June 2003 - Government to export 100,000 MT of maize

Format
Situation Report
Source
Posted
Originally published


EXECUTIVE SUMMARY

Dry conditions and cold temperatures persist over Malawi.

Recently harvested crops are being marketed and winter crops are being planted at the moment.

The government intends to export 100,000 MT of maize while at the same time reserving another 100,000 MT for the Strategic Grain Reserve.

Local maize prices during the first week of July 2003 ranged from MK5.91/kg to MK13.48/kg. These prices are much lower than at the same time last season. ADMARC has been compelled to reduce its maize price from MK17/kg to MK10/kg in order to compete with local market prices.

The national inflation rate continues to drop, from 9% in May to 8.5% in June. The country is experiencing its lowest inflation rates in five years.

1. FACTORS AFFECTING CROP PRODUCTION

a. Agro-climatic Conditions

Most parts of the country continued to experience dry conditions and cooler temperatures.

As typical of the winter season in Malawi, the country continues to experience dry conditions coupled with intermittent showers in some parts of the country, particularly the southern highlands and lakeshore areas with cold temperatures. The cold temperatures and rainfall showers provide an environment which supports the cultivation of winter crops. The dry conditions on the other hand facilitate the main season (summer) harvest, which is now almost complete.

2. AGRICULTURAL ACTIVITIES

The main (summer) harvest is almost complete except for in a few areas of the northern region.

The first winter crop planting is currently underway.

The main (summer) harvest is almost over, except for in a few areas of the northern region. The northern region always harvests last because of the rainfall pattern that starts from the south and gradually progresses towards the north, delaying the northern harvest by around 3 to 4 weeks. Most farmers in areas that harvested are now selling their crops.

Cultivation of winter crops varies from one area to another. In some areas, where there is residual moisture after the rains, farmers are preparing and planting their fields. This is mainly the case in the wetlands (locally known as dambo). The cool temperatures and rainfall showers help soils retain moisture and these conditions encourage plant growth. This crop is generally harvested around September/October, after which a second crop is planted, often requiring irrigation in the early stages before the start of the main season rains around November. This second winter crop is ready for consumption around December or January.

It is worth noting that winter cropping in the lower Shire area will be reduced due to flooding of the Shire river plains. Normally by April, as harvesting of the summer crop commences, farmers in the Shire plain begin to plant the first winter crop. However, this year, as a result of the flooding, little winter planting occurred at that time. According to a press release by the Ministry of Water Development, the floods this year were caused by a combination of high precipitation and high lake levels, which resulted in above average flows into the Shire River. In addition, weeds have blocked some sections on the upstream side, thereby restricting flows in the river.

Some farmers are now busy making compost manure for use later when they start preparing their fields for the main season crop. The government has been encouraging farmers to make and use compost manure due to the high price of the inorganic fertilizers. Fertilizer prices have been increasing every year making it increasingly difficult for poor households to afford. The prices have almost doubled in a period of 5 years. Figure 1 shows the trend in fertilizer prices since 1990.


Figure 1: Average retail fertilizer prices for a 50KG bag by type: 1990-2003


Unfortunately fertilizer use remains the key to increased maize production in the country, and yet its cost is increasingly prohibitive. For example, the cost of applying the recommended amount of fertilizer per hectare, (100kgs of basal dressing fertilizer [23:21:0+4s] and 150kgs of top dressing fertilizer [Urea]) is MK69001. Assuming an average yield of 1000kgs per hectare, the producer price would have to be at least MK7.00/kg in order to cover just the cost of fertilizers, without considering other costs; however, most households sell their maize soon after harvest when prices are less than MK5.00/kg. Most poor households cultivate far less than a hectare, leaving them with very little to sell, and making it difficult for them to afford adequate amounts of fertilizer.

3. MAIZE MARKET CONDITION AND PRICES

Maize prices in the local markets ranged between MK5.91/kg and MK13.48/kg as of first week of July 2003.

Government intends to export 100,000 MT of maize.

Maize continues to be readily available in local markets at relatively low prices decided to export 100,000 MT of maize through the National Food Reserve Agency (NFRA) as one means of addressing this stock glut. It will retain 100,000 MT in the Strategic Grain Reserve to hedge against unforeseen domestic food shortages. Keeping this food in reserve is important because low maize prices may result in low informal maize imports and reduced maize supplies in the local markets later in the season. It is also possible that maize might end up flowing out of the country through informal channels to capitalize on higher maize prices elsewhere, and this could result in maize shortages and price hikes in the domestic market. The government will therefore need to manage the Strategic Grain Reserves prudently.

During the first week of July 2003, m,aize prices in local markets ranged between MK5.91/kg at Nkhotakota market in Nkhotakota District in the central region, and MK13.48/kg at Namwera market in Mangochi District in the southern region. These prices are much lower than both last season's comparable prices and the original ADMARC price of MK17.00/kg.

As mentioned in the last report, the government has advised ADMARC to reduce its maize prices from MK17.00/kg to MK10.00/kg as one way of attracting buyers and competing with the prices in the local markets, as shown in Figure 2. Since this decision was made only last month, it is too early to assess the impact of this change. However, lowering the ADMARC price may act as a bargaining tool for private traders, who may argue that since they will not be able to sell their maize for more than MK10.00/kg, they will be forced to offer something even lower to farmers in order to make profit. Unlike in the past, it is not clear whether ADMARC will buy maize from farmers this year and if so, at what price.

As discussed above, low producer prices will make it difficult for most farmers to afford fertilizers. Anecdotal field evidence from the baseline vulnerability assessment (completed last month) supports this argument.


Figure 2: Comparison of 2002, 2003 local market and ADMARC maize prices by market


4. MACRO-ECONOMIC ENVIRONMENT

The national inflation rate continues to drop and was at 8.5 percent by June 2003.

The national inflation rate dropped from 9% in May to 8.5% in June 2003. The country is experiencing its lowest inflation rates in the past five years, as shown in Figure 3. As reported last month, the drop in inflation is mainly attributed to the improved food security situation this year and the subsequent decline in the food index which accounts for over 50% of the inflation rate. The drop in the food index has been accelerated by the recent downward adjustment of the ADMARC maize price from MK17.00/kg to MK10.00/kg. The food index dropped by 7% between May and June this year compared to a 5.5% drop at the same time last season. The declining inflation rate has been further supported by the stable exchange rate (Malawi Kwacha against the USD). Inflation rates in both urban and rural areas show similar trends, with the rate in urban areas dropping from 10% to 9.2 % between May and June and the rate in the rural areas dropping from 8.6% to 8.5% in the same period.


Figure 3: National inflation rate trends : 1007-2001

FEWS NET Malawi
Source: National Statistics Office


Note: 1 Based on an average price of MK1500 and MK1300 per 50kg bag for the 23:21:0+4s and Urea fertilizers respectively