Zambia

FEWS Zambia Monthly Report May 2003 - Maize floor price set by government

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Grain supplies in both urban and rural areas have increased significantly with a relatively good harvest expected from the 2002/03 production. Official crop estimate figures will be available by the end of May.

Maize prices dropped substantially between March and April in response to the increased supply. Price reductions ranged from 6 percent in Kasama to 54 percent in Mazabuka.

The real price of maize for April has fallen below average after two consecutive years of above average prices.

The ongoing food relief program needs to be appropriately managed given the changing market situation.

The Government has set the floor price of maize for the 2003/2004 marketing season at K30,000 per 50 kg bag (about US$122/MT). This is the first time floor prices have been set for maize in Zambia since market liberalization in 1992.

Grain Availability

Market maize supplies have increased substantially as the main harvest has started to reach the market. Millers are currently stocked with grain and likely to begin purchasing more with the drop in maize prices following harvest.

The Government received additional maize imports between mid-April and mid-May 2003. In addition to a previous 54,452 MT the Government had paid for (63 percent of which had been received by mid-April), 17,000 MT is expected and will go towards the strategic reserves. Of this 17,000 MT expected, 2,387 MT had been supplied by mid-May. In addition, the Chinese government has donated a total of 4,500 MT of yellow maize, most likely for relief purposes, and 17 percent of that had been received by mid-May.

In response to the private sector's outcry for the Government maize imports to stop, since local stock from the new harvest is available, the Government announced that Sable Transport would start purchasing the maize from local stocks in order to fulfill the contract made with the Government.

The FRA strategic reserve position as of May 15 stood at 32,884.6 MT, of which 19,288.6 MT was Government import contribution. An additional 17,667.4 MT is expected by the FRA from the Government purchases.

Grain Access

Generally, there has been substantial drop in the price of maize in both urban and rural markets between the months of March and April 2003. The nominal maize retail price reductions ranged from 6 percent in Kasama (Northern Province) to 54 percent in Mazabuka (Southern Province). Using CSO price data for the month of April, Mumbwa District (Central Province) reported the lowest price of K533/kg (US$0.11) while the highest price of K1,244/kg (US$0.25) was recorded in Chipata (Eastern Province). Based on data from 50 percent of the districts in Zambia, Central Province has the lowest maize prices, closely followed by Southern Province. This is in line with the high maize production expected from Central Province.

As a result of the significant increase in grain output from the 2002/03 harvest, the maize retail prices have fallen below average in real terms, as depicted in Figure 1.


Fig 1: Real Maize Price Comparison among Rural Districts currently Receiving Relief Food

Source: CSO/FEWS NET


Availability of other major foods such as pumpkins, sweet potatoes and grain from the new harvest, as well as continued relief in parts of these rural areas may have helped push prices down. Maize prices for the current marketing season (2003/04) are expected to fall substantially below those of the past two seasons to the benefit of the consumer. Among the selected districts, only Mongu District is showing a higher than average maize price for the month of April. This could imply that the current harvest has not been substantial enough to improve the grain supply in the district. The results of the Vulnerability Assessment, due at the end of May, should help clarify the reasons behind these differences.

The current prices indicate a significant improvement in access at this time of the year over last, and therefore the ongoing relief program will need to be appropriately managed in relation to this new market situation in order to avoid unintended market distortions.

The price trend of maize grain for two urban centers (Lusaka and Kabwe) shows a trend similar to rural areas where maize grain prices fell slightly from January to February and then sharply thereafter as the early harvest started coming onto the market (Figures 2 and 3). Larger reductions in the grain price were observed in Kabwe compared to Lusaka. This is not surprising as a very good harvest is expected from Central Province.


Fig 2: Lusaka Urban- Nominal Retail Prices

Fig 3: Kabwe Urban - Nominal Retail Prices

Source: CSO/FEWS NET


As the price of maize falls, reductions in maize meal prices are also expected. So far, the reductions observed in the price of maize meal are moderate. More centers recorded reductions in roller meal prices (65 percent) than breakfast meal (49 percent). The fact that maize grain is readily available implies that industrially processed roller meal, consumed mostly by the low income group, is competing with hammer mill processing. Larger reductions in the price of roller meal compared to breakfast meal are inevitable shortly after a good harvest. The price of breakfast meal only fell in April after a gradual upward trend in the preceding months. Roller meal prices on the other hand had been relatively stable between December and March only declining in April. The price differential between breakfast meal and roller meal started progressively widening after the month of December, moving from 10 percent and 13 percent in December to 19 percent and 22 percent in April for Lusaka and Kabwe respectively. This trend is expected to continue until after September, when grain prices are expected to start rising. With the reduction in maize prices, most urban poor will rely more on hammer mill processing than industrial meal and will be spending much less on staple food than during the preceding months. Therefore, improved urban food security is expected.

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