Meeting Cereal Requirements
Likely Food Aid Requirements Over the Next Year
The Role of the Commercial Sector
- The estimated level of food aid requirements assumes that commercial imports will successfully fill the remaining production gap, and that consumers will be able to afford to purchase their food requirements.
- During the last marketing season, prices in many countries saw unprecedented increases as a result of supply shortfalls. On average, prices of basic food commodities more than tripled between April 2001 and March 2002. Current prices are typically double what they were one year ago.
- Prices have dropped in most markets following this season’s harvest. However there are already signs that this will be short-lived, and market analysts consider it likely that prices will soar in those countries most affected by production shortfalls.
- With reduced purchasing power, most poor households are unable to afford these high prices, and will require food assistance.
- To varying degrees, governments in Malawi, Zambia and Zimbabwe have been subsidizing maize prices. This makes it difficult for the private sector to competitively import cereals on their own, and serves as a disincentive for private sector participation.
- Large amounts of food aid could serve as a further disincentive to private sector participation in in the marketplace.
MALAWI
- During the past marketing season, prices rose to nearly 500% above the previous year in some markets.
- Prices have dropped following the harvest, but remain well above the government selling price of MK17/kg (US$224/MT) in many markets. In most markets, the price is more than double what it was one year ago.
- Government subsidies, anticipated food aid flows and high interest rates are discouraging private sector participation in filling the food gap.
ZAMBIA
- During the past marketing season, local maize prices increased by over 300% in some markets from the start of the season. Following the harvest, prices have dropped somewhat, but are still above normal in most markets.
- Government imported maize at a cost of US$260/MT, and sold this to the private sector for US$165/MT. Government support to prices has cost as much as US$15 million.
- The private sector can import cereal at market prices and determine their own selling prices, but find it difficult to compete with the government subsidized selling price.
ZIMBABWE
- Inflation is currently around 116%, but prices for basic food commodities are raising faster.
- The official exchange rate is US$1 = Z$56, the parallel rate is US$1 = Z$450.
Price controls for basic commodities were introduced in October 2001.
- Government imposed trade restrictions, preventing the private sector from importing maize and wheat, and from participating in the local marketing of these commodities.
- Government, as the sole buyer, purchases maize from producers at Z$15,000/MT, which is US$268 at the official rate, but only US$33 at the parallel rate.
- Commercial maize imports into Zimbabwe cost US$265/MT.
- Government sells maize at Z$18,000/MT, which is US$40. This represents a subsidy of $225/MT. Zimbabwe consumes more than 5,000MT/day, bringing the daily cost of this subsidy to more than US$1,125,000.
- If it can be found in local markets, maize is currently selling for Z$70/kg, almost 400% of the the official government price.
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