Using markets to increase food security

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Using markets to increase food security

• RATES Program
• October 16th, 2006
• by
• Stephen Njukia
• at
• 2nd African Drought risk and Development Forum

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Maize is Food

• In many African countries, maize is associated
  with food security Where theres NO Maize there
  is NO Food.
• Although maize is still the dominant staple food
  in this region, wheat products are catching up
  quickly in urban areas
• Wheat consumption is growing at a faster rate
  than maize

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COMESA/EAC Maize Statistics

• Average Total Production 22,000,000 MT
• Average Total Consumption 16,000,000MT
• Average surplus 4,000,000 MT
• Despite overall surplus, we can still have
  pockets of surplus and deficits at the same time
• This has resulted in the formal and informal
  movement of maize from surplus to deficit areas

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Maize Calendar for COMESA EAC
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Why Regional Trade

• Production shortfalls generally do not afflict
  the whole region
• Trade flows (not food aid) normally account for
  the bulk of food inflows to crises areas
• In 2002/03, trade accounted for ¾ of food inflows
  needed by Zambia and Malawi

Source MSU, T. S. Jayne, D. Tschirley, P.
Arlindo, B. Mwiingal
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Typical Maize Trade Flow
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Food Insecurity

• Production Failure
• Reduced government investments to research,
  extension, inputs, poor climatic conditions
  (drought), etc.
• Lack of Access
• A function of movement from surplus to deficit
  areas
• Commercial access
• People have income to purchase e.g. Northern
  Tanzania buying from Uganda
• Is increased where traders identify market
  opportunities
• Is reduced when government policy is
  unpredictable
• Relief access
• Lack of funds by the government to pay for
  distribution logistics
• Poor road and rail network
• Export ban from neighboring countries can limit
  this access

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Constrain to Commercial Access

• Lack of market information
• Poor infrastructure
• Unclear Government food policy
• Disorganized Grain Trade

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Market information

• Prices
• In the absence of a defined price discovery
  mechanism, farmers do not know the prevailing
  prices beyond their locale
• Cross border trade flow direction
• Lack of information on informal exports and
  imports leads to an inaccurate food balance sheet
  
• Crop update
• Lack of information on crop development in
  neighboring countries can lead to losses for
  farmers and traders taking a long position
• Poor policy decisions

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Infrastructure

• Failure by government to investment in
• inter-regional road and rail network
• Rural access roads to bring produce to market
• Research on new and developing markets
• Market information system (MIS)
• Most MIS are donor funded or operate under tight
  budgets

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Government food policy

• Unclear trade policy and regulatory framework
• Unpredictable market interference
• Ad hoc import/export bans
• Currently Tanzania ban on all food exports is
  curtailing export of rice and maize to Kenya
• Lack of trust and understanding between private
  and public sector
• Traders always described as unscrupulous

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Disorganized Trade

• Competing with Government programs
• Marketing Boards engaged in both commercial and
  relief food operations
• Limited private sector growth
• Traders will not take position in unpredictable
  environment
• Banks will not finance trades where there are no
  clear price discovery mechanism

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RATES Program Initiative

• Market Information
• Regional Maize Trade Policy
• Structured Trading System

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RATES Experience with Market Information Systems

• Trade Linkage Mechanism - Emphasis on ensuring
  trade takes place
• Maize, Beans and Pulses Traders
• www.tradeafrica.biz
• Cotton and Textile Traders
• www.cottonafrica.com

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Market Prices in selected countries
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TradeAfrica.biz

• The site has demonstrated that it is possible to
  match surplus with deficit (supply and demand)
  through trade

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RATES Experience with Market Information Systems

• Market Information for Kenya, Uganda, Tanzania
  and Rwanda
• RATIN www.ratin.net
• (Regional Agricultural Trade Intelligence
  Network)
• Provides maize balance sheet position that
  includes both formal and informal trade
• Forecasts on trade opportunities
• Monthly bulletin in English and Kiswahili

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Tradeafrica and RATIN connection

• Cross Border
• Linked Busia Trader to processors
• Provide training and linkage in Kibaigwa Tanzania
  hence expanded markets

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Regional Maize Trade Policy

• Promoted the Maize without Borders concept that
  has been adopted by both COMESA and EAC
• We still see some backsliding when theres
  threat of food shortages
• Initiated dialogue on reduction of barriers to
  trade
• EAC maize traders guide
• Simplified Customs document for cross border
  traders for COMESA
• Training of cross border traders on grades and
  standards, customs, and phytosanitary
  requirements
• Duty reduction to zero within East Africa
  Community

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Building Blocks for a Structured Trading System
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Grain Sector get organized
Kenya EAGC 1st Meeting
Malawi
Zambia
Uganda
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Storage
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Standards and grading
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Aggregation of volume
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Formation of the EAGC Grain Council
Preparation for Launch
Articles of Association Prepared
By-Laws Completed
January
February
March
April
May
June
July
August
September
Concept Paper started
Business Plan development
Concept Paper completed
Final Registration document prepare
Operations Manual Completed
EAGC Promotion initiated
EAGC Inaugurated
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EAGC Service

• Provide a platform for Public/Private engagement
• Market Information Service
• Current and accurate trade information
  www.ratin.net
• Rules of Trade
• Contracts, Quality and Standards
• Arbitration
• Faster dispute settlement
• Certification of warehouses
• Warehouse Receipt Management
• Promote Commodity Exchange

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Thank You