Prospects for increased staple food production in Eastern and Southern Africa and implications for r

1
Prospects for increased staple food production in
Eastern and Southern Africa and implications for
regional and global markets

• Nicholas Minot
• Markets, Trade, Institutions Division

Workshop on Trade Policy for Food Products
Conducive to Development in Eastern and Southern
Africa, FAO Headquarters, Rome, 1-2 March 2007
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Outline

• Background on staple crops in E SA
• Prospects for increased staple crop production in
  region
• Impact on global and regional markets
• Conclusions and implications

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Background Staples in the diet
Source of calories in nine Eastern and Southern
African countries
Source FAO Food balance data, 2004

• Staples account for about two-thirds of caloric
  intake
• Grains account for almost half
• Maize accounts for almost one-third

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Background Importance of staples
Source FAO Food balance data, 2004

• Maize most important in Malawi, Zambia, Kenya,
  SA, Zimbabwe
• Cassava most important in Mozambique
• Wheat relatively important in South Africa
  Ethiopia
• Rice relatively important in Mozambique and
  Tanzania

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Background Production trends
Source FAO

• Grain production characterized by
• Slow growth 1.2 since 1970 but 2.1 since 1990
  
• Shift Growth in rice is higher (1.8) other
  grains lower (0.8)
• Volatility CV is 16 overall but 30-40 for
  each crop in each country

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Background Production trends
Source FAO
Source FAO

• South Africa dominates, but production is
  volatile
• Growth fastest in Ethiopia, Tanzania,
  Mozambique (gt2.9 since 1970)
• Growth negative or very low in most other
  Southern African countries

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Background Production trends
Source FAO
Source FAO

• Strong growth 2.6 since 1970 and 3.6 since
  1990
• Fastest growth in Lesotho, Malawi, Zambia,
  Zimbabwe
• Possible causes decline in maize support
  fertilizer subsidies and rural labor shortages

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Background Production and net trade
Source FAO
Source FAO

• Maize from surplus (123 self suff in 1970s) to
  deficit (97) in 2000-04
• Maize trade does not smooth consumption (except
  1991-92 drought)
• Wheat shift from 93 self-sufficiency to 56
• Rice shift from 87 self-sufficiency to 67

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Projections Overview of IMPACT model
IMPACT International Model for Policy Analysis
of Agricultural Commodities and Trade

• Managed by IFPRI under direction of Mark
  Rosegrant
• Partial equilibrium agricultural sector model
• 43 countries/regions (4 in Africa)
• 32 commodities (mostly ag)

• Model specified as a set of country-level supply
  and demand equations for commodities and water
• Country-level models are linked to the rest of
  the world through trade
• World food prices are determined annually at
  levels that clear international commodity markets

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IMPACT projections - Alternative Scenarios

• Base scenario (business as usual)
• Current trends and existing plans for food
  policy, management, and investment continue over
  the projection period, including declining
  agricultural investments by international donors
  and national governments.
• Low scenario (pessimistic)
• Crop yield growth half of Base Scenario GDP
  growth 25 below Base Scenario population growth
  is UN high variant and deterioration of social
  factors, such as female education, access to
  clean water, labor productivity.
• High scenario (vision)
• Crop yield growth twice that Base Scenario GDP
  growth 8 per year population growth is UN low
  variant.

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IMPACT projections Staple production
Sources Rosegrant, et al. 2005
Source Rosegrant, et al. 2005

• Crop production growth generally 2-3 in low
  scenario
• Crop production growth 3-4 in high scenario

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IMPACT projections Net exports
Sources Rosegrant, et al. 2005

• In all scenarios, Eastern and Southern Africa
  remain net importers of wheat, maize, and rice
• Wheat and rice imports roughly double, larger
  imports in high scenario (income growth high
  income elasticity)
• Maize imports double in base scenario, smaller
  deficits in high scenario (low income elasticity)

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IMPACT projections Child malnutrition
Sources Rosegrant, et al. 2005

• High scenario results in sharp drop in child
  malnutrition
• Increase in wheat rice deficits do not imply
  food insecurity

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Impact of increased African grain production
Impact depends on tradeability
D

• At S1, commodity is importable so (small)
  increases in supply do not reduce price, e.g.
  wheat, rice, and sometimes maize
• At S2, commodity is nontradeable so increases in
  supply depress price, e.g. cassava,
  plaintains, and sometimes maize
• At S3, commodity is exportable so increases in
  supply do not reduce price, e.g. coffee, tea

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Impact of increased African grain productionOver
large range of world prices, no trade
World Price
D
S
Autarky price plus export margin Autarky price
Autarky price minus import margin
S
D
Quantity

• If world price above autarky price plus export
  margin, good is exported
• If world price below autarky minus import margin,
  good is imported
• If world price in between, good is not traded
  (SD)
• How big is range over which good is not traded?
• In Tanzania over 1990-2004, average export unit
  value of maize was US 147/mt vs average import
  unit value of US 238/mt

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Impact of increased African grain production on
global trade

• Elimination of Eastern and Southern African grain
  imports would have only very modest effects on
  global grain markets
• Effect on rice markets slightly larger than on
  wheat maize markets
• Possibly significant effects for specific types
  of grain e.g. white maize and broken rice

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Impact of increased African grain productionNet
maize exports
Source FAO
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Impact of increased African grain production on
regional maize trade

• Trends in maize trade
• In 1970s, South Africa, Kenya, and Zimbabwe were
  maize exporters
• Kenya started importing in 1980s, Zimbabwe since
  2000
• South Africa exports fell from 2 m mt in 1970s to
  0.14 m mt over 2000-04
• But relatively small increases in maize output
  would have large effects on net position
• For example, if maize output increased 10 from
  the 2000-04 levels
• Kenya becomes self-sufficient
• Zambia, Uganda, South Africa, and Tanzania go
  from self-sufficiency to exporters,
• ESA self-sufficiency ratio rises from 97 to 107

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Impact of increased African grain productionNet
wheat exports
Source FAO
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Impact of increased African grain production on
regional wheat trade

• Trends in wheat trade
• South Africa exported in 1970s, began importing
  in 1980s, and became consistent importer in 1990s
• Other countries increased imports over decades,
  particularly Ethiopia, Kenya, Tanzania,
  Mozambique
• If wheat output increased 10 from 2000-04
  levels
• Only Rwanda and Lesotho become self-sufficient
• ESA region remains in deficit, self-sufficiency
  ratio rises from 56 to 62

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Impact of increased African grain productionNet
rice exports
Source FAO
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Impact of increased African grain production on
regional rice trade

• Trends in rice trade
• Most countries are regular importers
• South Africa has largest imports (gt50 of
  regional total)
• Madagascar largest producer (70-80 of regional
  total) and consumer (50 of regional total)
• Madagascar imports 5-10 of requirements
• If rice output increased 10 from 2000-04 levels
  
• Only Madagascar and Malawi become self-sufficient
• ESA still deficit, self-sufficiency ratio rises
  from 67 to 74

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Impact of increased African grain production on
regional trade

• Caveats
• Net trade position varies within the country
• Maize exports from s highlands of Tanzania to
  Zambia
• Maize exports from northern Mozambique to Malawi
• Net trade position varies across years seasons
• Over 2000-04, South Africa net exports range from
  -294 th mt to 511 th mt
• With high transaction costs, increase in supply
  may cause price decline rather than shift to
  exports
• If maize supply in Zambia or Uganda increased
  10, may result in lower prices rather than
  exports
• Trends depend on policy
• In Zimbabwe, maize production fell 75 over
  2000-04

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Effect of long-term external trends

• Global climate change
• Probably lower rainfall and yields in much of
  Africa
• Growth of bio-fuels market
• Increased demand (and prices) for ag commodities
• Impact of HIV/AIDS in Africa
• Decline in labor force, possible shift to
  labor-saving crops such as cassava
• Multi-lateral trade liberalization
• Global agricultural prices 3-15 higher
• Regional trade liberalization
• Increased regional trade specialization
• But not necessarily positive effect on welfare if
  higher external tariffs (e.g. EAC)

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Conclusions and implications

• Trends in staples in Eastern and Southern Africa
• Maize shifting from surplus to deficit
• Wheat and rice shifting from self-suff to
  deficits
• Roots crops growing, but little trade
• Impact of increased African grain production
• Little effect on global markets
• Small increase in maize output could shift
  several countries and ECA region to maize
  surpluses if maize is tradeable
• Feasible increases in wheat and rice output not
  likely to achieve self-sufficiency (except rice
  in Madagascar)

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Conclusions and implications

• Reducing transaction costs is essential for
  facilitating adoption of new technology, esp for
  maize
• Transaction costs increased by
• Tariffs and quantitative restrictions, SPS
• High transportation costs
• Policy environment that impedes trading activity
• With low transaction costs,
• productivity growth leads to higher output and
  farm income
• With high transaction costs,
• productivity growth reduces prices, creating
  benefits for consumers but limiting adoption of
  technology
• Complementarity between programs to enhance
  agricultural productivity and effots to reduce
  marketing costs constraints