Informal Cross Border Food Trade in Southern Africa, Mar 2005

Highlights

Over 102,000 MT of maize, 17,000 MT of rice and 17,000 MT of bean trade have been recorded since July as 2004/05 marketing season comes to an end.

Harvest expectations and the maize export ban in Zambia will significantly influence the volume and direction of flow of trade in the new marketing season.

Informal Cross Border Trade Flow Overview

As of the end of March, the end of the agricultural marketing season for most Southern African countries, the informal cross border food trade monitoring initiative had captured nearly 102,000 MT of unrecorded trade in maize; close to 17,000 MT of trade in rice and 17,000 MT trade in beans in the six monitored countries of Mozambique, Malawi, Tanzania, Zambia, DRC and Zimbabwe. The monitoring system has been in place for only nine months (July 2004 to March 2005) and so actual volumes for the entire 2004/05 marketing season would be higher if the uncovered period April to June 2004 were included.

As shown in figure 1, maize was the most traded commodity. Nearly equal volumes of rice and beans were traded during the period and monthly variations were less significant than for maize.

Summary of Maize Trade : July 2004 -- March 2005

Figure 2 summarises the flows and volumes of maize trade between July 2004 and March 2005. Malawi has benefited the most from the trade, importing nearly 76,000 MT, largely from Mozambique (71,000 MT). Zimbabwe was the second biggest importer at 13,000 MT, entirely from Zambia, and DRC the third at close to 8,000 MT. The flow of trade was in the expected direction as both Malawi and Zimbabwe had cereal deficits where as the major exporters, Mozambique and Zambia had above average harvests. The large informal imports by Malawi have significantly ameliorated the food insecurity situation in that country and have helped to keep consumer prices at relatively low levels among the monitored countries (see figure 3).

The large volumes of informal imports may also have influenced the Malawi government to reduce by one half its programme to import 70,000 MT of maize for commercial sale. Informal maize exports into Zimbabwe could have been much higher had the country not imposed restrictive taxes and levies which only favoured the state owned Grain Marketing Board for imports. This could also have contributed to generally higher consumer prices in that country for most of the season as shown in figure 3. Zimbabwe had a higher level of cereal deficit than Malawi.

Maize Prices

Fig 3 presents retail maize prices from selected cities in the monitored countries during the period July 2004 to March 2005. The figure shows the general demand and supply situation in these major consumption areas and does not necessarily point to the direction of flow of cross border trade. However, inference could be made to the role cross border trade has played in supplying these markets and in some cases helping to keep prices down. In Zambia, as an indication of dwindling supplies as the marketing year draws to a close, retail prices in Lusaka rose by 18% between February and March. Prices in Maputo remained at the same levels in March as in February (US$0.26 per kilogram) indicating improving availability as new season crops become available especially in northern Mozambique. Prices rose marginally in Lilongwe from US$0.16 per kilogram in February to US$0.17 per kilogram in March; while in Harare, prices rose sharply (22%) between February and March . Prices are expected to peak at the end of marketing year as supplies are depleted. During the next few months, starting from April, retail prices are expected to initially decline as many consumers will be relying on own produce but prices are likely to gradually increase as the season progresses. How quickly prices start an upward trend will vary across the monitored countries. Prices are likely to rise earlier in Malawi and Zimbabwe because of successive seasons of poor harvest and due to the export ban imposed by Zambia. Although experiencing a poorer season, price increases in Zambia are expected to be cushioned by some carry over stocks from last season.

Informal Maize Trade Prospects for 2005/06 Marketing Year

Figure 4 shows sources of informal maize trade during the 2004/05 marketing year. Mozambique dominated the trade, accounting for 66% of the total exports. Zambia contributed 21% and Tanzania, 12%. In the new marketing season starting in April, the volumes traded and direction of trade could both change significantly due to the export ban imposed by Zambia. Zambia has imposed a cautionary maize export ban until conclusive harvest assessments are available. Early assessments, however, indicate a poor harvest due to among other things, a mid season drought in the southern parts of the country. Malawi is likely to continue to informally import maize from Mozambique, although the volumes could be less than last season. Surpluses in northern Mozambique are likely to be somewhat smaller than last year due to erratic rains. Relative prices will determine the direction the Mozambican surpluses will flow. If the expected poor harvest in Malawi leads to significant price increases, Mozambican maize will flow into the country due to the proximity and historical linkages. But poor harvests in other parts of central and southern Mozambique may exert a strong pull on these supplies. There is also a possibility of increased trade between northern Tete Province of Mozambique and parts of eastern Zambia. These borders are not currently monitored by the cross border trade initiative but efforts will be made to include them in the system before the main marketing season begins. In view of the Zambian export ban, Zimbabwean traders would have to compete with internal urban consumers of Mozambique for maize produced in Central Mozambique. However, given the stringent trade barriers in Zimbabwe, informal maize imports from Mozambique remain unlikely. South eastern DRC may have to look to western Tanzania for cross border trade in maize if the export ban in Zambia remains effective.