Monday, January 16, 2012

Price monitoring tool for maize

By Esther Nakkazi

A price-monitoring tool that will make available monthly updates of staple food prices is to be developed for east and central Africa countries.

The software-monitoring tool will seek to increase competition and resilience to price volatility and kicks off early this year with the monitoring of maize prices, the major staple food of this region.

“We will be giving monthly updates of food prices and balances. We will also be trying out a forecasting model so that we can be more prepared, but this may take some time to adapt adequately,” said Dr. Michael Waithaka the Policy Analysis and Advocacy programme (PAAP) manager at the Association for Strengthening Agricultural Research in East and Central Africa (ASARECA).

The monitoring tool will use food price indexes generated by each of the countries’ bureau of statistics every month. The information will then be analyzed and distributed to all countries to create price awareness.

One of the envisaged solutions the tool will offer to local markets is the flow of food from surplus to deficit areas and from markets where the prices are low to where prices are high reducing food shortages.

But this would only work if the regions’ markets were integrated so that food security is improved from a country to a regional level. The high price volatility in the region is associated with the weak integration of the food markets.

High food prices also have a negative effect on trade for Africa, a net food importer, which spends about $20 billion annually on food imports. For instance, 45 percent of rice and 85 percent of wheat consumed in Africa is imported, according to statistics from United Nation’s Food and Agricultural Organisation (FAO).

Dr. Waithaka warned that the monitoring tool would not be the sole solution for the volatile prices since the causes vary a lot but each country would be considered individually to determine the impacts and then they will propose a basket of options.

Since 2010, the east and central African region suffered volatile food prices due to a combination of global causes and region specific factors.

Domestic food prices within this region increased to unprecedented levels in tandem with global food prices, which reached the highest level on record in February 2011, the highest since the inception of the FAO food price index (FPI) in 1990 to suggest a food price crisis.

In east Africa specifically, prices escalated due to recurrent droughts, high input prices in the agricultural sector, which also has low investment and a rapidly expanding population that has created a high demand for food with no corresponding supply.

As food prices escalated, countries in the region imposed trade policy measures like import tariff reductions as well as export taxes and bans to protect their populations from starving.

Export bans were the most famous trade policy measure in the region which unfortunately was a missed opportunity as a ‘crisis is a terrible thing to waste’ said Joseph Karugia, the coordinator Regional Strategic Analysis and Knowledge Support System for Eastern and Central Africa (ReSAKSS-ECA).

“In the 70’s and 80’s we complained about low prices but now that they are high we continue to complain. A regional response would be an opportunity to address the food price crisis,” said Karugia.

Karugia said high food prices would prompt exploitation of regional diversity and facilitate regional trade with priority actions including removal of export bans, elimination of non-tariff barriers and upgrading infrastructure of main regional trade corridors.

Country responses to high food prices;

But all this happened in the reverse, food exports were banned in Kenya, Tanzania and Rwanda. As food security got further threatened, Kenya slapped a temporary ban on export of seeds.

Tanzania followed suit, banning exports of cereals until the food security was analyzed and further refused to lift the ban even when it reported a surplus. Uganda did not limit export of food partly to maintain the export-oriented nature of Uganda’s agriculture sector, which is almost entirely engaged in food production.

President Yoweri Museveni explained the situation and argued farmers to take advantage of the high prices and traders to invest more in agriculture but the public would not believe him. He was booed at the youth gathering in Arua.

The International Monetary Fund (IMF) later applauded Uganda for adhering to a market-oriented approach and keeping true to its title of a ‘food basket’ in the region and not imposing a food ban.

While in Rwanda, the price of maize the main staple crop, almost doubled and food security was threatened with hardly anything to export. In effect, Uganda was the country in the region that responded with a level head to take advantage of the volatile prices in 2010/2011.

Scientists believe that with the monitoring tool that will avail food prices in an integrated market, the east and central African region would partly be rid of price volatility, not entirely but to a decent level.


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