110973 en MINOT Presentation FAO workshop 3 07

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

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

Outline: 

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

Background – Staples in the diet: 

Background – Staples in the diet Staples account for about two-thirds of caloric intake Grains account for almost half Maize accounts for almost one-third Source: FAO Food balance data, 2004 Source of calories in nine Eastern and Southern African countries

Background – Importance of staples: 

Background – Importance of staples 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 Source: FAO Food balance data, 2004

Background – Production trends: 

Background – Production trends 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 Source: FAO

Background – Production trends: 

Background – Production trends South Africa dominates, but production is volatile Growth fastest in Ethiopia, Tanzania, & Mozambique (>2.9% since 1970) Growth negative or very low in most other Southern African countries Source: FAO Source: FAO

Background – Production trends: 

Background – Production trends 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 Source: FAO Source: FAO

Background – Production and net trade: 

Background – Production and net trade 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% Source: FAO Source: FAO

Slide9: 

Projections – Overview of IMPACT model 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 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)

IMPACT projections - Alternative Scenarios: 

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.”

IMPACT projections – Staple production: 

IMPACT projections – Staple production Source: Rosegrant, et al. 2005 Crop production growth generally 2-3% in low scenario Crop production growth 3-4% in high scenario Sources: Rosegrant, et al. 2005

IMPACT projections – Net exports: 

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)

IMPACT projections – Child malnutrition: 

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

Impact of increased African grain production –Impact depends on tradeability: 

Impact of increased African grain production – Impact depends on tradeability 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 D

Impact of increased African grain productionOver large range of world prices, no trade: 

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

Impact of increased African grain production on global trade: 

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

Impact of increased African grain productionNet maize exports: 

Impact of increased African grain production Net maize exports Source: FAO

Impact of increased African grain production on regional maize trade: 

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%

Impact of increased African grain productionNet wheat exports: 

Impact of increased African grain production Net wheat exports Source: FAO

Impact of increased African grain production on regional wheat trade: 

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%

Impact of increased African grain productionNet rice exports: 

Impact of increased African grain production Net rice exports Source: FAO

Impact of increased African grain production on regional rice trade: 

Impact of increased African grain production on regional rice trade Trends in rice trade Most countries are regular importers South Africa has largest imports (>50% 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%

Impact of increased African grain production on regional trade: 

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

Effect of long-term external trends: 

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)

Conclusions and implications: 

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)

Conclusions and implications: 

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