The effects of the Food Reserve Agency on smallholder production patterns and maize market prices Nicole M. Mason, T.S. Jayne, and Robert J. Myers Stakeholders Meeting on Evidence-Based Agricultural Policy Decisions to Shape Agricultural Development for Poverty Reduction December 212 Taj Pamodzi Hotel, Lusaka, Zambia INDABA AGRICULTURAL POLICY RESEARCH INSTITUTE FRA = cornerstone of GRZ ag sector strategy 7% 6% % 4% 3% 2% % FRA share (%) of total ag sector expenditures 1% > 6% of ag sector Poverty Reduction Programmes spending 2 & 211 13% 11% 19% 1% 26% 1% 61% 6% % 23 24 2 26 27 2 29 2 211 Source: Yellow Book 1
12//12 What does GRZ hope to achieve? FRA strategic mission: Efficiently manage sustainable national strategic food reserves, ensuring national food security and income FRA strategic goal: Stabilize national food security and market prices Source: http://www.fra.org.zm/ Main questions 1. How do FRA activities affect market prices? 2. Have FRA activities increased maize production? 3. If so, how? é maize area? b. é fertilizer use? c. é maize yields? 4. Effects on other crops? a. 2
Lusaka wholesale prices: with & without FRA 1,6 Lusaka wholesale maize price (ZMK/kg) 1,4 1,2 1, 6 4 2 Jan. 1996 Jan. 1997 Jan. 199 Jan. 1999 Jan. 2 Jan. 21 Jan. 22 Jan. 23 Jan. 24 Jan. 2 Jan. 26 Jan. 27 Jan. 2 With FRA (historical) Without FRA (simulated) Source: Mason & Myers (211) FRA effects on average market prices: Jul. 23 Dec. 2 3% Lusaka Choma % change in price due to FRA 3% 2% 2% 1% % % % 19% 17% Overall 27% 29% Post-harvest (May-Oct.) 9% 11% Lean season (Nov.-Apr.) Source: Mason & Myers (211) 3
Who wins & who loses from higher maize prices? Winners: maize net sellers Losers: maize net buyers Not directly affected: neither buy nor sell Maize market position: 27/ and 211/12 marketing years 27/ (good year) 211/12 (bumper harvest) Net buyers 49% Neither buys nor sells 23% Net sellers 2% Net buyers 2% Neither buys nor sells 3% Net sellers 42% Source: 2 CSO/MACO/FSRP Supplemental Survey Source: 212 CSO/MAL/IAPRI Rural Agricultural Livelihoods Survey 4
FRA effects on smallholder production in last year s FRA price maize kg harvested é maize area & fertilizer Little effect on maize yield (high soil acidity) Little effect on other crops Source: Mason, Jayne, & Myers (212) HHs with more land are more responsive to FRA price increase Kilograms 4 4 3 3 2 2 1 Increase in maize kg harvested when last year's FRA price increases by K, per -kg bag 4 -.99 ha 1-1.99 ha 2-4.99 ha + ha All HHs Landholding size (cultivated + fallow) Source: Mason, Jayne, & Myers (212) 19 41 13
Most smallholder HHs have < 2 ha Kilograms or % of HHs % of HHs in category in 27/ Maize kg increase when FRA price increases by K, per -kg bag2 4 41 4 3 3 33 3 24 2 19 2 1 13 4 -.99 ha 1-1.99 ha 2-4.99 ha + ha All HHs Landholding size (cultivated + fallow) Source: Mason, Jayne, & Myers (212) HHs w/ < 2 ha unlikely to sell to FRA & don t sell very much (27/) 6 % selling to FRA % of total sales to FRA 3 Percent (%) 4 3 3 2 2 16 2 1 -.99ha 1-1.99 ha 2-2.99 ha + ha Landholding size (cultivated + fallow) Source: 2 CSO/MACO FSRP Supplemental Survey 6
Most smallholder HHs have < 2 ha Percent (%) % of HHs in category in 7/ % selling to FRA % of total sales to FRA 6 3 4 3 33 3 3 24 2 2 16 2 1 -.99ha 1-1.99 ha 2-2.99 ha + ha Landholding size (cultivated + fallow) Source: 2 CSO/MACO FSRP Supplemental Survey Distribution of FRA benefits may explain stagnant rural poverty Rural poverty rate (%) 9 7 6 4 3 2 Rural poverty rate (%) 2 3 7 7 1996 199 24 26 2 7
Bringing it all together FRA activities mainly benefit larger farmers Better able to é maize production when FRA price é s Account for most sales to FRA Net sellers Small % of smallholder HHs; relatively better off FRA activities harm the urban and rural poor Net buyers Majority of smallholders have < 2 ha & aren t able to take advantage of high FRA price FRA a huge drain on the treasury; little effect on rural poverty Ideas on the way forward 1. Reduce scale of FRA purchases Enough for strategic reserves Invest savings in known drivers of pro-poor ag growth Rural roads Irrigation Ag R&D, Extension Market information system 2. Set FRA buy & sell prices closer to market prices Reduce unintended consequences Promote private sector participation
Thank you! For further details: Contact me (masonn@msu.edu) FRA effects on maize market prices Policy brief: http://www.aec.msu.edu/fs2/zambia/ps_.pdf Working paper: http://www.aec.msu.edu/fs2/zambia/wp6.pdf FRA effects on smallholder production Policy brief: http://www.aec.msu.edu/fs2/zambia/ps_7.pdf Working paper: http://ageconsearch.umn.edu/handle/126927 9