MALAWI Food Security Outlook October 2011 through March 2012 Key Messages It is unlikely that humanitarian assistance from government s Department of Disaster Management Affairs (DoDMA) will reach southern Malawi by December because the government of Malawi has not made the decision to mobilize assistance to meet the needs identified in the MVAC report released last month. Figure 1. Current estimated food security outcomes, October 2011 An outbreak of foot and mouth disease in Chikhwawa district has resulted in a limited income to support ganyu labor opportunities. Without government humanitarian assistance and increasing food prices, poor households are likely to be in Crisis (IPC phase 3) in the outlook period. Foreign currency shortages will likely result in a failure to import adequate quantities of key agriculture inputs. The Farm Input Subsidy Program (FISP) is well underway but scarcity of foreign currency in the country is currently limiting the importation of fertilizers and diesel. For more information on FEWS NET s Food Insecurity Severity Scale, please see: www.fews.net/foodinsecurityscale Seasonal calendar and critical events timeline Current food security conditions National overview of current and projected food security Malawi is beginning this year s lean season after the third consecutive year of surplus maize production in the country. The good harvests are concentrated in the central and northern parts of the country and are a result of a combination of good FEWS NET Malawi FEWS NET Washington FEWS NET is a USAID-funded activity. The authors views expressed in this Lilongwe 1717 H Street NW publication do not necessarily reflect the view of the United States Agency Tel: +265 1 754 894 Washington DC 20006 for International Development or the United States Government. malawi@fews.net info@fews.net www.fews.net/malawi
rainfall and a successfully implemented government Farm Input Subsidy Program (FISP). Following another bumper maize harvest of about 3.8 million metric tons (MT) against national maize grain consumption needs of about 2.6 Million MT will result in a surplus production of about 1.2 million MT. The National Food Reserve Agency (NFRA), a government agency responsible for stocking maize grain for humanitarian use, currently has estimated stocks of about 180,000 MT. Agriculture Development and Marketing Corporation (ADMARC), a government company involved in buying and selling agricultural products including maize, had about 23,000 MT stocks in September 2011 which was carried over from previous years. Current maize stocks in the country are high, and it is expected to be sufficient to meet the country s food needs, despite high volumes of exports. Despite the call for humanitarian assistance in southern Malawi through the MVAC report that was released last month, there have been no decisions made by the government of Malawi to mobilize food assistance through the Department of Disaster Management Affairs (DoDMA). MVAC estimated that approximately 4,800 MTs of food assistance will be required between December 2011 and March 2012 to cover 201,000 people. The NFRA has sufficient stocks to meet the identified food needs; however, without a decision and sufficient resources mobilized, the needs will not likely be met by December. The government of Malawi has allowed maize to be exported from the country since 2010. Most of the maize has been exported to Kenya through Beira port in Mozambique this year. The Informal Cross-border Trade Monitoring System (XBT), implemented by FEWS NET, captured 21,000 MT of informal maize exports and 71,000 MT of formal maize exports in monitored border points from April to September 2011. These levels are a sharp increase compared to previous years (Figure 2). The government has issued 200,000 MT worth of single-year export licenses from September 2010 to July 2011, but it is unclear how much has been exported to date. However, since August 2011, the government stopped issuing new maize export licenses. Regardless, maize grain exports are likely going to continue at least until December 2011. Figure 2: Imports and Exports (formal and informal) capture through the XBT monitoring system Since April, all maize grain imports into Malawi have originated from Mozambique, as usual. However, the level of imports is at its all time low since 2005. For the past five years, the average amount of informal maize imports is about 45,000 MT for the period of April to September, while for the same period in 2011 formal maize imports was less than 20,000MT. Despite the drastic changes in maize exports and imports, it is unlikely that there will be maize shortages in Malawi due to the very high level of production in the past three years and and current stock levels. Notwithstanding the good maize stocks and subsequent positive food security outcomes for the past few years, the Malawi economy is currently experiencing economic instability as the supply of foreign currency in the country has suddenly decreased. The country normally receives assistance from donors to meet the foreign currency needed to facilitate trade and promote development initiates within the country. However, this year, funds from major donor such as the IMF and World Bank and key bilateral donors, such as the UK and US, have stopped for a variety of reasons. As a result, most of 2011 has witnessed a scarcity of foreign currency in Malawi banks, making it difficult for traders to purchase and import essential commodities, such as fuel and fertilizer among other goods. Traders are unable to exchange or use the Kwacha outside of Malawi. Further siphoning foreign currency is the worsening trade imbalance brought on by decreasing tobacco prices. Tobacco makes up nearly 80 percent of Malawi exports and the agriculture sector, in general, comprises about a third of the GDP. To mitigate these issues, the government recently devalued the Malawi Kwacha against the US Dollar by about 10 percent, but this has not substantially improved the availability of foreign currency in Malawi banks. As of October 2011, reports show that only about 25 percent of the planned FISP fertilizers had been delivered. Suppliers are still trying to access foreign currency to secure the rest of the inputs. It is unlikely that the supply of fertilizers for both the FISP and commercial markets will be adequate to meet the demand this year. Compounding the issue is the challenge 2
for transporters to access fuel required for their trucks to distribute commercial goods, including fertilizers and seeds, in all rural areas. Seed producers have also highlighted the challenges related to distributing and marketing improved seeds to rural areas. Irrespective of seasonal rainfall performance, good farm managerial skills, and improved seed varieties, agriculture productivity will be compromised without adequate and timely fertilizer applications. It is likely going to be too late for the issues resulting in foreign currency scarcity in the country to be resolved before they negatively impact the agriculture sector. Assuming that fertilizer will not be available, the 2012 crop harvest will likely be poor. The government of Malawi has planned to implement a cotton production subsidy program worth about MWK 1.6 billion this year. The cotton subsidy is expected to support all farmers interested in growing cotton as a cash crop with high yielding seeds and pesticides. The actual quantity that each farmer will receive and specific delivery mechanisms for the support are not yet known. In some major cotton producing districts, such as Chikhwawa, Nsanje, Balaka, Zomba, and Phalombe, the district agriculture offices have estimated that two to three times more land will be cultivated with cotton compared to last year. However, farming households will need functional spraying equipment and adequate labor to cultivate the cotton fields successfully. It is expected that cotton prices will be as good as they were in June 2011, when prices increased from about MWK30/kg to more than MWK100. This increase in cotton production is expected to translate into more ganyu opportunities for the poor, which will assist in food access. However, there is a possibility that the foreign currency scarcity will negatively impact the implementation of the program. Decreasing supplies of household maize stocks, seasonal inflation, and increasing transport costs as a result of fuel shortages are exerting upward pressure on maize prices throughout the country. Significant price increases in the southern districts are likely to cause negative food security impacts as households are more dependent on the market to meet their food needs and income earning opportunities are expected to less than normal this year. Figure 3. Most likely food security scenario, October-December 2011 Figure 4. Most likely food security scenario, January-March 2012 The national average retail price of maize has moved upwards from MWK 28.27 in August 2011 to MWK 30.06 in September, representing an increase of 6.3% percent. While the seasonal increase is a normal trend, average prices in southern Malawi have had a steeper increase of 10.74 percent, far greater than the 2.59 percent in central Malawi and 6.29 percent in northern Malawi. The highest prices for September in Southern Malawi were recorded in the districts of Chikhwawa and Nsanje ranging from MWK 38.38 to MWK 43.16/kg. The two districts fall within the Lower Shire Livelihood zone which is a maize production deficit area. Highest maize prices in Northern Malawi were recorded in Chitipa district at MWK 38.35/kg. Chitipa has turned into a major informal export route for maize to Tanzania and Kenya/Horn of Africa. Based on the market performance in the 2010 consumption year and noting that Malawi has a large maize surplus, market experts within the Malawi Vulnerability Assessment Committee (MVAC) predicted that retail maize prices would be within the range of MWK 30/kg to MWK 35/kg, and in the worst case scenario would not go beyond the MWK 40/kg mark. This assumption has not held as prices have already gone beyond the MWK40/kg in some markets in south. Recent field reports and observations have confirmed that the average maize prices will likely range from MWK 45/kg to MWK 50/kg or above from October to March. ADMARC was supposed to offer maize at MWK 40/kg in an effort to suppress any potential rise in maize prices, but ADMARC has not yet started making significant sales in most of the southern region despite prices rapidly rising in September. Anecdotal assessments in Southern Malawi have shown that most ADMARC outlet markets either have no 3
maize or have discolored or weevil infested maize, forcing consumers to rely on local markets where the quality of the grain is good and prices are higher than the government established prices of MWK 40/kg. There is no doubt that ADMARC markets can contribute significantly to improving access to maize in the southern districts this year, but with very high fuel prices, it is doubtful that ADMARC will deliver enough maize to significantly influence market prices. Over the past few months the Ministry of Agriculture, Irrigation, and Water Development (MoAIWD) advised farming households who had bumper maize harvests this year not to oversell their maize, but to stock adequate maize grain for household consumption until the next harvest in April 2012. It is unclear if poor farming households have heeded the advice owing to the fact that income from selling tobacco harvests was low this year. It s likely that some households in central and northern regions of Malawi have sold more maize from this year s surplus maize production to compensate for the lost tobacco income. Recent reports from the Tobacco Control Commission (TCC) show that foreign currency from tobacco sales was at US$241.55 million, which is a reduction of 40% when compared to US$401 million last year same time. Average prices of tobacco have also fallen by 37% from US$1.92/kg to US$1.21/kg. The most likely food security scenario is based on the following assumptions: Humanitarian assistance will not be delivered to people experiencing food shortages in southern districts by December 2011 due to late decision making in the government. Ganyu opportunities will increase in cotton producing areas in southern Malawi except in Chikhwawa district where the better-off are unable to sell cattle and goats to get income for paying ganyu laborers. Less than adequate Farm Input Subsidy Program delivered in time, resulting in less productivity of the agriculture sector next year. Minimal improvements in the supply of foreign currency, fuel, and fertilizer throughout the sowing period (October to January). Rainfall will be erratic from October to December resulting in delayed start-of-season in some areas but it will normalize from January to March 2012. Maize prices will continue to increase to about MWK55 per kg in most southern local markets due to continued scarcity of fuel. Most-likely food security scenario, October 2011 through March 2012 Southern Malawi Districts The lean season in Malawi begins in mid-october and will last until April. Household food stocks for many poor households in southern Malawi are already exhausted due to a lower than normal harvest last year as a result of prolonged dry spells that affected the region. At this time of the year, all farming households in the south are preparing agricultural land in anticipation of the seasonal rains. It is normal for poor households to engage in ganyu labor opportunities provided by better-off households this time of year to supplement the income required to purchase food from the market. Figure 5: Comparison of average nominal maize prices in markets in southern Malawi. In a normal year, better-off farming households depend on the sale of cattle and goats for income to pay poor households. In Chikhwawa district (Lower Shire Livelihood Zone) experienced an outbreak of foot and mouth disease, and as a result the government of Malawi has banned all sales of meat and animal products from cattle and goats. This will constrain the necessary income that better-off Source: MoAIWD and FEWS NET households use to pay for ganyu services and engage in the normal agriculture season. As a result, poor households in Chikhwawa district will be unable to access adequate ganyu opportunities, limiting their normal income sources. 4
Maize prices in the southern part of the country have risen much faster than predicted by food security experts. Observed nominal maize grain prices ranged from MWK42/kg to MWK50/kg in some markets in southern Malawi (figure 5). Prices this month are higher than both last September and the past five-year average in September. There are no signs that the price of maize will stabilize as the fuel scarcity on the market will likely continue. ADMARC may not be able to bring the price of maize down by releasing cheaper maize into the market because they do have the resources to transport stocks of maize to southern markets. In addition, there has been no decision about mobilizing humanitarian assistance through DoDMA to meet the needs identified in the MVAC report. The higher than expected maize prices in combination with limited income earning opportunities will likely create food shortages for poor households in Chikhwawa district. Other parts of southern Malawi will be able to cope with the higher food prices. With the absence of food assistance, households will likely begin to engage in negative coping mechanisms to meet their food needs throughout the lean season. Food security outcomes will likely be Stressed (IPC Phase2) for most the southern region, but households in Chikhwawa will reach Crisis phase (IPC Phase 3) if humanitarian assistance is not delivered by December. Table 1. Events over the next six months that could change the above scenarios Area Event Impact on food security outcomes Southern Malawi Quick decisions to provide adequate humanitarian food assistance in all the areas experiencing food deficits All poor households in areas experiencing worsening food situation able to access humanitarian food assistance and able to meet all food needs. National Southern Malawi Improvement in the foreign currency and fuel availability situation in Malawi ADMARC able to supply all its markets with adequate maize Transportation costs would come down resulting in lower prices in local markets in the south thereby allowing more poor consumers more access to food through markets Maize prices would stabilize at MWK40/kg or less as private traders would end up being uncompetitive. National Government exporting maize from ADMARC and NFRA There would be concerns about national availability of maize 5