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Wednesday, 7 January 2009

Food security and trade restrictions..

A new FSRP explores the implications of removing import and export restrictions on maize for Zambian food security. It provides further support for A better vision for agriculture.... . Excerpt :

Opening up international borders to regional trade in food staples offers many advantages to the region’s consumers and farmers. Open borders offer a financially inexpensive means of reducing the domestic price volatility of staple foods. The import parity price sets an upper bound, while export parity sets a floor below which prices will not fall, assuming private traders enjoy the freedom to import and export maize when market conditions permit. The alternative policy of closing borders in small markets such as Zambia invites the prospect of significant price volatility. Under normal production fluctuations, a closed border can easily lead to price volatility in the range of 100% from one year to the next.

Consumers clearly benefit from reduced maize price volatility, particularly during drought years when price spikes can become particularly acute, particularly in thinly markets closed to opportunities for trade. Because poor households spend over half of their income on foods, price spikes in staple food markets risk forcing them into unsustainable short-term coping strategies, forced asset sales or migration, both of which may impair their prospects for building up the human and physical assets required to grow out of poverty over time. By capping price spikes, cross-border trade offers a means of moderating these pressures. Among smallholder farmers, many of whom are net buyers of food, reliable food supplies and reduced price volatility permit them to diversify into higher-value production, thus opening new pathways out of poverty.

Producers of staple foods likewise benefit from open borders. To maintain and sustain producer incentives, surplus farmers in surplus producing zones need access to growing markets, both internal and across national borders. Failure to allow regional trade in food staples risks stalling production growth and private investment in agriculture. In thin national markets, without export outlets, production surges lead easily to price collapses. In turn, these disincentives dampen long-term agricultural income growth. This suggests that both consumers and farmers stand to benefit from the reduced price volatility that results from opening borders to regional trade in food staples.

Update (8th January 2009) : The government's view is characteristically hostile at present.


  1. Export restrictions are reasonable in emergency situations and the government is taking the right approach here.

    Selling subsidized food obviously hurts prices and hurts farmers. It's bad for the economy. But in an emergency situation then it's better than the alternative.

    For the longer term, the export restrictions should be phased out. On a normal year the only subsidies should be on inputs.

    Btw. I think an outright ban on imported used clothing would help cotton farmers as well... High prices are not evil.

  2. I would say we should also not treat the country's staple crop as just another commodity, whose affordability should be determined by supply and demand.

    Btw. I think an outright ban on imported used clothing would help cotton farmers as well... High prices are not evil.

    Even better would be to legalize hemp, which can be grown with much fewer inputs like fertilizer, water or *cides (herbicides, fungicides, pesticides), and can be used to locally manufacture excellent clothes, as well as rope, bags, etc. You can even make biodegradable containers and bags from it, and even 'plastics'. Or use it for biofuel, and eat it's seeds.

    How is that for an alternative to cotton? :)

  3. MrK,

    I agree with the thrust of your sentiment, "we should also not treat the country's staple crop as just another commodity, whose affordability should be determined by supply and demand." However, I am not exactly clear on how to avoid supply and demand from being part of the equation. Previous attempts at eliminating market forces from staple food production (mostly in soviet or otherwise declared communist states) have not worked, and for the most part left only thriving informal sector operators in their wake.

    As an example, Stalin used to dictate a policy whereby communal farms would devote 90% of their land to growing grain and other government mandated crops, most of which would then be transferred to government trains to meet a certain production quota measured in railcars. The trains were arranged such that they would be filled up as the train moved from east to west towards Moscow.

    The farmers soon discovered that if they were short on their quota, they could shift the blame to the farmers further eastward by simply moving produce from one section of the train to another. Not long after that they decided that they could concentrate their labour and inputs on to the 10% of land entirely under their control, and make more money selling non-mandated crops via the informal market than they could by trying to exceed their quota of price controlled staple crops. They determined it was preferable to settle any negative repercussions from failure to meet quota by corruption than other more productive means. By the time the policy was finally altered, the 10% of land under control of the farmers was responsible for an estimated 40% of food produced by communes nationwide.

    I've got no problem with helping hungry people get food that they otherwise cannot afford in the market, but I see no reason to subsidize every consumer simply because many are poor. Subsidies to farmers work well if you want to keep prices higher than global markets. Subsidies to vulnerable consumers prevent higher prices from leading to starvation while stimulating investment in future production. In the US they do both, prop up prices for farmers as well as distribute subsidized food to consumers via Food Stamps (which are spent like cash but for groceries only). Same money (same department budget even I think), different uses, reciprocal relationship between them. That's the most effective means I know of to increase rural incomes from agriculture without unduly burdening urban and/or poor populations.

  4. Yakima,

    What if farmers would be allowed to pay their taxes in maize (or sorghum or cassava)?

    The FRA could have huge reserves, enough to last the country for more than a year.

    It would make every taxable farmer a contributor to the national food reserves.

    I quote from Hemp: American History Revisited by Robert Deitch:

    The value of hemp was universally recognized and the colonists commonly used raw hemp as a barter medium. Even the colonial governments, Virginia in 1682, Maryland in 1683, and Pennsylvania in 1706, allowed farmers to pay one-fourth of their taxes in hemp. This further promoted the cultivation of hemp and promoted the economic well-being of the colony.

    Maybe a maize tax could do the same for Zambia.

    The only danger I could see, is that if the FRA set it's prices too low, it would discourage the growing of maize among farmers who were not taxed - and who are presently the largest producers of staple foods.

  5. Mrk,

    I fail to see how a maize tax would make any difference. Maize becomes cash when sold. So any maize paid as tax is cash lost.

    A better idea you have previously suggested is using maize as collateral to improve credit access. But for that to work government has to eliminate export and import restrictions. Otherwise the value of the collateral would be dictated by government interventions.

    Also I don't get this idea of maize being a staple food. In Luapula and Northern Provice, Cassava is the staple.

  6. Anon,

    I remain skeptical that export restrictions would make a difference anyway. As the paper notes in a drought or where supply is restricted the domestic prices should be high to disincentivise exports. Exports are only attractive in a boom or where transport costs are extremely low. Also as the paper says, the trouble with 'temporary restrictions' is that they are difficult to phase out.

  7. MrK,

    I think that on this one I have to agree with Cho's assertion that, where reliably administrated, currency transactions have an inherent efficiency over barter, however institutionalized it may be. The operational flexibility provided by cash can be more attractive than the fixed rate benefit which might be derived by planning for a tax break, this is especially true for operations which are highly susceptible to external events like agriculture or tourism (I often have this debate with NGOs about non-profit status).

    I also agree that provision of longer term support and credit instruments for farmers can do a lot. The lack of ability to borrow against the actual land itself is a barrier to traditional assessment of collateral, so clarification of the value and transferability of 99-year leases, as well as harmonization between government and traditional land tenure, would go a long way towards commercialization of more Zambian farms.

    I would also love to see rural communities coming together like the Amish do (traditional low-tech middle-european farmers). When an Amish farmer needs a new barn built, he gathers the materials, and then throws a party. All his neighbors come and share in the festivities, and somewhere in the middle of it all, a barn is built. Everyone knows how to do it, because they have all done it together many times before, and everyone helps, so it isn't so hard. Ultimately everyone has benefits, not least because the boys get to show off for the girls, who get a chance to compare notes about the boys. I think that this is the kind of thing you are trying to tap, and I am with you on it.


    In MrK's defense, he has argued on more than one occasion in favour of expanding the official definition of staple to include not only cassava, but other indigenous and/or drought resistant crops such as sorghum. I think that his own personal definition already includes them.

  8. Cho,

    I fail to see how a maize tax would make any difference. Maize becomes cash when sold. So any maize paid as tax is cash lost.

    Unless they can pay less tax if farmers pay tax in maize, and/or can discount maize from their tax obligation at a price slightly above the market rate.

    It would make paying taxes in maize more attractive than paying taxes in cash, which would encourage the growing of maize for the purpose of paying taxes. And would rapidly fill the silos of the FRA.

  9. And allowing farmers to pay a lower rate of tax in maize has the distinct advantage of getting more hectares under maize cultivation. The more commercial crops farmers grow, the more maize they would have to grow to keep paying a lower tax rate.

  10. The interesting figure for me was that Zambia now grows as much cassava as it does maize. Also cassava growth seems a lot more predictable.

    My guess this is because cassava doesn't need as much water as maize.

    Cassava was the staple food in north west province before colonial times. During colonial times there was a governor who persuaded everyone that it was unhealthy compared to maize. Unfortunately maize didn't grow as well and is expensive to mill.

    The paper makes an interesting point that until 1990 people grew maize instead of cassava because of the subsidies for maize.

  11. Yakima,

    Cho, In MrK's defense, he has argued on more than one occasion in favour of expanding the official definition of staple to include not only cassava, but other indigenous and/or drought resistant crops such as sorghum. I think that his own personal definition already includes them.

    My definition of a staple is much broader. I would see it as basically any starch based food that forms the main food of most of the population. Whether that is wheat based in europe (bread, pasta), potatoes, corn/maize or cassava or sorghum. The main point is that without them, a lot of people would starve.


    I agree that maize could or should be replaced by better acclimated plants.

  12. The Namibian reports on livestock farmers being fleeced by local abattoirs due to export quotas. They are asking for a per animal export levy instead to allow regional market forces to set prices and force local abattoirs to pay competitively.[backPid]=61&cHash=21571f77b1

  13. Yakima,

    The parallels to Zambian maize farmers are clear.

    Export restrictions are effectively a rent transfer from farmers to monopsony buyers like the abattoirs. Removing the constraints widens the market and allows better returns.

    In short what I am trying to say is that the abattoirs (and similar powerful buyers across other markets) have significant lobbying power.


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