Is the Food Reserve Agency Market Based Pricing a step in the right direction?

By IAPRI

Key Points

The move by the Food Reserve Agency (FRA) towards market based pricing is a welcome and bold move. The Agency should further take steps towards a more dynamic pricing that takes into account location and time differences.

FRA’s recent announcement that it will stick to maintaining a strategic reserve is laudible and must be honoured. Further, FRA’s announcement that it will focus on purchasing maize in outlying areas is also laudible and must also be honoured. These two actions if implemented are market and private sector friendly.

Aligning prices and Government actions to the market leads to efficient and sustainable use of resources. 

Low prices of maize have several winners including urban mealie meal consumers and rural smallholder net buyers who constitute 40% of the rural population.

There is a high concentration of maize sales in rural Zambia with at least 5% accounting for more that 50% of the maize sales. Above the market maize prices benefit mostly this minority of the rural sector and they have not helped lower rural poverty rates.

Using market based support programs for those that are adversely affected by maize prices such as Social Cash Transfers are less disruptive to a sustainable maize market than price supports to both maize and mealie meal. 

Focusing efforts and expenditure on improving productivity of maize should be a priority as opposed to price supports that do not improve productivity and do not promote efficiency, which has resulted in stunted agricultural diversification. For land-contrained rural houseseholds (who are actually in the majority) other agricultural enterprises such as horticulture, livestock and fisheriers are far more profitable than maize.

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