The coming 2005/06 maize harvest promises to be a good one, certainly better than last season. Market prices have begun falling, and the question now is how far they are likely to fall. Government currently has a maize export ban in place. This short note aims to assess the likely price levels this coming season, with and without an export ban.food security, food policy, Zambia, maize, Crop Production/Industries, Q18,

Haggblade, Steven

English

Research Papers in Economics

POLICY SYNTHESIS 
FOOD SECURITY RESEARCH PROJECT – ZAMBIA 
Ministry of Agriculture and Cooperatives, Agricultural Consultative Forum, Michigan State University 
and the Market Access, Trade  and Enabling Policies Project (MATEP), Lusaka, Zambia. 
 
No.15      (Downloadable at: http://www.aec.msu.edu/agecon/fs2/zambia/index.htm)   June 2006 
 
MAIZE PRICE PROJECTIONS FOR ZAMBIA’S  
2006/07 MARKETING SEASON 
 
 By Steven Haggblade 
 
 
Main policy messages for the 2006/07 marketing season: 
 
•  Zambia’s forthcoming maize harvest will be a good one, with the crop forecast 
projected at 1.4 million tons. 
•  Historically, prices vary as much as 50% between good years and bad.  But how much 
are they likely to fall this coming season – with an export ban and without?   
•  To help policy makers and private actors answer this question, a small spreadsheet 
model can be used to explore likely price changes, using simple measures of consumer 
price responsiveness.   
•  These projections suggest that retaining the current export ban could result in prices 
falling between 20% and 40% below their historic norms.  In the most likely scenario, 
the price would fall by roughly 30%, leading to a July low in the range of $85 to $110 
per ton.   
•  Removing the current export ban would result in price falling less, given significant 
regional market demand.  Under an assumed 100,000 tons of exports, average annual 
maize price would fall roughly 20% below long-term norms, and if 200,000 tons were 
exported, the price fall would be closer to 10% below historical levels. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Objective: 
 
The coming 2005/06 maize harvest promises to be a good one, certainly better than last season.  
Market prices have begun falling, and the question now is how far they are likely to fall.  Government 
currently has a maize export ban in place.  This short note aims to assess the likely price levels this 
coming season, with and without an export ban.   
 
 
Historical Perspective on Production and Prices:   
 
Production.  Given that Zambian smallholders depend primarily on rainfed production, Zambia’s 
maize output fluctuates significantly from year to year, largely as a result of changes in rainfall 
patterns.  Output varies by up to 100% from bad years to good (Table 1).   
 
Average annual prices.  Price levels likewise fluctuate, though not as much as production.  
Historically, average annual prices vary by about 50% from bad years to good (Table 1).   
 
Seasonal price patterns.  Seasonal price movement remains highly pronounced.  In Lusaka wholesale 
markets, into-mill prices typically peak in February.  Following the new harvest, prices fall to their lowest levels around July (Figure 1).  The question now is how low prices are likely to fall in the 
coming season.   
 
Table 1. Historical Maize Production and Price Movements in Zambia 
 
Year Harvest Production
tons $/ton % change
1994 good 1,020,749 $150
1995 moderate 737,835 $208
1996 excellent 1,409,485 $127
1997 moderate 960,188 $173
1998 bad 638,134 $183
1999 moderate 822,056 $135
2000 moderate 881,555 $116
2001 bad 601,606 $192
2002 bad 602,000 $244
2003 good 1,161,000 $169
2004 good 1,113,916 $150
2005 moderate 866,187 $236
Averages, 1994 to 2005
excellent 1,409,485 $127 -27%
good   1,098,555 $156 -10%
moderate 853,564 $174 0%
bad 613,913 $206 19%
baseline good to moderate 945,436 $167
* Lusaka into-mill price for the marketing year, May - April.
Source: MACO, FAOSTAT, AMIC.
Price*
 
 
 
Figure 1. Maize Price Seasonality in Lusaka, 1994-2005 
 
100
120
140
160
180
200
220
240
260
Jan
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
P
r
i
c
e
 
(
$
/
t
o
n
)
moderate to good years excellent years bad years
 
Source: AMIC. 
 
Page 2 Projections for the 2006/07 marketing season:   
 
Baseline.  The following projections take as their baseline historical norms for good to moderate 
production years.  As defined in Table 1, these amount to eight of the past twelve production seasons, 
when national output averaged 945,000 tons and average annual into-mill price in Lusaka averaged 
$167 per ton.  Given standard, observed seasonal price movements, the monthly price typically ranges 
from a low of $141 per ton in July to a high of $209 per ton in February. 
 
2005/06 production.  The Crop Forecast Survey for the current season projects a harvest of 1.4 million 
tons of maize.  Various trade groups have suggested alternate figures, with estimates ranging from 1.5 
to 1.2 million tons.  As a starting point, the following projections compare the baseline historic norm 
of 945,000 tons  to a year when production increases to 1.2 million tons.   
 
Projection method.  These projections rely on historical data coupled with a small spreadsheet model 
of the Zambian maize market
i.  The simple model underlying these projections uses standard measures 
of consumer price responsiveness
ii together with an ordinary supply and demand framework to 
estimate a plausible range of market prices under various export scenarios.   
 
2006/07 prices under an export ban.  Under an export ban, and given a possible 30% production 
increase this season over the “normal” baseline harvest of 945,000 tons, the model projects that 
average maize prices would fall between 20% and 40% below their historic norms.  This would lead to 
average annual prices between $100 and $130 per ton, with a July low in the range of $85 to $110 per 
ton in Lusaka.   
 
2006/07 prices if exports are allowed.  If exports were allowed, this would relieve downward price 
pressure in the domestic market and moderate the price decline.  From a market perspective, it doesn’t 
matter who does the exporting.  The price impact will depend on the volume of maize taken off the 
domestic market.  Under 100,000 tons of exports, the average annual maize price would fall roughly 
20% below long-term norms, and if 200,000 tons were exported, the price fall would be closer to 10% 
below historical levels.  As a rough rule of thumb, each 100,000 tons of exports will increase market 
price by about $10 to $15 per ton.   
 
Table 2. Projections of the Lusaka Into-Mill Maize Price 
 
Area planted
Harvest Exports next season
Baseline* 945,436 18,421
Projections
a)  export ban 1,200,000 0 $100 to $130 $85 to $110 -9%
b)  small exports 1,200,000 100,000 $120 to $142 $101 to $120 -6%
 
c) large exports 1,200,000 200,000 $140 to $154 $118 to $130 -4%
* Baseline is historical averages from 1994 to 2005.  See Table 1 for details.
Source: projections base on Zambia multi-market model (Dorosh and Haggblade, 2006)
Average annual  
Lusaka into-mill price
Seasonal low
price (July)
$141 $167
 
 
 
Page 3 Production impact next season:   
 
Lower prices this season may discourage market-oriented smallholder and commercial farmers from 
planting maize next season.  If the price responsiveness of Zambian producers lies in the normal range 
observed elsewhere in Africa
iii, then area planted to maize next season would fall by roughly 9% under 
an export ban and by as little as 4% under 200,000 tons of exports. 
 
Rainfall this season has been good.  But if weather patterns revert to normal, or worse, then Zambia 
faces a potentially compounded risk of a production shortfall next year.  If farmers were to reduce area 
planted by 9% next season, and if yields were to revert to the normal 1.5 tons/ha (compared to an 
estimated 1.8 tons this season), then production would fall from the most recent Crop Forecast Survey 
estimate of 1.4 million tons this season to 1.1 million tons next year -- a 300,000 ton fall.  Should 
rainfall prove erratic, as in 2004/5, and yields fall closer to 1 ton/ha, then production would fall to 
740,000 tons, over 600,000 tons below this year’s estimate.  Prices would shoot up correspondingly, 
improving farmer incentives for the ensuing season but penalizing consumers and leading Zambia into 
a boom and bust cycle of overproduction followed by underproduction.   
 
Regional trade as a tool for moderating domestic price volatility 
 
Regional trade in maize – becoming a reliable exporter in surplus years and an importer in deficit 
years – helps to moderate these potentially wide swings in national prices and production.  Exporting 
during surplus years lifts low farm prices and encourages production for the coming year.  It also 
enables Zambian farmers to target external markets in chronically deficit neighbors without fear of 
trade retaliation and border closing by other countries.  Allowing imports in deficit years dampens 
high prices and discourages over-expansion of maize production in the coming year.  By cushioning 
price swings in both good years and bad, regional maize trade enables farmers to plan better, at the 
same time moderating both price and production volatility.   
 
Refusal to export maize during surplus years could invite neighboring countries to do the same, to 
refuse to allow exports to Zambia in years when Zambia faces deficits.  So in order for regional trade 
to become a reliable tool for helping government reduce price variation for Zambian farmers and 
consumers, neighboring countries will need to be able to rely on Zambia to keep markets open and 
support regional trade agreements favoring maize without borders.   
 
 
 
 
 
 
 
The Food Security Research Project is a collaboration between the Agricultural Consultative Forum, the Ministry of 
Agriculture and Cooperatives, and Michigan State University's Department of Agricultural Economics, and is funded by 
the United States Agency for International Development in Lusaka.  Supplemental funding is also acknowledged from the 
Market Access, Trade and Enabling Policies Programme.  The Zambia FSRP field team is comprised of  J. Govereh, S. 
Haggblade, S. Kabwe, A. Mwanaumo, M. Nyembe, and B. Zulu.  MSU-based researchers in the FSRP are C. Donovan, 
T.S. Jayne, D. Tschirley,  M. Weber, and A. Chapoto. 
 
                                                           
i The model is described in a paper by Paul Dorosh and Steven Haggblade, 2006.  “Incorporating Market Responses in 
Emergency Needs Assessments: A Prototype Spreadsheet Model for Zambia.”  Paper presented to the WFP SENAC 
Conference in Cairo, March 2006.    
ii The price elasticity of demand measures consumer responsiveness to price changes.  An elasticity of -0.5 indicates that a 
10% increase in maize price will result in a 5% reduction (10*-0.5) in maize consumption.    
iii These projections use a supply elasticity of 0.3, meaning that a 10% fall in price will result in a 3% decline in area 
planted next season.   
 
Page 4 

Maize Price Projections for Zambia's 2006/07 Marketing Season

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