'Price famine' looming, warns report

Malawi could be facing a "price famine" due to the impact of rising commodity prices on its vulnerable population, according to a report by the Famine Early Warning Systems Network (FEWS NET). The report noted that "the last agricultural season's [production] shortfall will mean that more households than normal are dependent on purchasing food for a longer period of time" But incomes have fallen due to last year's poor harvest, not only reducing household ability to purchase food, but also the ability of wealthier farmers to hire seasonal labour known as 'ganyu'. Seasonal labour "is an important source of income, especially for poor households, and increasingly for middle-income households". Ganyu labourers are paid either in cash or food, or both. Given "increased labour supplies and reduced effective demand, ganyu rates are likely to diminish over coming months, diminishing income opportunities for poorer and middle households. In light of this income problem, staple food prices are an even more important determinant of household access to food," FEWS NET explained. ECHOES OF 2001 In 2001/02 more than 3 million Malawians needed food aid. Although observers blamed the crisis on two years of severe drought, the government also came under fire for selling off most of its emergency grain stock. FEWS NET warned that the "situation this year could be described as more risky than in 2001, in the sense that the [state grain marketer] ADMARC price has been [increased], at a time when the local market maize prices are already higher than during the adjustment in August 2001". The government has announced a 70 percent increase in ADMARC's maize price from Malawian Kwacha (MK) 10.00 (around US $0.09) per kilogram to MK 17.00 (about US $0.16) per kilogram. "This kind of price hike is reminiscent of 2001, when a similar announcement triggered price hikes in the local markets that led to the 'price famine' of that year in Malawi, [as it is] referred to by many analysts. In 2001, the maize price increased by 240 percent in August ... to MK 17.00 per kilogram," FEWS NET said, warning that "we may see a repeat of the 2001 situation or even worse". FEWS NET also criticised the timing of the ADMARC price adjustment. "The ADMARC price has been adjusted upwards when most of the rural households depend on purchases, and it gets lowered when most of the farmers are selling their crop," the organisation said. "The problem ... [is] that the ADMARC consumer price ... is used as a bargaining tool by private traders [who] take advantage of the government-fixed high price to charge even higher prices for their maize." A continued rise in prices may result in an increased number of people needing food aid. Earlier this year the Malawi Vulnerability Assessment Committee projected two possible scenarios regarding the impact maize prices could have on food security. In the first scenario, maize prices were projected to peak between MK 20 per kilogram and MK 23 per kilogram, with in 1.3 million households needing food aid, FEWS NET said. In the second scenario, maize prices were projected to range between MK 25 per kilogram and MK 29 per kilogram. "This would result in the worst-case scenario of 1.7 million households requiring food aid," FEWS NET noted. The World Food Programme spokesman in Lilongwe, Antonella D'Aprille, told IRIN that between January and March 2005, WFP aimed to reach 1.1 million people through targeted food distributions, food-for-work activities and therapeutic feeding programmes.