POLICY RELEVANCE SUMMARY

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1 POLICY RELEVANCE SUMMARY Ensuring Food Securiy in Ghana The Role of Maize Sorage Sysems. Paul W. Armah and Felix Asane 1 Research Findings and Policy Relevance-Summary 1. Research Framework and Objecives Ghana is abou 99% self-sufficien in he producion of maize (Nyaneng and Asuming-Bempong, 2003), he major saple for many low-income Ghanaians, ye he aggregae saple maize availabiliy projecions in Ghana does no ake ino accoun insecuriy problems in he pos-harves season caused by poor sorage, disribuion difficulies, high prices and low incomes. This sudy uses he concep of food securiysorage relaionship or availabiliy-gap o refer o he abiliy of poor Ghanaians o access maize available in he pos-harves season from sorage. This esimaed availabiliy gap herefore measures available maize needed o raise food consumpion of he poores Ghanaians o he minimum nuriional requiremen during he pos-harves season. Unforunaely, he price of maize is usually highes in he pos-harves season when maize is no easily available. As a resul, Ghanaians wih increased povery levels have insufficien purchasing power o access a minimally healhy maize die in he posharves season. Therefore, ensuring easy availabiliy of maize o he poor can scarcely be accomplished wihou sufficien maize sored in he pos-harves season o sabilize prices. The focus of his collaboraive research is o provide informaion on how o develop effecive naional sorage policies o overcome chronic maize shorages and high prices in he pos harves season in order o ensure securiy in saple maize for low income Ghanaians. 2. Daa Se The daa se used for his sudy is based on he survey of maize farmers and raders as well as secondary daa colleced from public insiuions in July and augus A sysemaic daa was colleced from he maize producion and markeing sysem using paricipan observaion echniques; semi-srucured inerviews; quesionnaire

2 surveys of raders, ransporers, and farmers; and price monioring in various major producing and consuming markes. Abou 243 randomly seleced maize raders were inerviewed in major maize consuming markes from Wesern, Cenral and Greaer Accra regions. 375 farmers were randomly seleced for inerview in Techiman, Nkoranza and Kinampo agriculural disrics ha had been sraified ino 13 zones wih 48 operaional areas. The daa used included seasonal wholesale maize prices for major maize producing and consuming regions as well as esimaed sorage coss for radiional sorage cribs. 3. Resuls a. Maize Availabiliy and Price Variabiliy in Pos-Harves Season. Analysis of maize prices showed wide variaions beween he producing and consuming regions as well as beween he harves and pos-harves seasons. Monhly maize prices are generally very low during he major season s harvesing period and Paul W. Armah is an agriculure economics professor, and Felix Asane is a Research Fellow a ISSER, Universiy of Ghana increase seadily o a peak jus before he minor season s harvesing period, Figure 1. I is esimaed ha Ghana is abou 99% self-sufficien in domesic maize producion and Figure 1: Graph of Ave Maize Prices for Major Consuming and Producing Regions: Ave. Prices Accra/Cenral/Wesern Ashani/Brong Ahafo 0 Jan Feb Mar Apr May June July Aug Sep Oc Nov Dec Monhs Source: Wholesale prices from Minisry of Agriculure herefore, inadequae sorage may be considered as he major cause of maize price variabiliy in Ghana. Indeed, over 78% of he long-disance raders inerviewed indicaed ha no having a crib or secured warehouse in he markeplace for sorage purposes. This grealy limis heir abiliy o sore maize even for shor periods. Mos long-disance raders generally do no see long-erm maize sorage in anicipaion of

3 high fuure price as par of heir business or as a means of earning profi. Furhermore, given he general siuaion of capial shorage in Ghana, long-erm maize sorage is relaively unprofiable o arac he ineres of small-scale long-disance raders who mosly buy on cash bu have o sell o prepared food sellers and reailers on credi. Long-disance raders herefore engage almos exclusively in shor-erm sorage in he normal course of heir business and heir operaions rarely influence he maize securiysorage relaionship or availabiliy-gap. Maize has minor and major harvesing seasons in he major producing regions. Maize prices coninue o be lowes during he major harvesing season as farmers generally sell heir oupu immediaely afer harves (Augus o Ocober) o mee cash needs. However, mos farmers also repored soring much of heir minor season s crop harvesed in January and February for sale beween May and July when prices are high. Therefore, he amoun of he minor season s crop and lengh of period sored largely influence he maize securiy-sorage relaionship or availabiliy-gap. However, he amoun of maize farmers sore from he minor season is insufficien o eliminae he availabiliy-gap or sabilize prices in he pos-harves season. As a resul, inadequae maize sorage in he pos-harves season coninues o be he major underlying cause o high prices or insecuriy in saple maize. b. Sorage Cos Analysis To overcome he poor maize securiy-sorage relaionship or availabiliy-gap in he pos-harves season in order o enhance securiy in saple maize, he governmen iniiaed a buffer sock policy in 2001 wih a goal of 15,000 meric ons of locally produced maize and rice. The main goals of he 2001 buffer sock policy for maize include: o pu o use some modern sorage faciliies locaed in sraegic places in he counry belonging o he defunc GFDC, o reduce he high pos-harves maize losses, o reduce he exen ha producer prices collapse in he immediae pos harves periods, o reduce he high maize prices in he pos-harves season ec. (Nyaneng and Asuming-Bempong, 2003). A survey of sorage faciliies available in Ghana revealed ha none of he defunc GFDC s warehouses or silos was funcioning or had buffer socks of maize. Indeed, all were idle or have become rusing monumens o inappropriae echnology ransfer. None of he oher public sorage faciliies owned by MofA, FASCOM, CMB, Acion Aid, ec. was being used o implemen he governmen maize buffer sock sraegy. Despie he governmen s buffer sock sraegy in maize, naional maize sorage capaciy problems coninue o be ignored or overlooked. The absence of public sorage faciliies including hose of he GFDC from he naional maize buffer-sock sorage program has adversely affeced Ghana s maize securiy reserves in he pos-harves season. Therefore, he privae secor including farmers and raders now have he responsibiliy of soring maize o overcome he availabiliy-gap and preven high prices in he pos-harves season. The major sorage problems repored by over 85% of he farmers surveyed include: uncerain reurns from sorage as a resul of fuure price unpredicabiliy. lack of working capial o consruc cribs and sore maize

4 physical losses of sored maize Furhermore, mos farmers who have farms proximiy o GFDC silos repored lack of access o GFDC drying and sorage faciliies as heir oher sorage concerns. The survey resuls also show ha maize farmers will only sore maize unless heir sorage benefis ouweigh heir coss or fuure prices rise enough o cover sorage coss. In deciding how long o sore in he pos-harves season, he benefis from sorage (Pf Pc) mus be balanced wih he sorage coss (S) involved and is represened by: n 1 n S = Pf 1 P c Where S represens monhly maize sorage cos, P f for fuure monhly prices a which maize is sold and P c for curren monhly price a which maize is sored. Table 1 shows he resuls of he model applied o farmers esimaed monhly maize sorage coss and corresponding monhly price spreads in he major maize producing disrics of Brong-Ahafo. I is expeced ha farmers will have greaer opporuniies of increasing heir earnings by soring maize immediaely afer harves in order o sell when prices are high. However, Table 1 indicaes ha shor-erm sorage does no increase farmers earnings or here is no opporuniy for farmers who sore for less han hree monhs afer harves. While farmers generally benefi from long-erm Table 1: Monhly Maize Price Spreads and Esimaed Sorage Coss for Tradiional Cribs - Brong Ahafo (Cedis) Price Change Sorage Cos Margin 2003 Pf - Pc S (Pf - Pc) - S Acion February Loss March Loss April Loss May Profiable June Profiable July Profiable Augus Loss Sepember Loss 2002 February Loss March Loss April Loss May Profiable June Profiable July Profiable Augus Loss Sepember Loss Source: 2004 Farmer's Survey and Minisry of Agriculure

5 sorage of heir minor season s crop harvesed in February and sold beween May and July, furher sorage coss analyses indicae ha farmers do no benefi from soring heir major season s maize from Augus o December. The implicaion is ha here is opporuniy in long-erm maize sorage bu no in shor-erm sorage i.e. only long-erm sorage of he minor season s maize crop for sale beween May and July is beneficial. The policy implicaion is ha access o invenory capial will encourage farmers o engage in long-erm sorage of heir minor season s maize crop. Nowihsanding he opporuniies in long-erm maize sorage, maize prices and unavailabiliy are a heir highes during May and July. Fuure price unpredicabiliy and losses are cied by mos farmers surveyed as some of he facors prevening hem for soring maize ill he pos-harves season. I is imporan ha he moisure conen of fresh maize inended for long-erm bag sorage is low o reduce he incidence of discoloraion. Reducion in losses due o discoloraion in bag sorage can be aained hrough rapid drying before sorage. Unforunaely, mos farmers who sore heir maize in bags do no have access o drying faciliies. While i is now generally acceped ha radiional local sorage sysems such as he cribs are usually well adaped o local condiions, and losses from grain sorage are generally low and accepable o farmers (Compon 1992), farmers surveyed esimaed losing 5% o 20% of maize sored in cribs. Maize sorage losses herefore affec he quaniy and qualiy of maize available for sale during he posharves season and hence is price. Thus any program ha encourages farmers o increase on farm sorage mus sress he need for appropriae marke informaion and access o effecive drying and sorage faciliies. 4. Conclusions The sudy shows ha maize prices are a heir highes in he pos-harves season boh in major consuming and producing regions. This suggess ha maize sorage is inadequae and ha here is poor maize securiy-sorage relaionship or availabiliygap. Given he general siuaion of capial shorage, long-erm maize sorage is relaively unprofiable o long-disance maize raders who mosly buy maize on cash bu have o sell on credi. Long-disance maize raders herefore engage almos exclusively in shorerm sorage in he normal course of heir rading aciviies and heir operaions rarely influence he maize securiy-sorage relaionship or availabiliy-gap. The absence of public sorage faciliies for he naional maize buffer-sock sorage program implies ha he public secor is no direcly involved in overcoming he maize availabiliy-gap in he pos-harves season. Therefore, soring maize in he posharves season o overcome he availabiliy-gap and preven high prices in order o ensure food securiy o he poor has o a larger exen become he responsibiliy of radiional small-scale maize farmers and o a lesser exen on long-disance raders. While here is opporuniy in long-erm maize sorage, however, farmers and raders coninue o face many consrains including uncerain reurns from sorage as a resul of fuure price unpredicabiliy, lack of working capial o consruc cribs and sore maize, and physical losses of sored maize. Programs designed o eliminae hese consrains can encourage farmers and raders o increase maize sorage in he pos-harves season. 5. Policy Recommendaions

6 In spie of he governmen s buffer-sock policy iniiaed in 2001 o enhance saple maize securiy, he mos relevan ingredien o ensuring increased maize sorage or overcoming he availabiliy gap are incenive public programs ha can encourage maize farmers and raders o engage in long-erm maize sorage. I is clear from his sudy ha he privae secor will sore more maize ill he pos-harves season only in respond o posiive incenives or opporuniies in sorage. The successful implemenaion of he governmen buffer-sock sraegies or programs will herefore require helping farmers and raders overcome he consrains hey face as well as creaing incenives ha will encourage hem o change heir curren sorage pracices in order o eliminae he maize availabiliy-gap in he pos harves season. While mos of he inervenional aciviies may be provided by local farmers and raders hemselves, here will be a need for a complemenary role of he governmen. Access o drying and sorage faciliies a sraegic maize producing and consuming areas, easy access o invenory capial, and improvemens in communicaion infrasrucure o assis in effecive disseminaion of marke informaion and predicing fuure prices, are areas where naional policies can play a key role in encouraging maize sorage among farmers and raders. a. Marke Informaion Consrains Uncerainy of sorage coss, fuure prices, and benefis from sorage appear o be major consrains affecing farmer s maize sorage. Inabiliy o predic pos-harves maize prices has mean a reducion in maize sorage or made farmers and raders engaged in maize sorage vulnerable. Furhermore, as GFDC s influence on maize prices in he pos harves season has ended, he value of fuure maize prices has become an imporan facor o increasing maize sorage. Therefore, improvemens in governmen s collecion and disseminaion of maize prices o boh consuming markes and producing regions will poenially be a valuable service o farmers and raders engaged in maize sorage bu lack access o fuure price informaion. The improved communicaion or disseminaion of fuure maize prices may herefore offer significan poenial benefis o he privae secor s decision on maize sorage. b. Sorage Consrains The sudy shows ha rader s and farmer s access o drying and sorage faciliies is criical o increasing maize sorage as well as overcoming maize losses and availabiliy-gap in he pos harves season. Unil now, large-scale maize sorage in Ghana has been carried ou by GFDC wih financial assisance form he governmen and privae banks. This resuled in he building of large numbers of silos and warehouses locaed in boh he major maize consuming and producing regions. However, GFDC is now defunc because of poor managemen, and inappropriae designed and locaion of sorage and drying faciliies. Greaer emphasis is now needed in designing a posiive complemenary role for he governmen in assising farmer s and rader s access o sorage and drying faciliies in order o increase maize sorage. One such possible role for he governmen is he evaluaion of he available or idle public silos, drying and warehouse faciliies and making hem available o he raders and farmers (a a fee) for maize sorage, and his may improve heir access o sorage faciliies and provide he possibiliies for reducing sorage coss. Anoher possible area of proacive inervenion o encourage raders in long-erm maize sorage is he involvemen or collaboraion of

7 raders, cenral and municipal governmens in he design, consrucion and managemen of secured warehouses or sorage spaces in markeplaces for use by long-disance raders. Indeed, improved governmen and privae secor arrangemens involving he managemen and use of he public drying and sorage faciliies (e.g. easy access o GFDC s idle drying and sorage faciliies o farmers and raders) may allow some reducions in sorage cos and encourage more farmers and raders o sore maize. c. Capial Consrains Easy access o invenory capial by boh farmers and raders appears o be a criical componen o increasing maize sorage over long periods of ime. Public policies and programs ha encourage easy credi access from financial insiuions o maize raders and farmers o finance sored maize or o hold maize socks ill he pos-harves season may be an appropriae means of promoing or encouraging maize sorage among raders and farmers. While Ghana is self-sufficien in maize producion, however, he managemen of saple maize securiy in he pos-harves season requires effecive policies on sorage pracices and informaion disseminaion o deal wih he shorages, surpluses and corresponding price variabiliy. Furhermore, i is he poor Ghanaians who are prone o maize food insecuriy in he pos-harves season as a resul of unavailabiliy and inaccessibiliy. Addressing he maize availabiliy gap is herefore he cenral policy issue of maize insecuriy problems in he pos-harves season. The sraegic focus on increasing maize sorage and ensuring maize securiy o he poor in he pos-harves season will only be aained hrough complemenary public policies and programs ha can assis he privae secor s access o marke informaion, capial and sorage faciliies. Therefore, he creaion of an enabling environmen o encourage farmers and rader o sore maize ill he pos-harves season is considered as a major complemenary role for he governmen in ensuring securiy in saple maize o he poor. References: Compon, J.A.F. (1992). Reducing Losses in Small Farm Grain Sorage in he Tropics. Chaham: NRI Nyaneng, V.K., and Asuming-Bempong S. (2003). The Role of Agriculure in he Food Securiy of Ghana 2003, Paper presened a he Roles of Agriculure Projec. Inernaional Conference, Ocober 2003 Tomek, W.G. and K.L. Robinson. (1991). Agriculural Produc Prices. Cornell Universiy Press. Third Ediion. Page. 160.