14 June 2013

Uganda: Maize Maze

Poor post harvest handling, low demand and impassable roads spell mayhem for maize stakeholders

Maize is one of the best-selling cereal in the region, right? Well not quite, at least for now. Joseph Sekitoleko, a maize grain trader in Kasambya sub county, Kibaale District, is stuck with over 50 tonnes (50, 000 kilograms) of dried maize grain in his store after the market price for the grain dipped below his expectations.

The biggest amount of Sekitoleko's stock was bought at between Shs 600-650 per kilo in March and April; investing over Shs 30 million. His expectation was that he would sell at Shs 1, 000 per kilo, which could reap over Shs 50million as turnover and over Shs 20 million as gross profits.

However, in early May and June the average price for the grain went up to about Shs 800 before dropping to between Shs 500-600 in most parts of the country to date. That price range would leave Sekitoleko with a loss, so he decided to buy his time, hoping it would rise.

Unfortunately, things did not go his way, the price dropped further instead.

"I cannot sell them now," Sekitoleko told The Independent in a telephone interview. "I will be making serious losses." "I have to wait, pray that the price goes above Shs 650 and I sell before the July harvest sets in."

His experience is cutting across all maize dealers in the country. Those that The Independent talked to among other challenges mentioned the lack of access to good markets, exploitation by middle men and the continued fluctuation in the market price for the perennial grain crop.

It's a vicious cycle. The drop in prices is as a result of increased supply of the grain on the market by many farmers who had earlier stocked waiting for an increase in the market price.

"You can't easily predict the price of the grain; we stay in a speculative mood," Justus, another dealer in Kasubi, a Kampala suburb said, adding that you can be happy today after making profits but cry the following day when the price fails to rise. Justus adds that sometimes it is hard to store the maize because of space and the high costs involved in maintaining the grain for many months waiting for price increases.

Maize in Uganda is sold mainly for food in schools, relief by World Food Programme (WFP) and serves as food for households in several parts of the country. Reports say the maize sub-sector is estimated to provide a livelihood for about two million Ugandan households, thousands of traders and hundreds of mill operators.

Ochira Bosco, a broker at the Uganda Commodities Exchange, told The Independent that the average price for the East African Standards Grade II maize grain at Warehouses is between Shs 1,000 to Shs 1, 200. He agreed that the farm gate price at the moment has dropped to around Shs 600 in most parts of the country from about Shs 800 in the larger part of May.

He said that the price is likely to drop further due to the new harvests expected next month and in August.

Bosco hopes the price will rise only if there is high demand from the neighboring countries going forward.

"The problem now is that most of the maize is locally sold and little is demanded by the other countries," Bosco said.

There were unconfirmed reports that WFP had stopped buying the grain due to the poor quality of maize and that had contributed to the drop in the price.

When contacted for a comment about the subject, the WFP Public Relations Officer Lydia Wamala and Mats Persson, the head of procurement at the WFP, told The Independent that such reports were untrue.

They said however that currently they have no tenders for maize grain because they have enough tonnes in stock.

The officials stressed that the organization has not stopped buying maize in Uganda and there are no such intentions, adding that they have continued to purchase maize flour and other food commodities in line with their needs.

The WFP has no fixed price for maize or other food commodities. Officials said they all fluctuate due to local demand, regional demand as well as global market prices.

Last year, the WFP purchased 28, 533 tonnes of maize grain worth over $10million, constituting about 90% of the total value of foods bought by the food agency.

Sticking to quality

Due to the rampant informal trade, East African Grain Council says about 85% of the maize is traded out of Uganda. Officials said no maize grain traded in East Africa ever leaves the region, either due to quality issues or informal trading, thus limiting the market as well as the potential for increased income for all parties within the maize trade.

The WFP has implemented a zero percent Grade II deviation policy for any general procurement contracts.

Part of the quality standards is keeping the moisture content for the grain between 10 and 13%. But most farmers sell off grain of 20% moisture content.

WFP is going out to all the maize grain markets in Uganda with the aim of registering as many traders/ larger farmers/farmer organizations as possible to properly screen the market as it is aware that there are good initiatives in the country with some groups being able to supply Grade II and in some cases even Grade I maize.

WFP says over 90% of all the maize grain it purchases is supplied by local suppliers and they are happy to source so much maize locally.

However, officials said the WFP Uganda operation is at current trends using less and less food in general based on its programmes after changing from emergency rations to development-oriented programmes in the recent years - trend that is likely to continue.

Ideally, since the institution buys thousands of tonnes annually, this trend might see the price for the grain remaining lower over time.

Also, the fact that WFP has upgraded the quality of maize to the East African Standards Grade II, means that those who have maize of a lower grade will suffer with it.

At regional level, officials said without specifics that the maize growers in Tanzania and Kenya have already overcome a major part of the quality issues still faced in Uganda.

Yet, while the East African standard for maize grain has been in place since 2005, this has not generally penetrated to the Ugandan suppliers and market yet. This is because maize stakeholders have not been keen on the standard as the informal trade across borders in particular to South Sudan and DR Congo is very large with purchases by cash upfront at farm gate with little regard for the so-called standards.

But there is now a glut in supply, also caused by natural circumstances. Now that it is rainy season in for example DR Congo and South Sudan, it is a huddle to move maize out to these areas and this has increased supply in Uganda and thus leading to a fall in the price.

Huge potential

Amid, those challenges, officials said there are major opportunities for Uganda maize grain to be traded on a much larger scale if the quality adheres to EAS Grade II.

Since Uganda has non-GMO maize, the market potential beyond the East Africa Region in general is an untapped market that can pay higher prices than any informal market can ever do.

High post-harvest losses, poor quality grain, using old crop rather than good maize seeds, lack of modern storage facilities, high bank lending rates, and poor market access roads among others are the challenges listed by the WFP facing the maize sector business.

The WFP's intervention has focused on investing in agriculture and market assistance in support of small-holder farmer groups and medium-scale traders. It supports training in post-harvest management.

This is in addition to WFP's renovation and establishment of warehouses, leasing out warehouse equipment to the private sector, and its support to the warehouse receipts system. As the situation stands, the farmers and dealers who stuck with their maize, might have little or no respite from the government.

Speaking at the National Forum on Agriculture and Food Security under the theme "Unlocking the export potential of Uganda's agricultural Sector" in Kampala on June 6, Tress Bucyanayandi, the minister for agriculture, animal industry and fisheries, said government had liberalised the economy as a way of encouraging free trade of commodities such as maize.

However, Bucyanayandi said the government recognises maize grain as one of the priority crops in Uganda since it serves as food for most Ugandans, has potential to bring in revenue from outside.

"We are working with the other government ministries say trade and other agencies to extend our support to the sector," he said, without giving details.

David Wakikona, the state minister for trade, told The Independent on the sidelines of the Forum that the sector is facing problems such as poor post-harvest handling which affects the price, limited infrastructure in some areas across the country, and the poor storage facilities.

Wakikona said through Public Private Partnerships (PPPs), they intend to put in place ten silos across the regions of Uganda and 63 warehouses at various districts to support farmers on the post-harvest handling of the grain.

"It is an important crop and we will ensure these measures work," he said, adding they are encouraging maize dealers to add value to it, export and earn more revenue from the crop.

But statistics from the Uganda Bureau of Statistics (Ubos) paint a different picture. In its statistical abstract for 2012, the bureau says that while the area under maize during 2011 was the largest in Uganda and constituted 19% of the total area under selected food crops, this was slightly lower than the percentage (19.6%) recorded in 2010.

The bureau added that the highest maize production in the country was reported in the district of Iganga with 303,262 tonnes. The districts with the highest production of Maize in the Central, Eastern, Northern and Western regions were Mubende (171,089 tonnes), Iganga (303,262 tonnes), Adjumani (47,264 tonnes) and Kabarole (91,318 tonnes) respectively.

The bureau has no readily available numbers on maize exports mainly because most of the trade is informal. Maize production contributes roughly 16% of total cash and food crop contribution to Uganda's national income, despite its production being dominated by subsistence level farmers with small land holdings (0.2, 0.5 ha).

In its latest report, the WFP said sufficient supply of markets with staples has kept prices for most staples, and notably maize, unusually low for the month of April. It says between March and April, the national average price for wholesale maize reduced by 5.5%, from Shs 842 to Shs 796 per kilogram.

Expert view

Lawrence Bategeka, the acting principle and research fellow at the Makerere based Economic Policy Research Centre (EPRC), says there is a need for public-private partnerships to improve the production, drying and marketing of maize.

He says educating farmers on all stages of production of the crop is critical. Helping them access cheap credit, putting in place enabling infrastructure, and organising farmers in groups are equally important.

"All these, if well implemented will boost the sector going forward," he said.

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