GLOBAL AGRICULTURE AND TRANSPORTATION PRICE TRENDS AND FOOD SECURITY - THE CASE OF COMESA Cris MUYUNDA, PhD Senior Agricultural Advisor, COMESA USDA/USAID FOOD AID CONFERENCE April 14-16, 2008, KANSAS CITY, MISSOURI, USA

OUTLINE OF PRESENTATION  COMESA OVERVIEW : MARKET PARAMETERS  FOOD SECURITY SITUATION  MAJOR ISSUES OF CONCERN OVER FOOD PRICES  MALAWI FOOD SECURITY SUCCESS STORY  KEY TRANSPORTATION ISSUES  CONCLUSION

COMESA OVERVIEW : KEY PARAMETERS  FORMED IN 1994 FROM PTA, itself est  19 member states  POPULATION : 400 million – big potential market  Intra-COMESA trade: US$9 billion (2007 est.); Extra-COMESA trade: US$90 billion  US$3.0 billion (about 40%) of intra COMESA- trade is food and agricultural raw materials

AGRICULTURE IN COMESA  32% of COMESA GDP  65% of Raw Materials for Industry: Agricultural commodities are major drivers for growth in intra-COMESA trade.  80% of employment

FOOD SECURITY SITUATION IN COMESA IN ADDITION TO EMEGENCY FOOD AID:  2004/2005: 11 MEMBER STATES WERE IN FOOD DEFICITS AND REQUIRED EXTERNAL FOOD  2005/2006: 5 MEMBER STATES EXPERIENCED FOOD DEFICITS, BUT THE WHOLE REGION HAD A SURPLUS OF 550,000 MT.  2006/2007: 2 MEMBER STATES EXPERIENCED FOOD DEFICITS, BUT WHOLE REGION HAD A SURPLUS OF 1,500,000 MT.  2007/2008: …….  OVERALL: MAJOR INFRASTRUCTURE / DISTRIBUTION CHALLENGE

NEGATIVE IMPACT OF HIGH PRICES  AFFECTS POVERTY LEVELS (Studies indicate 10% increase in prices leads to 2.3% increase in poverty in Africa)  HAS IMPACT ON NUTRITIONAL STATUS OF THE CONTINENT WHERE ALREADY SOME 200 MILLION PEOPLE ARE CHRONICALLY MALNOURISHED  HAS IMPACT ON POLITICAL SITUATION NATIONALLY, REGIONALLY  COULD AFFECT PEACE AND SECURITY SITUATION

POSITIVE IMPACT OF HIGH PRICES  HIGH FOOD PRICES BRING ECONOMIC GROWTH IN AGRICULTURAL LED ECONOMIES: AGRICULTURE is 32% of COMESA GDP  GROWTH REDUCES POVERTY: 1% INCREASE IN GROWTH ELIMINATES 6 MILLION PEOPLE OUT OF POVERTY

MAJOR FOOD SECURITY SUCCES STORY : MALAWI 2004/2005: SERIOUS FOOD DEFICIT: 800,000 MT; INTERNATIONAL FOOD APPEAL 2004/2005: SERIOUS FOOD DEFICIT: 800,000 MT; INTERNATIONAL FOOD APPEAL 2005/2006: 400,000 MT FOOD SURPLUS 2005/2006: 400,000 MT FOOD SURPLUS 2006/2007: 1,200,000 MT FOOD SURPLUS 2006/2007: 1,200,000 MT FOOD SURPLUS

MALAWI: MAJOR CONTRIBUTING FACTORS TO LAND LOCKED COUNTRY “SUCCESS” FERTILISER SUBSIDY PROGRAM FERTILISER SUBSIDY PROGRAM POLICY FOCUS: BUDGET IS ON THE INCREASE POLICY FOCUS: BUDGET IS ON THE INCREASE COMPREHENSIVE FOCUS: IRRIGATION, FERTILIZER, MARKETING (COMMODITY EXCHANGE) COMPREHENSIVE FOCUS: IRRIGATION, FERTILIZER, MARKETING (COMMODITY EXCHANGE)

KEY TRANSPORTATION/RELATED ISSUES ISSUES  LANDLOCKED COUNTRIES, 9 out of 19 countries (up to 55% of commodity costs)  TRANSPORT DELAYS, World Bank Study (each day is equivalent to 400 km)  ISLAND NATIONS, Net Importers of Food – food prices affecting them  AIR TRANSPORT AS A SOLUTION FOR LANDLOCKED COUNTRIES TO RAISE INCOMES  COMPREHENSIVE APPROACH – CAADP.  POOR INTEGRATION: EXPORT BANS

Additional Transport Challenges Lack of diversified transport systems based on inter and multi modal transport corridors comprising road, rail, water and air transport. Lack of diversified transport systems based on inter and multi modal transport corridors comprising road, rail, water and air transport. Poor physical connectivity: number of kilometers of paved road per million people is about 60. Poor physical connectivity: number of kilometers of paved road per million people is about 60. Brazil and India: over 1,000. Brazil and India: over 1,000. Developed World, the kilometers of paved road per million people is about 20,000. Developed World, the kilometers of paved road per million people is about 20,000. Sources of energy: need to aggressively explore hydro- power, bio-fuels and nuclear energy given the abundant resources in the region. Sources of energy: need to aggressively explore hydro- power, bio-fuels and nuclear energy given the abundant resources in the region.

REAL CHALLENGE: LOW CEREAL YIELDS – empty back trips

POTENTIAL SOLUTIONS/CONCLUSIONS  HARMONIZED ROAD TRANSIT SYSTEMS, COMESA CARRIER’S LICENCE, AXLE LOADING AND MAXIMUM LOADING DIMENSIONS, COMESA YELLOW CARD INSURANCE  COMMON INVESTMENT AREA, RECOGNISES COMESA INVESTOR – REDUCED COST OF DOING BUSINESS  DEVELOPMENT CORRIDORS, not just transport corridors CAADP: LAND AND WATER, MARKETS/INFRASTRUCTURE, FOOD/NUTRITION SECURITY, TECHNOLOGY/EDUCATION CAADP: LAND AND WATER, MARKETS/INFRASTRUCTURE, FOOD/NUTRITION SECURITY, TECHNOLOGY/EDUCATION PPPs: ACTESA, RELPA, AAMP PPPs: ACTESA, RELPA, AAMP

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