Crop production forecasts
Market information systems
Early warning systems
Once a decision has been taken that a strategic grain reserve should be established the requirements and the various options open to government to meet those requirements need to be considered. Decisions will need to be taken concerning the mechanisms required for monitoring market conditions, and the ownership, structure, size, location and financing of the reserve.
Under a regulated marketing system, the government, through various departments in the Ministry of Agriculture, e.g. extension and statistics, and through the parastatal agencies responsible for cereal marketing, has, or should be in a position to amass, the information necessary for monitoring fairly reliably the overall food situation in the country. Based on its assessment of the likely market developments, the government is solely responsible for taking the necessary decisions concerning the need to import, or export, and the likely need for releases from the reserve during the course of the marketing year to cope with envisaged food shortages. However, once the first steps towards market liberalisation have been taken, control over the market begins to slip from the government's gasp into the hands of the other participants, i.e. private traders. Under such circumstances government needs to review its information requirements and sources to enable it to have a reliable overview of market conditions and prospects.
When the grain market was a government controlled monopoly the marketable surplus was normally purchased soon after harvest. The quantities of grain available to meet market requirements would be known and thus, in years of poor production, the expected shortfall which would need to be covered, either by imports or by a reduction of stocks. Under a free market the quantities of grain marketed, held in store, either on-farm or in traders'/millers' warehouses, is unknown, and not possible to obtain with any degree of reliability1 Foreign trade arrangements made by the private sector would also not be known unless special arrangements have been made, e.g. through a system of import/export licensing. Government is therefore increasingly forced to rely on secondary data to monitor the current and expected market conditions. This would involve the use of market prices, price trends and movements as a proxy for assessing market availabilities. Thus, as liberalisation proceeds, the government will become increasingly dependent on the collection and analysis of statistical data if it is to keep abreast of market conditions and be able to assess likely future market developments. This will require that greater attention is given to improving the quality and reliability of production forecasts and on the development of market information and early warning systems than has been common in the past. The less reliable the available information is, the greater will be the degree of uncertainty in the assessments of the likely market developments, and thus the greater will be the provision which will have to be made to ensure that the market will be adequately catered for.
1 As in a free market producers tend to hold stocks on-farm in the hope of receiving a higher price later in the season the quantities marketed at harvest are likely to be lower than under a regulated marketing system. These quantities are impossible to determine with any degree of reliability. Also, for commercial reasons, private sector companies are unlikely to respond reliably to requests from government concerning the stocks of grain they are holding.
Governments have been traditionally unwilling to make the necessary investments in developing and maintaining effective information systems in the firm belief that they can not afford the resources. However, it needs to be remembered that such information systems can, by providing reliable information, help the government avoid the high costs of coping with an unexpected, or poorly prepared for, food emergency. Clearly the reliability of the information systems available to government relating to production and market forecasts will have a direct bearing on the size of the strategic grain reserve needed to give the required degree of protection.
Estimates of the production of key crops are usually made during the growing season based on area planted and expected yield. These estimates are finalised following harvest when the results of crop cutting surveys are normally also included in the calculations. However, the reliability of these estimates varies considerably between countries. With market liberalisation the timeliness and reliability of production forecasts for basic food production becomes increasingly important to government as an early indicator of the likely food situation facing the country in the coming marketing year. Armed with this information the government is in a stronger position to assess the probability of food shortages arising and the likelihood of demands being put on the strategic grain reserve.
In most countries the past neglect and/or under-resourcing have resulted in relatively unreliable crop forecasting systems. Governments will therefore need pay attention to the need to strengthen their crop forecasting systems to improve both timeliness and reliability of information. In some countries different agencies may be involved in preparing independent crop forecasts1, this often leads to substantial variances which can be difficult to resolve. The situation can be made more complex by interdepartmental rivalries resulting in a reluctance to accept information prepared by others. As an alternative, consideration needs to be given to appointing a single authority with responsibility for preparing consolidated crop forecasts. The authority would be mandated to bring together those agencies/departments which are currently engaged in making crop estimates, or could usefully contribute to the estimating process with the provision of appropriate information, and to jointly develop a coordinated and consistent approach to crop forecasting. The authority would be responsible for assessing the information provided by each agency/department and for the preparation of a consolidated forecast. Ideally mechanisms should also be established for comparing forecasts with the subsequent observed results with the objective of identifying the reasons for any significant variances so that procedural adjustments can be made to improve the reliability of future forecasts. Currently such post factum reviews are rarely if ever undertaken.
1 In Kenya four agencies prepare separate production estimates, viz. Ministry of Agriculture, Central Bureau of Statistics, Department of Resource Surveys and Remote Sensing and the parastatal grain agency. National Cereals and Produce Board (NCPB).
Market transparency is of fundamental importance for the efficient operation of a free market. It requires the ready availability to market participants; i.e. producers, traders and retailers; of information relating to prices and availabilities in key markets throughout the country. The availability of this information stimulates market users to exploit spatial price differences by moving produce from low-priced to high priced markets, i.e. encourages arbitrage, and, apart from inter-market handling costs, the equalisation of prices between markets. As market prices under a regulated market system were intended to be fixed there was no need to develop systems for monitoring market prices and availabilities, as a result most countries embarking on the liberalisation process do not have systems in place for providing market users with price information. The establishment of a market information system (MIS) for use by both government and traders which provides regular information through the media on the prevailing market prices and availabilities needs to be given a high priority by government in its market liberalisation policy.
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Zambia Market Information System The Agricultural Market Information. Centre in the Food Security Division of I the Ministry of Agriculture, Food and Fisheries, with the help of the FAO Marketing Management Assistance Project produces a Weekly Market Bulletin: containing information on: the prevailing wholesale and retail market prices for a range of basic commodities and inputs m 9 key markets, the prevailing prices on the Agricultural Commodity Exchange, tables and graphs showing price treads for maize over the past year and an assessment of market conditions. Other information which may be of interest to those involved with the market, e.g. the government's policy for maize marketing in the coming year, is also provided from time to time The information is made available, each Tuesday for the prices at the end of the previous week to the media, press and radio for publication It is also available on subscription and can also be accessed directly by E-Mail (faoamic@zamnet,zm or [email protected]) |
In addition to providing market information such a system could be extended to include market intelligence, in particular the government's assessment of the food situation in the country, e.g. production, market demand, as well as estimates of import need or export potential, international prices and other information of general interest to the trade. Appendix 1 provides an example of a weekly market bulletin produced by the Zambian Ministry of Agriculture. The wide dissemination of such information by government to traders would help them make more informed judgements of market requirements, thereby improving the efficiency with which the market operates. Such improvements in market efficiency would offer a direct benefit to government by reducing the provision it has to make to cover for any weaknesses in the marketing system.
Crucial to the usefulness, and hence its likelihood of success, of a market information system is the speed with which information can be made available to potential users. Common criticisms of market information systems are the problems of organising the regular collection of price and availability information from selected markets and the cost of collection, particularly if special teams of collectors are employed by the responsible department. These costs can be minimised if responsibility for the collection of the information in a standardised format is transferred to the market authority, often the municipality. The cost of collection can then be recouped through the system of market fees. In this way the users of the market, who are also be the main beneficiaries of the information disseminated, would be responsible for covering the costs of collecting, and possibly also processing and disseminating, the information. The service could therefore become self-financing The information collected in the selected markets would be transmitted directly, by fax or modem, to a central agency, usually based in the Ministry of Agriculture, which would process the data and then retransmit it to the markets, media and subscribers. The central agency would be responsible for determining: the data to be collected, designing a standardised format for the ease of collection and processing, and for training and monitoring the data collectors to ensure that they follow established procedures.
Many Sahelian and Sub-Saharan African countries which are susceptible to food emergencies have established early warning systems responsible for gathering together all the information which has a bearing on the current and expected food situation in the country and preparing regular reports assessing the prevailing food situation in the country and the prospects. For Southern and East African countries regular regional early warning reports are also prepared by regional units based in Harare (SADC) and Djibouti (IGAD)1.
1 SADC countries associated with the Regional Early Warning System are: Angola, Botswana, Lesotho, Namibia, Malawi, Mozambique, Swaziland, South Africa, Tanzania, Zambia and Zimbabwe. The IGAD countries are: Djibouti, Eritrea, Ethiopia, Kenya, Somalia, Sudan, and Uganda.
Information used for providing early warning assessments of the future food situation bring together information from a variety of sources including: remote sensing; agro-meteorological information, particularly rainfall data; and crop forecasts. Timing interpretation of this information can play an important role in alerting governments and traders to the likelihood of food shortages occurring later in the food year, or in the following food year. With such advance warning there should be sufficient time for the government, or responsible public agencies, e.g. the agency responsible for the strategic grain reserve, to take appropriate action to cope with a pending emergency.
Again the reliability, and timeliness, of such information has a direct bearing on the size of the reserve required. The better and more reliable the information is with respect to giving advance warning of those events which are possible to foresee, e.g. drought, the lower will be the requirement for the reserve.
