MAFAP presents review of ways to set reference price for cashew nut producers in Mozambique
FAO’s Monitoring and Analysing Food and Agricultural Policies (MAFAP) programme has delivered an analysis on the way that the reference price is set for producers of cashew nuts, a key commodity in Mozambique and once leader in exports of cashew nuts.
Invited by the Director General of the Mozambican Nut Institute [Instituto de Amêndoas de Moçambique, IAM], MAFAP’s Focal Point in the country and Economist, Ivânia Mondlane, attended the 2nd Session of the Committee on Nuts to present a policy review on the current method of calculation that is used by the IAM to determine reference prices for cashew nuts and to propose ways to improve the formula that would adequately reflect the cashew value chain and its many nuances.
The review by MAFAP determined that while the formula is calculated in a transparent and inclusive way, it does not adequately reflect current market conditions or true marketing costs of cashew nuts throughout the value chain. The study argues that the current formula does not differentiate the types of cashews being exported (raw, borma or processed), their quality, as well as some costs incurred by different actors in the value chain, such as the traders.
Following this diagnostic, the MAFAP team presented a series of recommendations, which, through research present some features of a “good” formula to calculate a reference price. These include ensuring that the formula ‘mirrors’ the value chain, by ensuring that costs access costs for all relevant actors are included, a formula based on a distribution of profits along the key actors of the value chain, and which ensures that the price factors in the government’s objectives, such as a boosting production or exports. The findings also recommend clarity over the type of cashew being considered in the formula, as they have different implications in terms of tax.
From request for support to reform in 6 months
MAFAP's policy support for cashew nuts started in July 2023, when FAO received a request from the IAM to support the institution with the design of a reference price-setting formula for the cashew nut value chain. More specifically, through a detailed analysis of the formula, to understand whether there are any issues in the design of the formula that could undermine the proper functioning of the current reference price formula.
Initial results from the analysis and recommendations were drawn up over summer, presented in October to IAM and in December 2023 to the IAM and stakeholders during the 2nd Session of the Committee on Nuts for validation. The IAM has since taken MAFAP’s policy recommendations onboard and has stopped using the old formula, with a final decision pending.
This analysis follows on from similar policy analysis for the cotton and oilseeds sector in 2022 and 2023, for which MAFAP has been instrumental in proposing the first-ever formulas for the Cotton and Oilseeds Institute (IAOM) to set reference prices for producers of sesame, soybeans and sunflower seeds. Read more on this here.