The effect of the National Food Reserve Agency on maize market prices in Tanzania

Tanzania’s National Food Reserve Agency (NFRA) has a mandate to guarantee national food security through procuring, reserving and recycling grain stocks – primarily maize – and doing so in a cost effective manner. The agency procures maize at set, annual pan-territorial maize prices based on estimated production costs, and distributes maize free of charge or at a discount to targeted vulnerable populations. Surplus stocks are sold in the market, often also at subsidized prices to millers, or at market-related prices to other state or non-state actors. The perception exists that these procurement and sales activities are distortive; hence, this study adopts a time-series econometric approach to modeling price dynamics in selected regional wholesale maize markets in Tanzania with a view to isolate the NFRA’s impact on these markets. Results suggest the NFRA has had an insignificant impact on maize prices during 2010/11–2014/15 despite their pricing strategy and fairly significant presence in at least some regional markets. As such its activities only benefit a select number of maize suppliers, i.e., traders or farmers, or consumers, with limited spillover effects into markets more generally. With this in view, the NFRA should reconsider its strategy of offering a price premium for the maize it procures or selling maize at a discount, even though its mandate of providing subsidized or free maize to vulnerable people is not in question. Current storage capacity expansion plans are also not consistent with the NFRA’s food security mandate.

Type: Reports
Date: Apr 2018
Country: Tanzania
 - East Africa
Commodity: Maize
 - Cereals

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