1 Maize Market in Southern Africa: Effects from Improving Storage Efficiency (A spatial-temporal price equilibrium approach) António Sousa Cruz Mozambique September 2006

2 Problem Prices rise before following harvest

3 Objectives To study the maize market in Malawi, Mozambique, South Africa, Tanzania, Zambia e Zimbabwe (SA6) To analyze economic effects from improving storage efficiency, i.e., reducing real interest rates (Arndt, Schiller, e Tarp 2001) –Using a spatial-temporal price equilibrium model (Samuelson 1952; Takayama e Judge 1971) To analyze effects from reducing storage costs, reducing transportation costs and liberalizing intra-SA6 trade

4 Correlation Coefficients of Maize Output among SA6,

5 Assumptions Producer and consumers are price-takers, operating in competitive markets Transactions costs: storage, transportation, tariffs Each region is a separate market Partial equilibrium Producers and consumers are risk neutral Perfect foresight for the entire year Maize is a single and homogeneous product

6 STPE Model: Objective Function

7 Subject to restrictions:

8 Simulations

9 South Africa-East reveals a pattern of trade of the Benirschka and Binkley (1995) type: –Storage efficient region –Intra-seasonal flatter prices –Sells maize later in the marketing season Mozambique-Center, Mozambique-North, and Tanzania present a Timmer’s (1974) pattern of trade: –Low storage efficient regions –Intra-seasonal price hikes –Exporting maize immediately after harvest –Importing it back later in the “hungry season” Results (Base Scenario)

10 Impact of Simulations on Welfare Measures, SA6 Regions (% changes)

11 Conclusion: Maize Market Current differences in storage costs (in particular, in real interest rates) is an important determinant of South Africa’s comparative advantage over other SA6 countries When reducing real interest rates Mozambique-Center, South Africa-East and Tanzania increase their exports to other SA6 Combining improvement in storage and transportation efficiency, and trade liberalization provides the best welfare results among all scenarios