PROJECT FOR STAPLE FOOD (MAIZE) SECTOR IN GHANA Presented by Selorm Ayeduvor

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COMPETITION REFORMS IN KEY MARKETS FOR ENHANCING SOCIAL AND ECONOMIC

WELFARE IN DEVELOPING COUNTRIES

PROJECT FOR STAPLE FOOD (MAIZE) SECTOR IN GHANA

Presented by

Selorm Ayeduvor

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OUTLINE OF PRESENTATION

• Introduction• Motivation of the Study• Objectives of the Study• Methodology of Primary Research• Analysis of Secondary Data• Results and Discussions• Conclusions and Recommendations

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INTRODUCTION

• The project is being implemented by CUTS with support from DFID (UK) and BMZ (Germany), facilitated by GIZ (Germany). Two sectors have been identified for study and exploration under the CREW project in the staple food sector and the transport sector.

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MOTIVATION FOR THE PROJECT

• The purpose of the project is to assess the state of competition in the selected sectors and countries.

• Especially focusing on the impact that past and existing public policies, regulations, private sector business practices, institutional arrangements and other factors have had on consumer and producer welfare.

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MOTIVATION CONT’D• Specifically, the goal of the project is to better

demonstrate measurable benefits from effective competition reforms in Developing Countries (DCs), for ensuring long-term support for competition.

• Further, the project would be implemented guided by the following objectives:

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OBJECTIVES

• To enhance international understanding of the benefits from, and best practices in, effectively implementing competition regimes in developing countries.

• To develop and test a methodology (with indicators) for assessing the efficacy of competition - regimes in achieving impacts on developing country consumers and producers.

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OBJECTIVE CONT’D

• To advocate to national stakeholders and international development partners for according greater importance to competition policy and law issues, in the national development agenda.

• To sustain the momentum on fast-tracking competition reforms, gained from stakeholder awareness, understanding about the benefits and participation in related process in developing countries.

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METHODOLOGY OF PRIMARY RESEARCHStudy Area: Three Regions were selected Accra, Brong Ahafo and Ashanti for the study. The locations are selected based on the levels of production and consumption of maize.

Sample Size and Sampling technique: A total of 140 maize farmers (70 from Techiman and 70 from Ejura) in Brong Ahafo and Ashanti Region respectively and a total of 90 consumers were randomly selected and interviewed from the three regions. The regions were however purposively selected for the study.

Method of analysis: Descriptive statistics such as means and percentages, line graphs, bar charts were used to analyze the response of farmers. The logit models were used to study awareness of farmers about government policies, regulations and programmes.

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PRODUCTION OF MAIZEDistribution of Maize Production by Region (2000-2012)

Regions Agro-Ecological Zones

Output (MT)

% Area (Ha) Yield (MT/Ha)

Central Semi deciduous ‐

rainforest192,069 13.68 104,984 1.83

Eastern Semi deciduous ‐

rainforest405,377 19.77 176,825 2.29

Ashanti Semi deciduous ‐

rainforest205,419 13.59 154,613 1.33

Brong-Ahafo

Forest savanna transition

570,350 26.22 244,922 2.33

Northern Guinea savanna 209,353 8.73 139,214 1.50

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MAIZE PRODUCTION CONT’D• Maize area, Production and Yield trends in Ghana (1990-2012)

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MAIZE PRICES

Descriptive statistics of Regional nominal wholesale maize prices (2002-2008)

Statistics Greater Accra Central Eastern Ashanti B/Ahafo Northern

Mean 28.87 29.61 27.65 25.95 21.86 21.05

Standard Deviation

13.68 13.53 11.91 13.16 11.43 11.40

Minimum 10.59 8.65 9.03 7.96 6.75 8.40

Maximum 82.00 75.65 64.56 78.16 60.39 56.67

Coefficient of var

47.38 45.71 43.06 50.73 52.27 54.16

Count 84.00 84.00 84.00 84.00 84.00 84.00

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MAIZE PRICESDescriptive statistics of Regional nominal wholesale maize prices (2009-2012)

Statistics Greater Accra

Central Eastern Ashanti B/Ahafo Northern

Mean 74.94 76.65 68.39 72.11 55.27 46.85

Standard Deviation

22.80 22.51 26.20 23.40 17.29 11.48

Minimum 45.50 41.81 4.90 43.33 32.05 32.44

Maximum 151.00 137.86 123.48 128.98 93.28 74.35

Coeffient of var 30.42 29.36 38.31 32.46 31.28 24.50

Count 48.00 48.00 48.00 48.00 48.00 48.00

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MAIZE PRICE CONT’D

National average wholesale maize price (2002-2012)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

100

200

300

400

500

600

700

800

900

1000

Average Wholesale Price Trends for Maize

NominalReal

PRIC

E(G

H)

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PROCUREMENT OF MAIZE• NAFCO’s mandate consist of guaranteeing an assured income to

farmers by providing a minimum guaranteed price and ready market for farmers in order to reduce post-harvest losses

• Purchasing, selling, preserving and distributing food stuffs in times of crisis

• employing a buffer stock mechanism to ensure stability/balance in demand and supply

• expanding the market share/demand for food grown in Ghana by selling to state institutions such as the military, schools, hospitals, prisons.

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PROCUREMENT CONT’D• acting as a foreign exchange earner as increased food production

resulting from MOFA’s interventions• and storage by NAFCO will afford the country the opportunity to

export surplus food items when the local food requirement has been met.

• The target quantities for 2012 for maize were 15,000 Mt of white maize and 15,000 Mt of yellow maize; 15,000 Mt of paddy rice; 1,000 Mt of soya.

• The Emergency Government Stocks include: 10,000 Mt of white maize; 10,000 Mt of milled rice; 1,000 Mt of soya.

• The share of these stocks in an estimated production of 1.7 Million Mt is around 3 percent.

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MARKETING AND DISTRIBUTIONMaize Consumption and Utilization

• Food balance sheet for maize in Ghana (2006-2012) 2006 2008 2009 2010 2011 2012

Gross Biological Production (MT) 1,189,000 1,470,000 1,620,000 1,871,695 1,683,984 1,949,897

Available for Human Consumption* (MT)

832,000

1,029,000 1,134,000 1,310,187 1,178,789 1,364,928

Total Imports of Commodity (MT) - - 34,000 18,000 15690 151,258

Total Exports of Commodity (MT) - - 150 10,000 15000 20,000

Total Supply of Commodity (MT) 1,024,000 1,167,850 1,400,167 1,298,927 1,614,086

Per Capita Consumption (Kg/Annum)

43.8 43.60 43.80 43.80 45.00 43.8

Estimated Net Consumption of Commodity-ties (‘000MT)

972,000

1,052,100 1,060,967 1,088,430 1,134,858

Net Deficit/ Surplus (MT) -140,000 5,000 115,750 339,199 210,497 317,819

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• Availability and Access to Food OutletsRegion Total market places Average per District

2008 2009 2010 2011 2012 5yrs Av 2008 2009 2010 2011 2012

5yrs Av

Ashanti 802 806 1755 1789 1196 1269.6 30 32 58 59 44.3 44.88

Brong-Aha

228 228 236 238 204 226.8 8 8 11.0 11 9.3 9.46

Eastern 171 174 218 277 285 225 10 10 10.0 13.0 13.6 11.32

Greater Accra

97 101 49* 50* 49 69.2 10 10 4.9 5.0 4.9 6.96

Northern 160 167 64* 65* 97 110.6 8 8.3 3.2 3.3 4.9 5.54

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Fertilizer Import and Consumption in Ghana

Fertilizer Imports in Ghana (2000-2012)

Year NPK Urea M. of Potash SOA SSP

&TSP* Nitrate* Pot. Sulphate

Cocoa Fert. Others Total

2000 14,902 141 4,510 23,165 600 180 43,975

2001 49,287 2,500 4,147 22,628 700 1,586 80,848

2002 800 n.a. 18,484 20,047 1,656 n.a. n.a. n.a. 901 41,888

2003 18,890 500 23,440 25,715 n.a. 7.35 n.a. 19,500 4,027 92,807

2004 18,223 250 822 7,688 1,850 95,312 72,000 25,000 2,588 223,733

2005 38,978 4,540 1,000 15,000 1,000 157 135 12,000 18,496 91,306

2006 84,907 9,072 19 19,090 99 52,601 103 n.a. 23,988 189,879

2007 87,388 4,962 109 17,458 504 52,823 321 n.a. 26,029 189,594

2008 18,873 13,773 8,853 4,172 15,440 64,085 371 n.a. 61,463 187,030

2009 197,631 25,028 15,007 4,616 66,501 110 n.a. n.a. 26,293 335,186

2010 30,560 11,521 16,079 12,077 52,117 236,547 n.a. n.a. 130,314 489,215

2011 139,128 12,363 10,387 46,222 72,976 75,292 1,004 24,192 50,779 432,343

2012 2,923,304 31,950 43,384 83,840 78,355 267 n.a. n.a 201,432 3,362,53

2

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Fertilizer Subsidy Budget, Volume, and Cost

ITEM 2008 2009 2010 2011 2012

Agric Budget(000GH₵) 97,131 202,632 255,886

Subsidy amount 20,654 34,417 30,002 78,700 120,300

% agric budget 21.3% 17.0% 11.7%

Total volume of fertilizer subsidy

43,176 72,795 91,244

Disbursement method

Coupon Coupon Waybill Waybill Waybill

NPK Farmer pays 25 25 27 39

Subsidy amount 26 26 18 37

% subsidy 51% 51% 38% 49%

UREA Farmer pays 26 26 25 34

Subsidy amount 26 26 16 38

% subsidy 50% 50% 39% 47%

SOA Farmer pays 16 16 18 53

Subsidy amount 18 18 16 18

% subsidy 53% 52% 47% 34%

Yearly average subsidy 51% 51% 42%

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ANALYSIS OF PRIMARY DATA

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PRIMARY DATA ANALYSIS

Policies, programmes and regulations identified are:1.Fertilizer subsidy programme2.Seed inspection and certification3.National seed policy4.National food buffer stock company(NAFCO)

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MAIZE PRODUCTION

Land holding and land under cultivation• The average land under cultivation of the respondents

in the study area was about 2.14 ha; however this ranges between 0.4 ha to 12 ha in the area.

• The total land holding of the 140 farmers was 547.7ha while the total land under cultivation was 297.1ha which means the proportion of farmers land holding under cultivation of maize is about 54.24%.

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Quantity and trend of maize production

• The production of maize increased from 358.5Mt in 2009 to 825.69Mt in 2013 this represent a growth rate of about 24.8% per annum in the two Regions

2009 2010 2011 2012 20130

100

200300

400500

600700

800900

TOTAL OUTPUT

TOTAL OUTPUT

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• Production level of maize (2009-2013)

2009 2010 2011 2012 20130

100

200

300

400

500

600

700

Ashanti Brong Ahafo

PRO

DU

CTIO

N(M

T)

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FERTILIZER Availability of fertilizer Response of farmers

Source of supply of fertilizer Government (24.3%) Private (75%) Both(0.7%)

Change in source of supplyfrom public to private

Yes(14.3% No (85.7%)

Reliability of supply Very good (25%) Good (56.6%) Neutral (14.3%) Bad(6%)

Time of supply Within time (72.1%) Beyond time (27.9%)

Change in availability in supply Yes positive (23.6%), yes negative (35%) no(41.4%)

Government policy responsible for the change Fertilizer subsidy programme

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FERTILIZER CONT’DAVERAGE USAGE OF FERTILIZER• NPK- 133.8 Kg/ha• SOA- 105 Kg/haAFFORDABILITY

Response of farmers

Rank of affordability Very expensive (77.9%)

Expensive (21.4) Neutra l(0.7%)

Change in affordability Yes positive (9.2%), yes negative (72.9%) no (17.9%)

Degree of change in affordability

Very high degree (37.9%) high degree (34.3%)

Government policy responsible for the change

Fertilizer subsidy programme

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FERTILIZER CONT’D

Trend of fertilizer prices from 2009 to 2013

2009 2010 2011 2012 20130.00

10.00

20.00

30.00

40.00

50.00

60.00

Prices of fertilizer used by farmers (2009-2013)

NPKAmmoniaUrea

Aver

age

Pric

es

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FERTILIZER CONT’DQuality of fertilizer Response of farmers

Rank of quality Very good (58.6%) Good (40.7%) Neutral(0.7%)

Change in quality Yes positive (17.6%), yes negative (31.4%) no (50%)

Degree of change in quality

Very high degree(9.4%) high degree (62.5%) high degree (28.1%)

Government policy responsible for the change

Not able to identify any government policy

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FERTILIZER CONT’DFactors affecting awareness of fertilizer policy

Variable Marginal Effects Standard Error z P>z

Fertilizer usage .05899 0.01225 2.22 0.026**

Farm size .0054359 0.156792 0.16 0.875

Farm type .092985 0.647092 0.71 0.478

Region -.211925 0.436585 -2.2 0.028**

Sex .0187825 0.595367 0.15 0.884

Age .0050151 0.022002 -1.03 0.304

Education -.049677 0.336099 -0.67 0.503

Farming experience .0070856 0.027622 1.16 0.247

Fertilizer source .2556671 0.500264 2.17 0.003***

Income .2506433 0.165175 -1.8 0.072*

Constant 1.39139 0.96 0.336

Number of obs 140

LR chi2(13) 18.42

Prob > chi2 0.0012

Pseudo R2 0.5122

Log likelihood -181.918

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SEED MAIZE Response of farmersSource of seed Government (7.1%), private (22.9%), own seed(70%)

Choices in terms of Availability of seed

Many option (47.9%), no option(21.4%), few option(30.7%)

Ranking of option available Very good (37.1%), good(47.9%), neutral(11.4%) bad(3.6%)

Changes in availability of seed Yes, positive (15.7%), yes negative(9.3%), no (75%)

Affordability of seed Very expensive (18.6%), expensive(17.1%), Affordability(32.1%), Cheap (15%) Very Cheap (17.1%)

Changes in affordability Yes , Positive(10.7%), yes , Negative(32.1%) no change(57.1%)

Quality of seed Very good(38.6%), Good(45.7%), Neutral(13.6%), Bad(12.1%)

Changes of quality of seed Yes, positive(13.6%) yes ,negative(9.3%), no(72.1%)

Government policy

Not able to identify any government policy

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SEED MAIZE CONT’D

Factors affecting awareness of seed policyVariable Marginal Effects Standard Error Z P>zRegion -.2015774 0.459119 -2.54 0.011**Sex -.1292945 0.580594 -1.15 0.251Age -.0025377 0.026084 -0.56 0.573Education .1484688 0.304935 2.82 0.005***Household size -.0046713 0.069313 -0.39 0.696Farming experience .0011758 0.026279 0.26 0.796Income 0.317061 0.942062 1.95 0.041**Seed usage .0081371 0.070622 0.67 0.505Seed source .2915738 0.593313 2.26 0.024**Constant 2.246958 -0.07 0.945Number of obs 140 LR chi2(13) 23.41 Prob > chi2 0.0053 Pseudo R2 0.6275 Log likelihood -168.1867

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CREDIT Availability Response of farmers

Source of credit Government (24.3%) Private (75%) Both (0.7%)

Rank of the choice available Many options (10%), few options (35%), very few option (16.4%) no option (38.6%)

Change in source of creditpublic to private

Yes (5.7%) No (94.3%)

Rank the source of credit Very good (19.3%) Good (43.6%) Neutral (17.9%) Bad (5.7%)Very Bad (13.6%)

Change in availability in supply Yes positive (6%), yes negative (2%) no (92%)

Government policy responsible for the change

Not able to identify any government intervention

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CREDIT CONT’DAffordability of credit• With respect to affordability, about 41.29% ranked the

credit available as very expensive, 13.6% said it was expensive, 14.3% ranked affordable, 19.3% ranked cheap while the remaining 11.5% ranked very cheap.

• The total credit that the respondent received was GH₵ 4,080.00 in 2009 to about GH₵10,480.00 in 2013 however this amount dropped to GH₵7,080.00 in 2014.

• The interest charged according to the farmers ranged from 4% to 12% per month depending on the source of credit.

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PROCUREMENT CONT’D• Existence of Government Support Price

Response of farmers

Satisfaction of base price

Very satisfied (1.4%) satisfied (12.1%) Neutral (2.1%), Not aware (84.3%)

Awareness of price setting mechanism

Aware (10.7%) no aware (89.3%)

Information about base price

Always informed (3.6%), sometimes informed (8.3%) hardly informed (87.9%)

Source of information about based price

Government (12.6%), private (5.9%), media (1.7%), not application (79.8%)

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PROCUREMENT CONT’D• Sales information, Sales pattern and payment terms• Average selling price of maize in 2014 is about GH₵ 100/120 Kg

however prices of maize range between GH₵ 55/120 Kg to about GH₵ 130/120 Kg.

Response of farmers

Option of selling Yes (63.6%) No (36.4%)

Rank option of buyer available Many option (42.4%) few option (42.4), very few option(12.4%) no option(3%)

Source of selling Middle(62.9%) local traders (21.4%),any available buyer(11.4%), agro-firms(2.1%) others source(2.2%)

Place of selling Major market (65%), homes or farm gate(35%)

Distance from home 21.4km

Network of procurement entities

Very good ( 25.7%), good(52.9%) neutral(13.6%), bad(7.8%) very bad(0.7%)

Price determination Market price (90%), negotiation (10%)

Observe Change in price Positive change(57.3%), negative change(21.5%) no change(18.6%)

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PROCUREMENT

2009 2010 2011 2012 20130

100

200

300

400

500

600

700

800

900

TOTAL OUTPUTOUTPUT SOLD

YEARS

PRO

DU

CTIO

N(M

T)

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MARKETING & DISTRIBUTION

Monthly ConsumptionAVERAGE MONTHLY CONSUMPTION

FREQUENCY PERCENT

1-20 56 62.2

21-40 17 18.9

41-60 15 16.7

61-80 1 1.1

121-140 1 1.1

TOTAL 90 100

Monthly ExpenditureAMOUNT SPEND ON MAIZE

FREQUENCY PERCENT

1-20 59 65.6

21-40 15 16.7

41-60 13 14.4

61-80 2 2.2

101-120 1 1.1

TOTAL 90 100

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MARKETING & DISTRIBUTION CONT’D• The preferred staple by consumers

RICEMAIZEYAMCASSAVAPLANTAIN

77.8%

13.3%

2.2%

5.6%

1.1%

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MARKETING & DISTRIBUTION CONT’D Response of farmers

Source of maize Open market (84.4%), private (15.6%)

Private entities you buy maize from

Grocery / retail (70%), farmers/co-operative (14.4%), wholesale (2.2%)

Changes in Price of maize Increase (88.9%), Decrease (8.9%), No change (2.2%)

Degree of change in price Very high (34.8%), high (47.2%), low (18%)

Aware of quality standard Yes (14.4%), No (85.6%)

Mechanism of setting dispute due to poor quality

Aware (3.3%), not aware(96.7%)

Government policy Not able to identify any government policy

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CONCLUSIONBased on the major findings from the study, the following conclusions are drawnPRODUCTIONMaize production has increased from 2009 to 2013 While Cost of inputs used in production have also increased over time. Private entities are the major source of fertilizer to the farmers. NPK is the main fertilizer used the farmers

• Though there are efforts to subsidise fertilizer for farmers, it prices have increased • consistently over time

• Fertilizer is mostly not available to farmers though the quality has improved

• The statistically significant factors that affects the farmers awareness of fertilizer policies are: Region, fertilizer usage, income and source of fertilizer

• Seed prices have also increased over the period .Though there are efforts to improve availability and affordability of seeds, farmers still rely on their own seeds. There have been any significant improvement in the quality and availability of seeds. The statistically significant factors that affect awareness of seed policy are: Level of education, region, income and seed usage

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CONCLUSION CONT’D• Majority of the farmers are credit constrained• Interest rate and credit delivery have been

fluctuating over time.

PROCUREMENT• Majority of the farmers are not aware of the

price setting mechanism by NAFCO. Most of the farmers sell produce to middle and market queens

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CONCLUSION CONT’DMARKETING AND DISTRIBUTIONThough there have been some improvement in the availability of maize, the quality has not improve whiles the price continue to rise. Most consumers also buy their maize from open markets

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RECOMMENDATIONS

• It is therefore recommended that Ghana Government should facilitate distribution of subsidized fertilizer and credit facilities at lower interest rates to farmers. This will help reduce the cost of production of maize.

• The communication of government policies, programmes and regulations be enhance by various agencies responsible. This will enhance farmer awareness , improve their participation and benefits derived from them.

• It also recommended that government establish retail shops in the country in order to reduce price of maize through competition.

• NAFCO should intensify their activities to ensure that prices of maize are stabilized and also reduce postharvest losses.