ETHIOPIA: Cereal food prices to rise despite good harvest

ADDIS ABABA, 25 Jan 2005 (IRIN) - Poor families in Ethiopia could be hit by unusually high cereal prices, according to a report by the Famine Early Warning Systems Network (FEWS Net).

Current high prices could be pushed up even further by local purchase of food aid that is planned for this year, the USAID-funded FEWS Net said on 20 January. The high prices, it added, had come as a surprise to many aid organisations because it comes on the heels of reports of a bumper harvest in the country.

According to the Food and Agriculture Organisation (FAO) and World Food Programme (WFP), this year's harvest is expected to be 10 percent higher than last year's.

FAO and WFP are predicting a harvest in the area of 14 million mt of cereals - close to a 23 percent increase from the past five-year average - and following last year's robust harvest.

Traditionally, the price of cereals - the main food supply in Ethiopia - drops at this time of year because it is the main harvest period. However, current maize prices are around US $170 per mt - compared with previous years of $105 per mt.

"If these higher level stable prices persist, the on-going local purchase of food aid activities may further increase prices and, hence, there will be an obvious disadvantage for poor households, with limited means to access food in the market," said FEWS Net.

The government and donor organisations had been looking at local purchases of food for the safety-net programme, aimed at supporting five million people. It is estimated more than 200,000 mt of food aid may be purchased locally this year as part of the safety-net programme.

In December, the government appealed for 387,000 mt of emergency food aid to feed 2.2 million people. Aid organisations and donors, like the European Union, often argue that local purchases of food aid are far better than shipping in food aid, as it stimulates the local economy.

The FAO said they were unaware of what was keeping prices high.

"The price increase is positive for the farmers," said Luciano Mosele, the emergency head with the FAO in Addis Ababa. "Unless prices keep relatively high, people are not compensated for their work and production will never increase."

Production levels had been hit in recent years because prices plummeted after bumper harvests and farmers lost money and cut production the following year.