January 2015 Volume 8

January 2015 Volume 8 Figure 1: Main Staple Food Commodities Informally Traded Across Selected Borders in Eastern Africa in 2014. The Market Analysis Sub-group of the Food Security and Nutrition Working Group (FSNWG) monitors informal crossborder trade of 88 food commodities and livestock in eastern Africa in order to quantify the impact on regional food security. This bulletin summarizes informal trade across selected borders of Tanzania, Burundi, Rwanda, Uganda, Kenya, Somalia, Djibouti, Ethiopia, Sudan, and South Sudan and DRC. Data is provided by the East Africa Grain Council (EAGC), the Famine Early Warning Systems Network (FEWS NET), the Food and Agricultural Organization of the United Nations (FAO), the National Bank of Rwanda (NBR) and the World Food Program (WFP). Informal trade represents commodity flows outside of the formal system, meaning that activity is not typically recorded in government statistics or inspected and taxed through official channels. These flows vary from very small quantities moved by bicycle to large volumes trucked over long distances. This report does not capture all informal crossborder trade in the region, just a representative sample. Maize and maize flour remained the most traded commodities in the East Africa region in 2014 (Figure 1). There were also significant informal cross-border trade of local and imported wheat, wheat flour, dry beans, locally produced rice, sorghum, sorghum flour, sesame seed and local and international sugar. Maize and maize flour trade represented 46 percent of the total trade when compared with 33 percent in 2013 as a result of reduction in sorghum and rice trade due to conflict-related trade disruptions from the main producing markets in Uganda and Tanzania to South Sudan. Dry bean, wheat and wheat flour accounted for fourteen percent of the total trade in 2014 similar to 2013. Sugar and sesame seed accounted for 10 percent each of the total trade in 2014 when compared to 17 percent in 2013 due to limited foreign exchange and depreciation of the Sudan currency that affected sesame exports from Ethiopia to Sudan, and conflict-related disruptions that affected informal re-exports of international sugar from Somalia to Ethiopia and Kenya. Goats and cattle represented 60 and 30 percent respectively of 2014 livestock trade in eastern Africa which was similar to 2013. *Additional products may be covered in the annexes. 1

CURRENT MARKET CONTEXT Informal regional cross-border trade in staple food commodities declined significantly by 66 percent between 2013 and 2014 in eastern Africa due to conflict-related trade disruptions, adverse macro-economic situation, and weather-related below average production along some trade corridors routes notably, Uganda-South Sudan, Ethiopia-Sudan, and re-exports of wheat flour and rice within the region. See Figure 2. However, there were other trading corridors that did not experience any conflict or macro-economic disruptions and registered significant trade levels. These corridors include the Uganda-Kenya, Tanzania-Kenya and Ethiopia-Kenya trade routes. Also fourth quarter 2014 informal cross-border trade in the Figure 2: Volume of Informal Cross border Trade in Selected Markets in Eastern Africa Source: COMESA significant number of regional cross-border and overseas imports including staple foods, reducing the purchasing power of most traders. Anecdotal evidence also reveals that formal trade has also been severely affected. Supplies from a regional manufacturer of edible oils and fats, to South Sudan had fallen by 60 per cent, since the war broke out. Due to scarcity of the dollar, risk averse formal businesses had given way to the black market where the dollar was 20-25 per cent more expensive. Depressed trade with South Sudan directly accounted for almost all of the reduced trade in the region in 2014. Crossborder trade imports of maize, sorghum, rice (and allied products) into South Sudan declined by 44, 85 and 79 percent between 2013 and 2014 respectively. Although regional exports to South Sudan started to pick up in the third quarter of 2014 albeit very gradually, depreciation of the South Sudanese Pound besides low demand and high business risk, moderated the volumes of imports traders would bring into South Sudan. region was much better along most corridors as adverse conditions eased. Still the increased informal trade along these routes and increased trade in the fourth quarter, could not compensate for reduced trade to the second most important destination market of South Sudan in eastern Africa, and trade disruptions in Sudan and Somalia especially during the peak trading period in the second and third quarters of the year. In South Sudan, the conflict-related reduction in oil production, declining global oil prices, fixed payment for use of Sudan pipelines, and a growing fiscal deficit continued to limit the availability of foreign currency amidst high demand. This is in turn caused the South Sudan Pound to depreciate in the parallel market that finances a The borders between Ethiopia and Kenya with Somalia remained closed in 2014 due to security operations. Following intensification of conflict since February 2014 as Federal Government of Somalia troops, supported by the African Union Mission to Somalia (UNISOM) extended the areas under their control, trade in southern Somalia was also widely disrupted constraining trade flows from the port of Mogadishu and Kismayu. In addition, increased informal road blocks and unofficial taxes in Somalia were major disincentives for engaging in wheat flour and sugar reexports to Kenya and Ethiopia. Consequently, the regional informal trade in sugar and wheat flour declined by 79 and 10 percent respectively between 2013 and 2014. Exports of goats from Ethiopia to Somalia decreased by 45 percent while exports from Somalia to Kenya declined by 57 percent. 2

MAIN CROSS BORDER TRADE IN JANUARY TO MARCH 2015 QUARTER Maize Trade Tanzania to Kenya: In 2014, the estimated total informal maize exports from Tanzania to Kenya across borders monitored by the Market Analysis Sub-group of the Food Security and Nutrition Working Group (MAS/FSNWG) was 500,000 MT. Maize exports from Tanzania to Kenya decreased typically between October and December (fourth quarter of 2014) when compared to the third quarter when exports were at their peak due to increased supply from the ongoing October-to-January (long rains) harvest in the main producing areas in the western highlands of Kenya. Also prices in the export destination markets in eastern and coastal regions of Kenya were stable at lower levels due to increased availability of food at household level as a result on-going harvest of green maize and early maturing drought resistant crops such as cowpeas and green grams. Nevertheless, monthly maize Figure 3: Maize Prices and Informal Cross border Trade in Selected Markets in Eastern Africa. Figure 3: Maize Prices and Informal Cross border Trade in Selected Markets in Eastern Africa. exports to Kenya were still higher at between 20,000 and 40,000 MT a month in the fourth quarter due to abundant supply, and relatively lower prices in Tanzania. See Figure 3. Tanzania to Rwanda: Maize grain exports from Tanzania to Rwanda declined atypically by 40 percent between the third and fourth quarters of 2014. This was attributed to increased competition from Uganda imports which are sourced from nearby main producing areas as opposed to long distances from the southern and northern main sources of maize in Tanzania. In addition, the high porosity 3 of the border between Uganda and Rwanda is more conducive for informal cross-border trade when compared to the one with Tanzania which is delineated by a river-a disincentive for informal cross-border trade. Nonetheless, Tanzania exports to Rwanda in the fourth quarter were still exceptionally high due to abundant availability and low maize prices in Tanzania, and two consecutive seasons of below average harvest in Rwanda amidst high demand. The imports moderated seasonal but elevated price increase in the eastern markets of Rwanda. Uganda to Kenya: The estimated total informal maize exports from Uganda to Kenya in 2014 was 340,000 MT (MAS/FSNWG). Maize exports from Uganda to Kenya also decreased seasonably in the fourth quarter due to increased availability in Kenya from the ongoing harvest mentioned above. However, exports to Kenya between October and December were still higher by 300 percent when compared to the respective three year average due to increased availability in Uganda as a result of conflict-related depressed demand in South Sudan, and relatively lower prices in Uganda. Uganda exports were mostly headed to the southwestern maize consuming areas of Kenya. Uganda to South Sudan: Maize exports from Uganda to South Sudan increased unseasonably by 11 percent between the third and fourth quarters albeit at lower levels. This was attributed to gradual resumption of trade between the two countries (30 percent of the respective three year average) as more traders resumed supplies following a long period of reduced incidences of clashes especially in the non-conflict States of South Sudan. Trade between the two countries was wrecked with the eruption of the domestic conflict in South Sudan in December 2013. Uganda to Rwanda: Maize exports from Uganda to Rwanda increased typically between the third and fourth quarters of 2014 with progression of the October-to December main lean season in Rwanda when more households depend on the market as household stocks deplete. Informal maize exports to Rwanda were 88 percent higher in the fourth quarter when compared to the respective three year average volumes due to high demand

as a result of two consecutive seasons of below average harvest in Rwanda, moderating seasonal price increases in some markets especially in the northwestern regions. Ethiopia to Kenya: Maize exports from Ethiopia to the northern frontier market of Moyale increased seasonably between the third and fourth quarters of 2014 towards the end of the August-to-November lean season when households revert to the market to procure food as stocks deplete. Fourth quarter imports were 270 percent higher than respective three year average imports due to absence of a prolonged intra-tribal conflict in the market. Ethiopia to Somalia: Maize exports from Ethiopia to Somalia increased seasonably in the third quarter of 2014 as supplies increased with progression of the October-to- January harvests while stocks in South-Central Somalia tightened with progression of the October-to-December rains. The fourth quarter exports were 146 percent higher than the respective three year average exports attracted by relatively higher prices attributed to July-to-August (Gu) cereal (sorghum and maize) harvest that were 32 and 23 percent below respective Gu 2013 and 2009-2013 average production. Sorghum Trade Sudan to Eritrea: Sorghum exports from Sudan to Eritrea declined seasonably by 83 percent between the third and fourth quarters as a result of imminent and start of the November-to-December harvests in Eritrea; attendant seasonal decline in prices and import demand. Sudan to South Sudan: Sorghum exports from the main producing eastern regions of Sudan to South Sudan s Upper Nile State increased typically but drastically quadrupled between the third and fourth quarters. Fourth quarter exports were also exceptionally higher than the respective three year average exports as conflict-related disruptions abated and some trade routes in Upper Nile State opened up, supported by high demand and prices. See Figure 4. Uganda to South Sudan: Sorghum exports from Uganda to South Sudan was atypically stable between the third and fourth quarters. The exports were also lower than the respective three year average by 78 percent due to conflictrelated slump in exports together with unattractive relatively higher export prices due to depreciation of the South Sudan currency. Ethiopia to Somalia: Sorghum exports from Ethiopia to Somalia increased typically by 12 percent between the third and fourth quarters with the beginning of increased supplies from the October-to-January harvest in Ethiopia. The exports were four times higher than the respective three year average exports for the same reasons mentioned earlier for maize. Ethiopia to Djibouti: Sorghum exports from Ethiopia to Djibouti increased typically by 10 percent between the third and fourth quarters following the beginning of the October-to-January harvest in Ethiopia, and were exceptionally higher than the respective three year average exports due to increased demand in Djibouti following systematic decline in food aid distribution in the country. Figure 4: Sorghum Prices and Informal Cross border Trade between Sudana and South Sudan. Somalia to Djibouti: Re-exports of Ethiopia sorghum from Somalia to Djibouti increased typically by 85 percent between the third and fourth quarters following increased supply from the June-to-August harvests in Southern Somalia (Gu) and Ethiopia (Belg). The fourth quarter sorghum exports and re-exports were twice as much as the respective three year average for reasons mentioned above. Dry beans Trade 4 Uganda to South Sudan: Dry bean exports from Uganda to South Sudan in the fourth quarter remained similar to unseasonable high exports of the third quarter. However, fourth

quarter exports were 81 percent below recent three year average exports reflecting depressed demand and conflict related trade constraints. Uganda to Kenya: Dry bean exports from Uganda to Kenya increased seasonably but drastically by 60 percent between the third and fourth quarters and were four times higher than the three year average exports. This was attributed to abundant supplies and low prices in Uganda due to conflict related depressed outlet to South Sudan, high demand and relatively higher prices in Kenya. Kenya bean production does not meet the total national requirements. See figure 5. typically tightening of supplies before the next January-to- February (Vuli) harvests in northern Tanzania. Dry bean exports to Kenya were still exceptionally high when compared to the three year average volumes reflecting high demand and prices in Kenya. Ethiopia to Kenya: Dry bean exports from Ethiopia to northern Kenya markets declined seasonably by 53 percent between the third and fourth quarters as bean flows from other domestic sources started reaching northern Kenya. However, bean exports to northern Kenya were still 165 percent above the three year average volumes due to high demand. Figure 5: 2014 Informal Dry Bean Trade in Eastern Africa. Ethiopia to Sudan: Bean exports from Ethiopia to Sudan including Fava beans increased seasonably between the third and fourth quarters following increased supplies from the ongoing November-to- January (Meher) harvests. Bean exports to Sudan quadrupled in the fourth quarter when compared to recent three year average exports due to the high prices of the locally produced and other imported types in Sudan when compared to the imported Ethiopian bean. The Ethiopian bean price was SDG 9-11 compared to SDG 32-35 per kilogram for the locally produced or other imported types in the fourth quarter. Uganda to Democratic Republic of Congo (DRC): Dry bean exports from Uganda to DRC declined seasonably by 61 percent between the third and fourth quarters due to imminent and start of harvesting in the destination market. Nevertheless, exports were still 153 percent above the three year average exports due to high demand in eastern DRC. Rwanda to Uganda: Exports of specific varieties of dry beans from Rwanda to Uganda increased typically between the third and fourth quarters due to increased supplies from the June-to-July and September-to-October harvests. However, exports were 67 percent lower than the recent three year average volumes as a result of below average June-to-July harvests in Rwanda. Tanzania to Kenya: Dry bean exports from Tanzania to Kenya declined seasonably by 59 percent between the third and fourth quarters due to increased supplies from the October-to-January (long rains) harvest in Kenya and 5 Rice Trade Tanzania to Kenya: Rice exports from Tanzania to Kenya increased unseasonably by 71 percent between the third and fourth quarters following above average May-to-August (Msimu) and July-to- September (Masika) harvests, and attractive prices for the Kenyan markets. In the fourth quarter, rice exports to Kenya were exceptionally higher than the recent three year average volumes and the regional export market enabled wholesale rice prices to increase gradually but seasonably across most reference markets in Tanzania as supplies tightened. The prices increased by seven to 27 percent in Mbeya, Lindi, Mwanza and Dodoma between November and December and were up to 28 and 13 percent higher than last year and five year average prices respectively. Rice prices were significantly depressed in late 2013 and early 2014 due to abundant production and the lingering effect of imports in early 2013. Tanzania to Rwanda: Exports of rice from Tanzania to Rwanda declined seasonably by 16 percent between the third and fourth quarters but were 140 percent above the recent three year average volumes due to high demand.

Rwanda s rice production does not meet the total national requirement. Figure 6: Marketing of Rice in Dar es Salaam Market, Tanzania. Source: 24Tanzania supported by international prices that are stabilizing at lower levels. Somalia to Ethiopia: International rice re-exports from Somalia to eastern Ethiopia declined seasonably by 19 percent as a result of increasing domestic food supplies from the ongoing October-to-January (Meher) harvests. However, fourth quarter rice re-exports were four times higher than the recent three year average re-exports as international prices stabilized at lower levels. Tanzania to Uganda: Rice exports from Tanzania to Uganda declined seasonably by 42 percent between the third and fourth quarters due to increased food availability in Uganda from the ongoing October-to-January harvests. Still fourth quarter exports were exceptionally high due to abundant supplies from the above average harvests in Tanzania explained earlier. Uganda South Sudan: Rice exports and re-exports of Tanzania rice from Uganda to South increased atypically by 39 percent between the third and fourth quarters due to increased demand for this commodity that is easy and faster to make, and has high value to bulk ratio that pays for the high risk premium for hauling rice to conflict affected South Sudan. Still, rice exports and reexports to South Sudan were 60 percent below recent three year average due to conflict-related trade constraints. Somalia to Kenya: International rice reexports from Somalia to eastern Kenya remained stable between the third and fourth quarters. The volumes were exceptionally higher than the recent three year average as informal cross-border trade resumed following security related drastic reduction in the first quarter, and was Livestock Trade Somalia to Kenya: Exports of goats, camels and cattle from Somalia to Kenya increased atypically and significantly between the third and fourth quarters attributed to religious gifts of assets (livestock) referred to as Zeka. The livestock offered to the poor livestock is sold for cash and hence the exports to Kenya. Goat, camel and cattle exports were 44, 130 and 89 percent higher than the recent three year average export volumes. Ethiopia to Somalia: Exports of goats, camels and cattle from Ethiopia to Somalia declined seasonably by five to 31 percent between the third and fourth quarters as livestock trekking is limited during the rainy October-to-December rainy season. However, fourth quarter exports of goats, camels and cattle were one to two times higher than the respective recent three year average export volumes because of high demand by better households for gifts to poor households and relatively better prices in Somalia. See figure 7. Figure 7: 2014 Livestock Prices and Informal Cross-border Trade between Ethiopia and Somalia. 6

CROSS BORDER TRADE OUTLOOK JANUARY TO JUNE 2015 QUARTER The wholesale prices of maize and rice in the main collection markets in the southern highlands of Tanzania are the lowest that they have been since early 2012. They are expected to remain about the same as 2013 and near their five-year averages between January and June 2015 (Figure 2). These low wholesale prices are attributed to surplus production in the region and to the following: Well above-average July-to-September Masika harvests in the northern parts of the country including Tanga, Kilimanjaro, and some parts of Arusha and Manyara Regions. Above-average production in 2014 in the countries south of Tanzania, especially in Zambia, Malawi, and Zimbabwe. From January to June 2015, the volume of Tanzania s maize and rice exports are expected to be far above average due to the above-average harvest and relatively lower prices. The exports will likely continue to moderate price increases in northeastern and eastern Rwanda and Burundi and southwestern, southeastern, and coastal Kenya. The June-to-August maize harvest in Uganda was above average. The November-to-January harvest is also expected to be above average at the national level. However, exports to South Sudan will likely be less than they have been since South Sudan gained independence in 2011. This will result in lower maize prices in Uganda. These prices mean though that exports will increase to both Kenya and Rwanda where recent harvests were moderately below average. However, in both countries, Uganda s maize exports will face competition from Tanzania s exports. Ugandan maize exports will likely be competitive and be the dominant source of imported maize in western Kenya and as far as Nairobi, but not in southeastern and coastal areas of Kenya. Dry bean prices are will likely vary in most markets in Kenya, Tanzania, Uganda, and Rwanda based on varied domestic production in recent seasons in all the countries. However, average-to-above-average production in Uganda and Tanzania in recent seasons will most likely result in an increased volume of exports to Kenya between January and June 2015. Since independence in 2011, Upper Nile and Jonglei States of South Sudan have been a destination for grain imports from Ethiopia, Sudan, and Uganda. Trade to the conflict-affected areas is expected to gradually increase from currently very low levels between January and June 2015. This will primarily be due to traders adjusting to the conflict. Average-to-above-average national harvests in Sudan and Ethiopia, and especially high levels of production in regions neighboring these areas of South Sudan will likely result in the following: Increased exports from Ethiopia through Matar town in Gambella to Nasir, Ulang, and Akobo Counties in South Sudan. Increased informal imports of sorghum from Sudan, following the easing of restrictions on cross-border trade by the Government of Sudan and expected above-average harvests in the eastern and central surplus-producing Blue Nile, Sinar, White Nile and Gadarif States in Sudan. Increased supply of staple food commodities in Bor being supplied from Juba and from Uganda due to the area being more secure and the improvements on the Juba-to-Bor road since October 2014. More food stocks held both by traders and humanitarian organizations in the conflict-affected areas, likely an amount more than in 2014 but lower than in the pre-conflict period before December 2013. Market supply to the conflict-affected states of South Sudan will continue to be constrained by high levels of tension and lawlessness which are likely to increase over the course of the December to May dry season. Supply will be further limited by a lack of transport facilities, high levels of formal and informal taxes, tariffs, and fees, and other factors that increase marketing costs. Exports of grain, mostly informal, from Sudan and Uganda to areas of South Sudan not currently affected by the conflict will likely be more than in 2014. The increased volume will be due to traders adjusting to new levels of risk for this trade and above-average supplies in the exporting countries. However, volume may be less than it was in 2013 due to insecurity in South Sudan. 7

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Summary of Trade Flows Along Important Corridors Commodity Trade Flow Corridors [sourcedestination] Trade Volumes in MT Last Quarter % Change Last Year Average Historical Comparison Last Quarter Last Year Average * 2-year average + 3-year average Source: FEWS NET, EAGC and NBR Uganda - South Sudan 11408-7 33-91 Uganda - Kenya 59485-58 7 34 Ethiopia - Somalia 693 77-23 -18 + Tanzania - Kenya 77530-64 808 864 + Uganda - South Sudan 3983-4 26-94 * Uganda - Kenya 64393 160 17 65 + Ethiopia - Somalia - - - - - - - Tanzania - Kenya 4619-61 377 914 + Uganda - South Sudan 6453 62-4 -88 * Uganda - Kenya - - - - - - - Ethiopia - Somalia - - - - - - - Tanzania - Kenya - - - - * - - - Uganda - South Sudan 10858 39 130-87 * Uganda - Kenya - - - - - - - Ethiopia - Somalia - - - - - - - Tanzania - Kenya 18113 63 223 482 * Uganda - South Sudan 4305 4 54-93 * Uganda - Kenya 6900 14 44 64 + Ethiopia - Somalia 539 83 230 60 + Tanzania - Kenya 765 - - - - - - Uganda - South Sudan 17199 23492 14202-29 * Uganda - Kenya - - - - - - - Ethiopia - Somalia - - - - - - - Tanzania - Kenya - - - - - - - 9