Importing maize stabilizes prices at home

Importing maize stabilizes prices at home19 Feb 2019

(Image courtesy: iStock/feellife)

Importing maize helps stabilize domestic food prices and could help tackle cost increases resulting from rising yield variabilities due to climate change, researchers in the US have found.

Data from 27 net-importers of maize across Africa, Asia and Latin America since the turn of the millennium indicate that the variability in maize price could rise by 10% by mid-century due to climate-induced supply shocks. But this rise could be offset by a 10% boost in those nations’ ratio of imports to total consumption.

“International markets act as a source of stability rather than a source of risk,” says Bowen Chen of Kansas State University, US. “This is at least the case for maize.”

It’s well known that importing food products has the potential to alleviate domestic price instabilities brought about, for example, by local weather changes. But imports also expose countries to supply shocks that originate overseas – a problem made more acute because the export of many staple food products comes from just a handful of countries, such as the US.

By performing a linear-regression analysis on data taken from 76 maize markets in 27 countries from 2000–2015, Chen and his Kansas colleague Nelson Villoriafound that a 1% rise in the import ratio resulted in a 0.29% reduction in an intra-annual coefficient of variability of maize prices. In comparison, a 1% rise in stored maize for future consumption reduced the variability coefficient by 0.22%.Several studies have explored the stability of food prices for countries with different approaches to imports and market intervention. But none, says Chen, has specifically explored the effect of imports on domestic price stability while keeping other variables constant.

“At least in these data, imports and buffer stocks are substitutes to achieve similar targets of price instability,” says Chen.

Chen and Villoria point out that storing food brings additional costs, as well as the risk of spoilage. Nevertheless, says Chen, the variability coefficient is a summary statistic that can be easily understood and can “therefore help to facilitate policy debates regarding the role of imports in mitigating the price effects of domestic supply shocks”.

Chen and Villoria, who reported their findings in Environmental Research Letters (ERL), are now exploring how foreign yield shocks could affect their analysis. “The possibility that crop yield shocks in the exporting countries translate into food price instability in the importing countries has been a major concern of food importing and developing countries,” says Chen.The researchers predicted future price variability using projections of maize yields under climate change. Calculations showed that a 10% boost in the import ratio would be enough to offset the greater future variability. It’s a target that would be easier for some countries than others. In some central African countries, for example, the maize import ratio is already less than 10%, so an additional 10% would, in relative terms, be roughly a doubling.

Jon Cartwright is a freelance journalist based in Bristol, UK

physicsworld.com 19/2/2019