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The Pigeon Pea Value Chain in Mozambique

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The Pigeon Pea Value Chain in Mozambique Final report The pigeon pea value chain in Mozambique Examining the 2017 price fall and its implications Jorrit Oppewal Alberto da Cruz December 2017 When citing this paper, please use the title and the following reference number: F-36409-MOZ-1 Table of Contents 1. Introduction ...............................................................................................................................5 2. Pigeon Pea Characteristics ..........................................................................................................8 3. Pigeon Pea in Mozambique ....................................................................................................... 10 3.1 Domestic Production and Number of Farmers ......................................................................... 11 3.2 Production Cost .......................................................................................................................... 15 3.3 The Complexity of the Marketing System ................................................................................. 17 4. International Market ................................................................................................................ 19 4.1 The Indian Market for Pulses and Pigeon Pea ........................................................................... 20 4.1.1 Production of Pulses in India ............................................................................................. 21 4.1.2 Indian Import of Pulses ...................................................................................................... 27 4.1.3 Export of Pigeon Pea to India ............................................................................................. 29 4.2 World Market Price and Processing Prospects in Mozambique ............................................... 30 4.3 Dependence on the Indian Market ............................................................................................ 35 5. The Possibility of Diversification to Other Pulses ....................................................................... 37 6. Recommendations .................................................................................................................... 41 6.1 Short-Term Measures ................................................................................................................. 42 6.2 Measures to Improve Information Systems .............................................................................. 44 6.2.1 Producion Statistics and Price Information ....................................................................... 44 6.2.2 Market Intelligence ............................................................................................................ 45 6.2.3 Monitoring of Trade Data .................................................................................................. 46 6.3 Measures to Promote Diversification ........................................................................................ 46 6.3.1 Market Diversification ........................................................................................................ 47 6.3.2 Promote Domestic Consumption ....................................................................................... 47 6.3.3 Diversification of Pulses Production .................................................................................. 48 Anexo I – Discrepancies in Trade Data .............................................................................................. 51 2 Abbreviations BM Bank of Mozambique CA Conservation Agriculture FAO Food and Agriculture Organization GoM Government of Mozambique IAI Integrated Agricultural Survey - Inquérito Agrícola Integrado ICRISAT International Crops Research Institute for the Semi-Arid Tropics IGC International Growth Centre IIAM Agriculture Research Institute of Mozambique – Institututo de Investigação Agrária INE National Statistics Institute – Instituto Nacional de Estatística LER Land Equivalence Ratio MASA Ministry of Agriculture and Food Security MoU Memorandum of Understanding MEF Ministry of Economy and Finance MIC Ministry of Industry and Trade MINEDH Ministry of Education and Human Development MSP Minimum Support Price MZN Mozambican Metical SIMA Sistema de Informação dos Preços Agrícolas UAE United Arab Emirates USA United States of America USD US Dollar 3 Acknowledgements This study would not have been possible without the collaboration, encouragement and commitment of the Ministry of Agriculture and Food Security (MASA), non-governmental organizations and many individuals. In this context, we would like to express our deepest gratitude and appreciation to all those who, directly or indirectly, contributed to making this work a reality. First of all, to MASA, particularly the whole team of the Directorate of Planning and International Cooperation (DPCI), especially to Director Ilidio Massinga, Delfim Vilissa, Eulália Macome, Sofia Manussa and Anina Manganhele. At the origin of this document is an invitation made by DPCI to the International Growth Center (IGC) to carry out a study on the pigeon pea value chain. The team was instrumental in designing the terms of reference, preparing the fieldwork, arranging interviews with key stakeholders, and finally in discussing the initial results. Our thanks also go to Dr. Cláudio Frischtak, Director of IGC Mozambique, not only for the institutional support given to the project, but also for his unrestricted availability to provide critical and creative feedback. To the Let's Work Program team, more particularly to Fion De Vletter, National Coordinator, and Marco Machado, consultant, for agreeing to work together and for actively accompanying the process and providing feedback. Finally, we would like to extend our deepest gratitude to all SDAEs in the districts visited during the field work, and all local extension workers, farmers and traders who kindly set aside time to speak with us. 4 1. Introduction Mozambique has a total area of 799,380 km2, half of which, around 36 million hectares, represents arable land. The country has abundant natural resources and its agro-climatic conditions are favourable to the production of a large range of agricultural products, both for domestic consumption and for export, which is facilitated by the country’s strategic location, with its long Indian Ocean coastline. Agriculture is the main economic activity of about 70% of the population and the sector is dominated by small subsistence farmers. The increased export of agricultural products could, in addition to its impact on the income of rural families, provide a solid basis for the diversification of the economy, acting as a major source of foreign exchange and as a catalyst for inclusive and sustainable economic growth. The last decade witnessed a remarkable growth in pigeon pea production, rapidly turning it into one of the country’s main cash crops and agricultural exports. On the back of growing Indian demand, several African countries, notably Mozambique and Tanzania, quickly emerged as significant pigeon pea exporters. During this period, various NGOs and international development agencies partnered with the private sector to promote pigeon pea production among Mozambican farmers, convinced that the market would remain strong. As a result of these efforts, production expanded rapidly, reaching almost 200,000 tons in 2016. Most of the production takes place in the provinces of Zambézia and Nampula, the most densely populated parts of the country. From the 2016 crop, Mozambique exported more than 170,000 tons of pigeon peas, corresponding to USD 125 million, which makes it the third largest agricultural export, after tobacco and sugar. Pigeon pea is processed into dhal, the main source of protein for the majority of Indians. For various years, Indian production could not keep up with growing domestic demand, leading to a deficit of more than 500,000 tons per year. This made India the world’s largest producer, consumer and importer of pigeon peas by far, accounting for about 90% of global imports; there is no other significant market. 5 The Indian Prime Minister visited Mozambique in July 2016 and signed a Memorandum of Understanding, through which he formalised India's commitment to import 125,000 tons of pulses in 2017-18, gradually increasing to 200,000 tons by 2020-21. Subsequently, the Government of Mozambique (GoM) intensified the promotion of pigeon pea production as a means of meeting the targets. These efforts, together with the high pigeon pea price of 2016, helped to further boost the area cultivated and the number of pigeon pea farmers, reaching more than one million, which led to an estimated production of 250,000 tons in 2017, the largest ever recorded in Mozambique. However, in addition to encouraging production in Mozambique, India also stimulated domestic pigeon pea production, which, combined with good monsoon rains and high farm- gate prices in 2016, led to an all-time production record of almost 5 million tons in 2017, enough to satisfy domestic demand and still be left with 1 million tons. As a result, the pigeon pea price in India collapsed, provoking farmer protests. In response, the Indian government took measures to protect its farmers, introducing a 200,000 ton pigeon pea import quota for the financial year 2017-18. Following these developments in India, the farmgate price in Mozambique fell by 90%, from an average of MZN 45/kg in 2016 to MZN 5/kg in 2017. Simultaneously,
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