A Trade Solution to the Food Security Challenge: Surplus Grains Worth $93 Million Now Available to Countries in Need

March 17, 2017

A food security milestone was achieved this month with the signing of contracts to sell 279,000 metric tons of food grains from areas of surplus in East Africa to areas of need. The 58 contracts to sell staple crops from Ethiopia to its drought-stricken neighbors were executed at the first multilateral grain trade facilitation forum in Addis Ababa, Ethiopia. The sales totaled US$93.1 million and included deals for maize, beans, soya, chick pea, sorghum, millet, rice, and sesame.

The forum attracted more than 40 sellers from throughout Ethiopia and more than 50 buyers from five East African countries. It was hosted by the Eastern Africa Grain Council (EAGC) in partnership with the Addis Ababa Chamber of Commerce and Sectoral Associations. The event was supported by the U.S. Agency for International Development (USAID)-funded East Africa Trade and Investment Hub (EATIH), which is implemented by DAI.

These transactions support the core of the U.S. Government’s Feed the Future Presidential Initiative by expanding food trade and markets and by enabling the private sector to lead the process. The volumes traded are projected to supply the food needs of 1.3 million households for six months in the recipient countries, according to DAI’s Juan Estrada-Valle, Chief of Party of USAID/EATIH.

“By promoting intraregional trade, we put the private sector in the driver’s seat to address food shortages and hunger in East Africa,” Estrada-Valle said. “Once we made this connection and supported the private sector to address policy issues, the floodgate opened, with open borders in East and Southern Africa to give rise to more stable markets that attract investment.”

The business-to-business transactions were facilitated by the removal of cross-border trade barriers and acknowledgment by East African governments that regional trade can drive national economic growth, according to EAGC Executive Director Gerald Masila, who signed 10 new Ethiopian members to his organization during the event.

“EAGC is gunning her efforts to ensure efficient and sustained trade amongst grain players within eastern and southern Africa,” Masila said. “This is through corporate engagement and facilitation of collaborative platforms of both governments and the private sector, which include business-to-business, government-to-government, and business-to-government linkages.”

Drought, Hunger Compel Solutions

Kenya’s East African Community (EAC) trading partners, Tanzania and Uganda, experienced low rainfall this past year, resulting in no tradeable surplus of maize. Kenyan consumers were suffering, with the supermarket price of maize flour—a dietary mainstay—rising by 30 percent from November 2016 to January 2017. But to the north, Ethiopia, which is not an EAC member, realized a bumper crop and surplus of more than 1 million metric tons of maize plus beans and other pulses.

“I am a trader and farmer from Kenya’s largest grain producing region, and we currently don’t have any cereals; I’m buying,” John Kandila, Chief Executive Officer of Zero Two Heroes, said at the event.

Kandila later manned one of 40 tables for designated for buyers to entertain trade deals with rotating sellers. Conversion rates and price per ton punctuated conversations and the smartphone calculator was omnipresent. Logistical and finance representatives also manned tables, eager to help actualize contracts and overcome hurdles to the movement and storage of grain.

In addition to moving food from areas of surplus to areas of need, the forum enabled participants to identify non-tariff barriers and trade policies thwarting regional trade and work toward their removal. The attending traders, processors, bankers, government officials, and providers of transport and logistics introduced themselves by country, grain interest, and specialty. Bankers summarized their portfolios and encouraged traders to come to them with their contracts. Buyers emphasized the exact grain they were looking for and stressed their readiness for purchase.

The forum is expected to open doors to future events that link food grain buyers to sellers and remove barriers to cross-border trade, further enabling East Africa’s private sector to meet public demand for food grain at a reasonable price.