elr the rice market in senegal 0106

8/8/2019 ELR the Rice Market in Senegal 0106

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Food-importing countries in liberalized world trade

The rice market in Senegal

Heavy reliance on food imports hasserious consequences for foodsecurity, incomes and poverty

reduction. A basic distinction must bemade between households which are netpurchasers of food and those which arenet sellers. High agricultural importspush down food prices and tend to bene-fit urban consumers, whereas high pricesfavour rural producers.In reality, however, the situation is oftenrather more complex, because in develop-ing countries in particular, almost everyhousehold rural and urban buys andsells agricultural products. It is this com-plex web of food purchases and sales by adiversity of household types which deter-

mines the overall impact of changes inthe global agricultural markets. In thiscontext, food prices are key determinantsof the income and purchasing power ofpoor households. This article examinesthe complex interlinkages behind importdependency with reference to Senegal inWest Africa.Whereas in absolute terms, food produc-tion in Senegal has doubled since 1960,due to the countrys high level of popula-tion growth, per capita food productionhas fallen by almost 50 percent. Virtually

no other country in sub-Saharan Africa(SSA) is so food-import-dependent, espe-cially on one specific product: rice. After

In the debate about

the impact of world

trade and the WTO on

agricultural exports

from developing

countries, the fact that

many of these

countries are also

major importers of

agricultural products is

often forgotten.

Indeed, most of Africas

poorest countries are

net importers of

agricultural products,

and the trend is

increasing. The reasonsare highly diverse and

can be due to both

internal and external

factors.

Nigeria a much larger country Senegalis the second largest rice importer in sub-Saharan Africa, ranking tenth in theworld.In view of rising imports of food, especial-ly rice, in almost all countries of sub-Saha-ran Africa, the situation in Senegal is like-ly to be symptomatic of the future sce-nario in many countries on the Africancontinent. The present case study high-lights the many aspects which must betaken into account when assessing thissituation.

Imported broken rice inSenegals cereals market

Rice is the worlds most important foodproduct. However, it is not a homoge-neous commodity. The world rice marketis extremely complex, and its individualsegments are highly volatile.This is due tonatural production conditions as well asto numerous interventions by industrial-ized and developing countries.

Rice imports into Senegal consist almostentirely of broken rice (see also footnoteto figure, p. 23). Broken rice is a by-product

Michael BrntrupThao NguyenChristian Kaps

German Development Institute DIEBonn, [email protected]

Storing the rice harvest at a

cooperative: the Union de Boundom.

Photo:Schucht

agriculture & rural development 1/2006


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achieve this objective but cheap labourrelies on cheap food,since food prices cru-cially determine purchasing power andtherefore the minimum wages paid tolower income groups. Imports are the sim-plest way of ensuring cheap foods; devel-oping a system of marketable productionat national level from a subsistence econ-omy is a far more complex process. Fur-thermore, the urban population in post-

colonial sub-Saharan Africa was and stillis of overriding importance in politicalterms. Policies which aim to promote localfood production through price increasestherefore encounter stiff opposition.Besides these circumstances specific toSenegal, another major factor is that thepreparation of rice dishes takes far lesstime and fuelwood, and is far less labour-

of rice processing. In the internationalmarkets, broken rice is considered an infe-rior product and is therefore much cheap-er than whole rice. However, Senegaleseconsumers have developed a marked pref-erence for broken rice, with the result thatin 2003, broken rice on sale in St. Louis(close to the centre of local rice produc-tion in the Senegal River Valley) costs 20-40 FCFA/kg or 10-20 percent more than

locally produced whole rice dependingon the season. This preference for brokenrice is probably due to changed consumerbehaviour in response to the type of prod-ucts available during the colonial andpost-colonial periods.Certain types of rice were available inSenegal even in pre-colonial times, butrice was a luxury, not a staple food. Ricehas only become an integral element ofthe Senegalese diet since the colonial era.Since independence in 1960, rice con-sumption in Senegal has increased byalmost 1 000 percent in just four decades,

currently standing at around 1 milliontonnes. Rice consumption now exceeds 70kg per capita per year and, since the 1970s,has replaced millet as the most importantstaple food. In urban households, riceaccounts for 54 percent of cereal con-sumption and 18 percent of total house-hold spending. In rural regions, the figuresare 24 percent of cereal consumption andas much as 25 percent of total householdspending. The latter figure reflects thefact that rural households are poorer and,in percentage terms, have less money

available to spend on non-food products.This dramatic increase in rice consump-tion results from several factors which arealso revealing in terms of trends occurringin other countries of sub-Saharan Africaand possible policy responses.During the colonial period, rice wasimported in large quantities in order tokeep food prices under control and at thesame time promote groundnut produc-tion as an important cash crop. Senegalwas already exporting groundnut oil toEurope in pre-colonial times; after colo-nization, groundnuts became Senegals

main export product. A further factorencouraging rice imports was that in theFrench colonies of Indo-China, rice pro-duction and export were under Frenchcontrol. That region exported the bulk ofthe rice going to the West Africancolonies.During the first two decades after inde-pendence, this import policy remainedunchanged, and there was a continuedinterest in exporting groundnuts andimporting rice. However, rapid industrial-ization appeared to offer better prospectsfor economic development, especially asSenegal has virtually no natural resourcesof its own. Cheap labour was essential to

intensive, than preparing Senegals tradi-tional millet dishes. In urban householdsin particular, these inputs time, fuel andlabour are scarce. This goes a long waytowards explaining why high rates ofurbanization in the West African statesare generally accompanied by increasedrice consumption.The promotion of imports, the industrial-ization strategy and Senegals high level

of urbanization (around 50 percent), com-bined with the positive image of rice as afoodstuff, created a new pattern of con-sumer behaviour based around rice as thestaple food. Most of the demand for ricewas and still is met by imports (seegraphs). Today, rice imports amount toaround FCFA 100 billion, accounting for7-8 percent of total imports and posing a

FAO data on imported broken rice are available for 2001-2003 only. During this

period, broken rice accounted for 99% of total rice imports.


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major burden on the countrys trade andforeign exchange balance. The fact thatonly a proportion of Senegals food pro-duction actually reaches the market (thefigure for rice is 40-50 percent) furtherhighlights the importance of rice importsfor the Senegalese cereals market.

Promoting national riceproduction

More intensive efforts to encourage localfood production began in the early 1980swhen the old model of industrialization atthe expense of agricultural developmentproved to be non-viable.The industrializa-tion strategy had yielded very little in theway of internationally competitive prod-ucts. The Senegalese economy initially abeacon of hope in sub-Saharan Africa

lapsed into structural crisis. Rural regionswere worst affected, especially since theurban bias of Senegalese politics now hada firm demographic basis. The austerity

measures imposed through the internaland external structural adjustment pro-grammes mainly hit the rural popula-tions.Soil fertility in the Sahels fragile produc-tion systems declined dramatically as aresult of the use of non-sustainable culti-vation techniques, especially in ground-nut production, and the increasing pres-sure on natural resources. A series ofdroughts also occurred in the 1970s, lead-ing to a permanent drop in rainfall andharvest yields. The situation was exacer-bated by changes in the global vegetable

oil markets which greatly reduced theprofit margins for exported groundnut oil.

the wholesale price in Senegal amountedto 28-31 FCFA/kg (compared with 8-19FCFA/kg under the liberalized conditionsintroduced after 1996). Some of the rev-enue from the import monopoly was usedto promote local production; however, asubstantial proportion went towardsfunding the general state budget and theSenegalese Progressive Union party.Yet despite this largely unintended pro-

tectionism and the injection of substan-tial funding from the state and interna-tional donors, satisfactory developmentof rice production in Senegal remainedelusive. Compared with the downturnthat had occurred during the previousdecades, a slight increase in output wasachieved, but the overall growth trendduring the period 1980-1996 stood at just3.1 percent per year, barely exceeding therate of population growth (see graph).Thedevelopment of key production factors harvest yields, number of harvests per

year, water consumption and the expan-

sion of irrigated areas lagged far behindSenegals potential. An important factorwas the powerful but often ineffectiverole of the state in all areas of productiondevelopment, starting with research intoirrigation management, agriculturalextension, the granting of loans and deliv-ery of inputs, and extending to processingand marketing. Faced with these unsatis-factory outcomes, donors scaled downtheir funding for the irrigation projects,which led to a further stagnation of riceproduction.

Another general disadvantage affectingSenegals rice production was the increas-ing overvaluation of the Senegalese cur-rency from the end of the 1980s. Thispushed down the price of imports whileintensifying price pressure on local foodmarkets, making agriculture even lessattractive. Other rain-fed crops wereaffected even more than rice; productionof these crops rose by just 1.3 percent over

The progressive shift towards local foodproduction from the early 1980s thereforetook place under far more difficult envi-ronmental and economic conditions than20 years earlier. The development strategyfocussed primarily on rice cultivationbased on large-scale irrigation. Overrecent decades, more than 60 percent ofinvestment in the agricultural sector hasbeen channelled into irrigated agricul-

ture, especially in the Senegal River Valley.The river valleys have always been regard-ed as the regions which offer the greatestpotential for more intensive agriculture,although they are home to just 10 percentof the rural population. The technicalparameters required for irrigated rice cul-tivation appear to be in place: in principle,the disadvantage of costly dependence ona system of irrigation which uses mecha-nized pumps is more than offset by the

outstanding climatic con-ditions prevailing in theseareas, especially during

the dry season, which areextremely conducive togrowth. By contrast, rain-fed cultivation is viewedas very fragile and offerslittle potential for moreintensive farming, al-though 90 percent offarms depend on this

form of cultivation.Until the mid 1990s, rice imports were akey element of Senegals highly central-ized and regulated economic policy. The

states price stabilization fund operatedan import monopoly; it organized themarketing and fixed the prices of bothimported and local rice. The price of bro-ken rice was fixed at around 50 percent ofthe price of whole rice.Within this system,a substantial levy was imposed onimported rice; in 1994/95, the year beforethe system was abolished, the differencebetween the cif world market price and

More than 60 percent of

investment in the agricultural

sector has been channelled into

irrigated agriculture, especially inthe Senegal River Valley.

Since independence in 1960, rice

consumption in Senegal has grown

almost ten-fold in just four decades,

currently standing at around 1 million

tonnes.

Photo:S

chucht


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this period, even though growth-imped-ing state intervention in production andmarketing were abolished in these sectorsmore rapidly than in the rice sector.Between early 1994 and mid 1996, theeconomic parameters for food cultivationchanged radically.The currency was deval-ued by 100 percent, imports were liberal-ized and privatized, and the role of therural development associations wasreduced to a handful of core tasks such asthe granting of loans, agricultural exten-sion and providing support to private pro-

ducers and processing companies. Thetransfer of responsibility for rice importsfrom the state to the private sector pro-ceeded smoothly,despite fears to the con-trary, although over time a significantconcentration process has occurred. Withthe liberalization of imports, the stateslevies and quota system were abolishedand the basic tariff now stood at around15 percent. Rice imports increased dramat-ically as a result. Two attempts to imposea special tax on broken rice importsbetween 1996 and 1998 achieved onlylimited success, although it is unclear

whether this was due to a lack of politicalwill and/or poor implementation. Since2001, the external protection of the ricemarket has been regulated through thecommon trade policy of the West AfricanEconomic and Monetary Union andstands at between 5 and 10 percent. In all,imports of broken rice have increasedfrom around 400 000 to almost 900 000tonnes since 1994.Yet even after the structural adjustmentprocess, food production did not experi-ence the expected upturn; instead, itentered a phase of stagnation and evendecline. Notable increases in productionwere not achieved in the rice sector until

1999. In cereals production as a whole thistook until 2002.Due to the major fluctua-tions in production (see graph, p. 23), it isstill impossible to say whether this marksthe start of a long-term trend. Ultimately,food production is influenced not only bydevelopments in the food markets butalso by trends in the groundnut sector,making it more difficult to draw any firmconclusions.

Conclusions

The high levels of food imports, especiallybroken rice, into Senegal undoubtedlypose a major problem for local food pro-ducers. They have created consumptionpatterns which local agriculture now findsalmost impossible to satisfy, while foreignproducers can meet this demand at verylow cost with agricultural by-products.But it is debatable whether the importsare the sole reason for, or rather the out-come of, the weakness of local rice pro-duction. Experience has shown that earli-er policies which might have afforded

some protection against imports havehad very little impact on local production.The unfavourable economic parameters,especially strong intervention by thestate, have often made it impossible forproducers to respond by increasing sup-ply.So will the ongoing liberalization of im-ports and production, under way since1995, stimulate local production over thelong term? It is difficult to draw any firmconclusions at this stage. This will dependsubstantially on whether private and gov-ernment actors are able to ensure an ade-quate supply of loans, technology,agricul-tural extension, seeds, inputs and legal

stability for producers while managingprocessing and marketing effectively. Thecurrent scenario gives little cause for opti-mism. In recent years, the situation inrural areas has worsened. The number ofrural poor remains constant in Senegal ata very high level despite an acceptablerate of economic growth.Could Senegal do more to promote andprotect its local food production? Thisquestion is not only significant for therural poor. A key question is whether acountry which is so heavily dependent on

a handful of export products for its for-eign currency reserves should be leavingthe matter of its food security to theworld markets to this extent. After all,with the increasing liberalization of theglobal rice markets, higher prices andwider price fluctuations are a distinct pos-sibility. Chinas future development posesparticular risks in this respect.However, even if politicians were able toassert their will against the interests ofthe extremely influential import lobby, itwould be almost impossible to enforce amassive increase in external protection

due to the ensuing price impacts on theurban population. Very high food priceswould also curtail Senegals internationalcompetitiveness in its other economicsectors.The solution to the dilemma is tointroduce moderate agricultural importprotection measures, which must beaccompanied by substantial support toimprove agricultural productivity and pro-mote a range of diversification options inrural regions. There is likely to be ade-quate scope for such measures within theWTO. Senegal is also supporting thedemand being voiced by many developingcountries for the introduction of specialimport protection measures.

The WTO agreements

should allow moderate

import protection

measures for Senegal in

order to protect local

rice production.

Photo:

Schucht

elr the rice market in senegal 0106

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