07/04/2024
WHEN SHOULD WE EXPECT RICE PRICE TO FALL UNDER THE FEED SALONE PROGRAMME?
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By Dr. Henry Musa Kpaka
Minister of Agriculture and Food Security
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As we embark on the first full planting season under the Feed Salone programme, I find myself frequently addressing a question posed by friends, family, government colleagues, and the media. It's a timely and significant inquiry: What impact will Feed Salone have on rice prices and when?
This is indeed a genuine question. Inflation and high prices of essential commodities, especially staple food like rice, touch us all and pinch the poorest even more painfully. According to the World Food Programme (WFP) reports, over one million Sierra Leoneans are acutely hungry. It is only natural for people to turn to the Ministry of Agriculture and Food Security and Feed Salone for solutions.
And what we do under Feed Salone should indeed have a link to food prices. However, the relationship between current production and market price for rice isn't direct. Various factors, many beyond the Ministry's control, affect rice prices.
To begin with, we are in a status quo where about 55% of the rice we consume locally is imported, and this imported rice is on average cheaper than homegrown rice. This situation leaves our market prices heavily influenced by the global commodities market and the profit margins of farmers abroad, reducing our control over rice pricing.
Let's consider the future scenario when Sierra Leone achieves self-sufficiency in rice, fully meeting its domestic consumption needs. Even in this scenario, several factors will influence the price of rice. These factors can broadly be categorised into two groups:
First, the yield and overall productivity of the rice value chain, which encompasses the efficiency and output of our agricultural practices.
Second, the production costs including the cost of seed rice, the fuel required for operating tractors and harvesters, the price of fertilizers and agrochemicals, milling costs, transportation expenses, and the wages for labour. Additionally, these costs are influenced by the general price levels of other goods and services traded in the country.
Most of these cost-driving factors fall outside the direct influence of the Ministry or the Government. For instance, Sierra Leone does not produce fuel or fertilizers; these are purchased at global market prices. We have not yet developed the capability to manufacture tractors domestically. Labour costs are inherently tied to the overall cost of living, which affects the reservation wage – the minimum wage at which individuals are willing to work. Notably, the cost of hiring youth labour gangs for farming has surged by over 50% in the last two years.
Yield and the general productivity of the rice value chain are the only factors directly under the influence of the Ministry. With the status quo, boosting rice yield and reducing post-harvest losses are the most significant levers we can pull to make rice production attractive and profitable.
The current national rice yield from various sources averages 1.9 metric tons per hectare, but the value chain faces a 40% post-harvest loss. Farmers typically harvest 38 bags (50kg each) of paddy rice per hectare, reduced to about 22.8 bags after losses, and finally to about 16 bags of table rice post-milling.
A 50kg bag of milled local rice is at most NLE 1,200, resulting in a revenue of about NLE 19,200 per hectare. However, the estimated cost for cultivating one hectare of rice in the 2024 planting season is around NLE 16,000 - and this covers only mechanical land preparation, seeds, fertilizers, and agrochemicals. Even excluding milling, transportation, and additional labour costs, the enterprise for producing a hectare of rice leaves little margin for the farmer.
Farmers that produce at a large scale stand a better chance because production at scale reduces the marginal cost (the cost of producing one additional hectare of rice), due to economies of scale. Doubling the rice yields, from say, 1.9 to 4 metric tons per hectare, and halving post-harvest loss will make the margins in rice production a bit more appealing.
One might wonder why the focus on rice despite its potentially thin margins. The decision to prioritise rice as one of the key value chains of Feed Salone is not only economically sensible but also of strategic national importance.
Over the past decade, Sierra Leone has experienced a rapid increase in rice imports, currently exceeding $200 million annually. To put this in context, rice importation alone sucks well over 25% of our foreign currency reserves. This weakens our currency and the purchasing power of our people, and consequently, a drag on the economy.
We are a rice-eating nation and with our population growth, the demand for rice will inevitably rise. A common retort to this line of thinking is that we should diversify our diet. Indeed, crop diversification is a central part of the Feed Salone strategy. But I am more willing to place my bet on tripling rice yields sooner than on changing people’s eating habits and diets. If we are not about to change our eating habits as a nation anytime soon, then producing the food we eat is vital to our economic independence. The COVID-19 pandemic and the Russia-Ukraine conflict have taught us a crucial lesson: our national sovereignty is vulnerable when we depend on other countries for our staple foods.
Sierra Leone boasts of ideal ecological conditions for rice cultivation. From the banks of the Sewa River in Gbondapi and Torma Bum, to the Bolilands in Tonkolili, up north along the Little Scarcies in Mambolo and Samu, and across the widespread inland valley swamps, it's evident that we have no business to import rice.
A key objective of Feed Salone is to reduce rice importation by 20% annually. To realize this goal, we must attract local farmers and investors into rice production. We will only be successful if rice production and the entire value chain are attractive and profitable. Having visited all major rice production zones multiple times, and had discussions with rice processors and millers nationwide, I understand that their primary concern is boosting profitability within the rice value chain. We cannot, on the one hand, nudge farmers and investors to the rice value chain, and on the other, have an explicit objective around low prices.
A government that makes low rice prices an explicit objective should be prepared to subsidise local rice production for the long haul heavily. The subsidy must include internal and external cost drivers.
By design, Feed Salone does not have an explicit price objective because guaranteeing low rice prices would rely on a large government subsidy programme which we find inefficient. Our approach relies on attracting the private sector in the value chain. With more competitive actors, rice production will rise, and the efficiency gains will begin to put downward pressure on some of the costs of production, which will ultimately affect the price of rice in the market.
H.E President Bio’s clear commitment is for Sierra Leone to be self-sufficient in rice, and to bring the importation of rice to near zero by 2028. A complete replacement of imported rice with our local rice will have huge spillover effects on our economy. It will bolster our foreign reserves, strengthen our currency, and increase our country’s purchasing power. This will have a knock-on effect of lowering general price levels domestically for other essential items like fuel or fertiliser and may eventually contribute to reducing rice price itself. This is the channel that stands the best chance of reducing the price of rice in Sierra Leone.
We have laid out a compelling agenda to make H.E President Bio’s vision a reality, including plans to boost rice yields from 1.9 to 6 MT/ha and reduce post-harvest losses by 80%. We have identified hubs in the most promising rice ecologies where we will direct infrastructure investments like irrigation, roads, and power supply, in partnership with the private sector, to cut down on logistics and transportation costs.
We have passed policies to create a market for local rice, and to encourage backward integration from rice importers. In collaboration with our partners, the government has also introduced a credit facility at a 10% interest rate, significantly lower than the market rate of over 30%, to stimulate private investment in the space.
Feed Salone requires concentrated and sustained investment from both the government and the private sector. Focusing on price is a distraction from the essential steps we need to take to succeed. Implementing Feed Salone policies will not only end rice importation in Sierra Leone but also boost other crop exports, thereby growing the economy, creating jobs, increasing incomes, and combating food insecurity.
Understanding the concern about global grain prices, I expect ongoing questions about rice pricing. I hope this article can be a reliable resource and guide. Be cautious of those who propose lower prices in opposition to our strategic plan. Should anyone promise reduced rice prices, question whether they intend to use price controls. If they don’t, ask them to specify which cost levers they plan to adjust to reduce the price of rice. The proof will be in the pudding.
