Democracy and Development in Mali

The Response of Cereals Traders to Agricultural Market Reform in Mali

The Response of Cereals Traders to Agricultural Market Reform in Mali NIAMA NANGO DEMBELE AND JOHN M. STAATZ Introduction Since 1981, the government of Mali has undertaken a broad range of reforms aimed at fostering a much greater role for the private sector and market processes. These reforms have involved the sale of state enterprises, permitting private-sector (including independent farmer and trader organizations ) competition and removal of domestic and international barriers to trade. These changes, combined with the liberty of association and expression that came with Mali's democratization starting in 1991, are having profound effects on the Malian economy and society. Because of the importance of the cereals subsector in the Malian economy , the lead element of economic reform since 1981 program has been the liberalization of cereal marketing under the multidonor-financed cereals market restructuring program, known by its French acronym, PRMC (Programme de Restructuration du Marchi Cerialier). The effect of any policy reform depends on how economic actors react to it. For PRMC, success hinged upon whether private traders were willing to fill the vacuum created by the retreat of the public sector from direct involvement in cereals marketing. This willingness, in turn, depended on how the reforms affected the profitability and riskiness of investing in the cereals trade. This chapter discusses how Malian traders of coarse grains (millet, maize, and sorghum) have reacted to the cereals market reforms since 1981.I 145 146 NIAMA NANGO DEMBELl~. AND JOHN M. STAATZ A Brief History of the PRMC Grain production in Mali Approximately 70 percent of the total calories in the Malian diet come from cereals. Millet, maize, and sorghum (hereafter referred to as coarse grains) are the major rainfed staples, and, up until the mid-1980s, accounted for about 85 percent of the cereal calories, with rice providing most of the remaining 15 percent. Most rural residents produce at least some of their own cereals supplies , with the result that only about 15-20 percent of total grain production enters the market. In urban areas, consumers devote on average between 18 percent and 31 percent of their total expenditures to cereals (depending on the city); hence, cereal prices strongly influence urban real incomes.2 Rice is much more important in the cities than in rural areas, accounting for more than half the cereals calories consumed in urban areas. Grain production in Mali has historically been highly variable due to fluctuating rainfall. This variability, combined with a low percentage of total production entering the market, makes market prices and quantities highly volatile. For example, between 1986 and 1988, millet and sorghum prices varied by a factor of 1:4 from year to year.3 Such instability makes cereal marketing risky, whether carried out by the public or private sector. In recent years, millet and sorghum production has increased at roughly 2.7 percent per year, approximately the rate of population growth. Most of this growth has resulted from expansion of area cultivated, not an increase in yields. In contrast, technological progress in maize and rice production, combined with the impact of market reforms, have resulted in rapid expansion of the production of those two cereals (table 1). Thus, millet and sorghum, while still the most widely consumed cereals in Mali, represent a smaller share of total national production and consumption than when the market reforms began in 1981. Genesis ofthe reforms In 1964 the Malian government created an official grain marketing agency, the Office Malien des Produits Agricoles (OPAM), and granted OPAM a legal monopoly on the grain trade. Through OPAM, the government fixed official producer and consumer prices for cereals in order to (1) increase rural incomes, (2) provide cheap cereals to urban areas, and (3) extract a surplus from agriculture to finance state investment in other sectors. THE REsPONSE OF CEREALS TRADERS TO AGRICULTURAL MARKET REFORM 147 Table 1. Share of various cereals in Mali's total grain production Cereal Annual Rate of Share of Total Share of Total Growth Production in Production in 1980-97 (%) 1980 (%) 1997 (%) Millet & Sorghum 2.7 80 56 Maize 12.5 6 16 Rice 9.0 14 27 Total 4.7 100 100 Source: Egg 1999, p. 17. Although the private trade was repressed, OPAM handled only between 20 and 40 percent of total grain marketed in the country.4 Since only about 15 percent of total production was marketed, merely 3-6 percent of total production...