Maize producer price: Outside-the-box thinking required

Emilia Zindi Agriculture Editor
The harvesting of maize crop that is currently underway has seen farmer unions and millers engage in marathon meetings from last week as the two seek to agree on a price with farmers demanding US$400 per tonne, up from last season’s US$378.

Last Wednesday’s meeting dragged for the better part of the day with both parties arguing on viability. Hopefully an agreement will be reached when negotiations resume this week.

Representing farmers at the negotiations, Zimbabwe Indigenous Commercial Farmers’ Union president Mr Wonder Chabikwa said it was equally important for millers to understand the plight of local farmers when negotiating prices.

Mr Chabikwa said all over the world, commodity prices were determined by production costs incurred by producers and as such these should be taken into consideration if parties were to negotiate in good faith.

He said a breakdown of production costs on maize locally showed that a farmer used US$982,82 to do a hectare with a yield of three-and-half tonnes.

“These production costs which are direct ones include labour, seed, fertiliser, herbicides, insecticides, grain bags, transport, insurance and levies.

“We also added other indirect costs that include tractor operating. When these are added up we came up with a total of US$982,82 for a farmer to do one hectare of maize with an expected yield of three-and-half tones,’’ said Mr Chabikwa.

On labour per hectare, he said a total of US$95 was used from planting up to harvesting, US$47,43 for a 25kg bag of seed that covers a hectare, US$384,24 for fertiliser, US$38,58 for herbicides, US$8,70 for insecticides, US$31,50 for grain bags, US$60,38 for transport, US$7,32 for insurance, US$7,98 on levies and US$9,73 for sundry expenses. Indirect cost covering tractor operating were US$193,79 for fuel, US$72,02 oils, US$19,08 filters and US$7,08 for tyre punctures respectively.

“When all the above figures are added, we came up with a total of US$982,82 per hectare. It is therefore our sincere appeal to buyers that they pay us US$400 a tonne so that at a yield of three and half tonnes per hectare a farmer gets about US$1 400 less the US$982,82 production costs. By so doing, farmers will be able to break even and afford to realise a profit,’’ argued Mr Chabikwa.

He said while labour could vary because of the use of causal workers during weeding, harvesting as well as planting, the gazetted wages of farm workers was currently pegged at US$75 a month for general employees while machine operators such as tractor drivers earn more.

The practice of gazetting maize producer prices is inconsistent with the provisions of the Zim Asset which calls for the formation of the Commodity Exchange of agricultural products where market forces will work uninterrupted to determine the market prices for agricultural commodities including maize. In the past five years, Government, through the Grain Marketing Board, has failed to sustain its gazetted prices (US$375 per tonne) to farmers on time.

To date, GMB still owe farmers handsomely.

Mr Chabikwa said comparing to farmers in the region, production costs for local farmers were thus high considering that their counterparts get subsidies. In South Africa, for instance, farmers get subsidies in the form of fertiliser, seed as well as making use of farm mechanisation where most of the work is done by machinery operated by a single person. Fuel used is also cheaper as farmers purchase direct from suppliers compared to Zimbabwean farmers who get fuel at retail prices.

Maize production budget for South African farmers in 2010 / 11 showed that total variable production cost per hectare was R7 488 (about US$700) with a yield of six tonnes per hectare while the purchase price for a tonne was R1 350.  The income per hectare was therefore R1 350 multiplied by six tonnes bringing the total earnings per hectare to R8 100. The profit for the farmer per hectare was thus R8 100 minus R7 488 production cost bringing it to R612.

The above calculations were based on good farmers who were capable of producing the six tonnes per hectare while the poor farmer managed 3,2 tonnes, average one 4,0 and 4,9 tonnes respectively. Putting things into perspective, if these same input costs and price estimates were applied to the poor farmer, the end result was a loss.

In Zambia where Zimbabwe again imports its maize at US$270 on landing, the farmers there are well supported through government subsidies which no longer exist in Zimbabwe.

The Zambian government intervention in the sector included purchasing of almost all the country’s surplus maize from farmers at a price above the market price as a way to incentivise production as well as counter allegations that farmers were being exploited by traders.

There is again a programme, code named Farmer Input Support Programme, where each household is given four bags of fertiliser and one bag of seed maize at subsidised prices of KR50 per 50kg bag of fertiliser (about US$7)  and KR80 per 10kg of seed maize (about US$10).

This programme is mainly for smallholder farmers although some large farmers were also finding ways of benefiting.

The government there has also been subsidising millers with the aim of reducing the consumer price of maize and mealie-meal.

Under this subsidy, the government sells maize to the millers at a lower price than what it buys from the farmers.

These various subsidies account for over 80 percent of government spending on agriculture as these are big programmes.

In Malawi, the government also subsidises its farmers through cheap inputs as well as finance with non-governmental organisations also playing a crucial role by providing cheap inputs.

In Zimbabwe, the Government is on record saying farmers should source own inputs as well as borrow from banks where interest rates are high.

Grain Millers’ Association chairman Mr Tafadzwa Musarara said while local farmers were justified in demanding US$400 a tonne due to high production costs as compared to their regional counterparts, the end result would see the price of mealie-meal going up as millers would have no choice due to the costs they also incur.

He said the millers were comfortable with US$340 per tonne, citing purchase the maize and storage costs. The farmers have dismissed the figure as too low after giving out their production cost.

Mr Musarara said the real issue was that government should re-introduce subsidies in the sector as it used to do during the years 2004 up to 2006 where government bought maize at higher prices from the farmers and sell at low prices to millers.

“This was some form of a subsidy and it never affected prices of mealie-meal to consumers. It is the trend all over even in Europe.

Government has to do its part as it was doing before,’’ he said.

Other governments were doing it by way of cheap finances, inputs or paying back to farmers at the end of the selling season.

This was where the missing link is in the Zimbabwean farming industry.

He encouraged the government to resume subsidisation of the agriculture sector.

 

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