The Sunday Mail
Peter Gambara
Last week Government liberalised the maize commodity market by withdrawing the controversial Statutory Instrument 22 of 2014 (Agricultural Marketing Authority Minimum Grain Producer Prices Regulations), which had set minimum producer prices for private buyers.
Buyers are now free to purchase maize at market prices, although Government stressed that the previously announced US$390 per tonne will remain the floor price. This liberalisation has been met with mixed feelings with grain buyers and millers obviously welcoming it.
However, some farmer organisations are sceptical. Can this liberalisation bear good news for the Zimbabwean farmer?
In 2014, when Government gazetted SI 22, grain buyers and millers were not amused, and some threatened to stop buying maize altogether. They argued that they were vulnerable to possible State prosecution if they agreed to a lower price.
In any case, buyers have always argued that US$390/tonne is higher than the world maize price, which the World Bank gave US$178,67 (November 2014) and US$174,23 (March 2015). The Grain Millers’ Association of Zimbabwe has indicated that prices in Zambia and South Africa are US$220 and US$210 per tonne, respectively. And the GMAZ contends the new measures give room to contract growing, trade financing and price stabilisation. The area planted to maize has declined considerably over the years due to lack of financing arrangements with either banks or millers. The World Bank ranks Zimbabwe as the 44th largest maize producer at 1,3 million tonnes and an average yield of one tonne per hectare. Zambia is ranked 24th with a production of 3,3 million tonnes and a yield of 3t/ha; while Malawi is 23rd (3,9 million tonnes at 2t/ha). Mozambique is ranked 30th with 1,9 million tonnes at 1,4t/ha.
South Africa is Sadc’s dominant producer (11th globally), producing 11,3 million tonnes with a yield of 4t/ha. However, it has projected 9,6 million tonnes this year due to drought. The low yield and our production costs – which are not exactly the lowest – combine to deprive Zimbabwe of comparative advantage in maize production. Malawi and Zambia , like us, have stuck to traditional varieties. One, therefore, wonders how they have managed to overtake us in maize production over the years. One reason that countries like Malawi have overtaken us has been the deliberate policy of their governments to provide cheap inputs.
Our Government has since adopted a similar policy to support small-scale farmers with inputs yearly and in 2014, the bumper harvest of 1,4 million tonnes was attributed to the Presidential Input Support Scheme.
Although these inputs were provided again this year, the drought that hit the country and distribution hiccups has resulted in lower yields being projected. The fact that a lower maize intake is expected should encourage maize prices to firm. In South Africa, the producer price firmed by 29 percent from R1 970 in November 2014 to R2 550 due to the drought.
In a normal set-up, therefore, we would expect the maize producer price to firm above the current US$390/t. However, this might not be the case as major grain buyers and millers will definitely resort to importing the commodity from the world markets, where it is a lot cheaper. The price might firm to above US$$400/t when farmers trade among themselves in the village and at local markets like Mbare Musika. The liberalisation of the maize commodity market is likely to see the maize producer price fall rather than increase in the long run. This is the reason why farmers are not welcoming the announcement as this means lower income accruing to them as prices fall.
Grain buyers and millers say the latest development will enable them to contract farmers to grow maize at “more reasonable” prices, thereby stimulating local production.
If more farmers are contracted or get support to grow the crop, there is likely to be a bumper harvest, and the producer price is likely to fall due to supply and demand factors.
Peter Gambara is an agronomist
