Maize price hike looms in Zimbabwe

By Nelson Chenga

A massive retail price hike for maize and mealie meal is looming as Zimbabwe heads for one of its worst deficits of the staple grain since the 1991/92 drought.

Statistics from the Zimbabwe Farmer’s Union (ZFU), the largest representative body for farmers, indicate that maize production for the 2014/15 season fell by more than half compared to the 2013/14 season. This follows poor rains in most parts of the country.

As local stocks dwindle in the coming months, the retail price of grain and mealie meal will skyrocket. Zimbabwe has since its disastrous 2000 land reforms depended on neighbouring nations such as South Africa, Zambia and Malawi for grain.

Because the entire region received well below normal rainfall in the 2014/15 season, Zimbabwe will be forced to search further afield for gain imports. This will increase the landing cost of the staple grain.

Mid this month, Vice President Emmerson Mnangagwa revealed that at least US$300 million was required to import enough grain to avert hunger, especially in rural communities. According to the International Grains Council, a tonne of maize is hovering at around US$179.

At that going price, it means Zimbabwe requires nearly 1,4 million tonnes of grain to bridge the deficit. According to ZFU data, farmers produced 742 226 tonnes of maize this past season against 1 456 153 tonnes produced across the country last season.

This translates to a 51 percent drop in harvested maize although the cumulative percentage fall across the eight provinces is 56 percent.

Matabeleland South has the biggest grain deficit with its maize production having dropped by -84 percent, followed by Masvingo (-76 percent), Matabeleland North (-71 percent), Midlands (-66 percent), Manicaland (-49 percent), Mashonaland East (-42 percent), Mashonaland West (-37 percent) and Mashonaland Central (-23 percent).

Mashonaland West had the highest produce for the 2014/15 season.

Consequently, ZFU is anticipating a situation whereby the maize imports could impact on the price.

“Food shortages are expected throughout the country as performance was very low in terms of production for the previous season. This may have some effect on the price of maize,” said ZFU in a statement.

While maize grain prices are currently averaging US$6 per bucket (or 15kg), prices might spike as demand for the product outstrips supply.

This could be particularly so in hard hit areas like Matabeleland South.

Already, a bucket of maize in Matabeleland South is selling for about US$7,50.

At US$7,50, it means that a tonne of maize is fetching on average US$500 in a country where the gazette price is US$390 per tonne.

Knowledge Transfer Africa (KTA), an organisation which tracks trading trends in agricultural markets across the country, said prices of grain have already started going up in areas lsuch as Masvingo where a bucket of maize which cost US$5 in May is now being sold for US$7.

KTA believes that prices are likely to rise further from August.

KTA chief executive Charles Dhewa, however, bemoaned the absence of a comprehensive mechanism of tracking agricultural related data.

“We have no methods of tracking data to pin-point the exact situation on the ground…It’s all guess work,” he said.

At their meeting of June 10, stock feed manufacturers noted that some traders were building up stocks in anticipation of “the looming shortage and increase in prices.”

“From a national perspective, it will be an interesting year for maize trade. In the past, various mechanisms have been in place to get through the season and the Grain Marketing Board had reserve stocks. This year will be different, volatile and is of grave concern to stock feed manufacturers,” reads part of the minutes of the meeting.

The stock feed manufacturers are encouraging members to procure as much maize as they can and take up requirements for maize with traders before it becomes short.

“The same applies to imports as the chances are that maize imports will dry up in a few months’ time. South Africans are already reported to be taking physical positions on the new crop in Zambia with the intention of exporting it later to the Southern African Development Community region,” they noted.

Maize bran is reportedly short on the market with the major supplier having to import part of its requirements, and the situation is likely to worsen.

“Bran is short as the supplier is milling less and the market for mealie meal has reduced because of imported product. Traditionally, there is usually a lot of maize germ on the market at this time of the year, but it, too, is short,” reads part of the minutes.

“Wheat bran is available at US$150/mt bulk, collected and US$160/mt bagged. However, supply might decrease because of reduced milling and the influx of wheat flour as opposed to import of whole wheat. Members were urged to ensure that they take a position as early as possible to ensure supply.”

Some, however, believe that the price of both maize and mealie meal may not rise that much given the massive maize meal imports since January when government issued maize-meal imports permits.

Hendrik Olivier, a director with the Commercial Farmers Union doubted the possibility of a price increase due to a combination of factors.

He said a deluge of imports and the illiquid conditions on the domestic market may conspire to pull down prices.

“Cheaper maize is coming in from South Africa and Zambia. The Grain Marketing Board is offering a higher price, but it doesn’t have the money to pay for the maize and those who are offering cash are paying ridiculous amounts. Some are offering as little as US$140 per tonne,” said Olivier.

President of the Zimbabwe Farmers’ Commercial Union, Wonder Chabikwa, also argued that prices of both maize and mealie meal should actually go down on the formal market because the grain is landing at between US$300 and US$320 per tonne from Zambia.

“While prices should ideally react to economies of scale, which are the forces of demand and supply, unfortunately our (Zimbabwean) market does not follow that. Because we harvested half of what we expected, we are supposed to see prices going up; but that is not going to happen because the landing price of maize from Zambia will determine prices,” said Chabikwa, who, however, added that prices on the informal market will definitely go up.

And given Zimbabwe’s now highly informalised economy there are fears that grain imports will ultimately end up on the informal market where it will fetch higher returns.

Fears abound that rather than take the trouble of grinding the imported maize into mealie meal, the temptation for the importers would be so high that they would end up selling the grain on the informal market to cut costs and cash in on demand.

Economist, John Robertson, said the scarcity of disposable incomes at household level across the country will force prices to remain subdued.

“The consumer price index has largely remained low because people don’t have the money to spend…The market responds to demand, but in this country it’s not about price but about the ability to pay. It’s more of a shortage of money than the shortage of food,” said Robertson. Financial Gazette