7 January 2016

Zimbabwe: Maize Price Hike Must Be Contained


El Nino, a weather phenomenon which causes drought is affecting the whole of Southern Africa. According to reports, South Africa, the continent's largest maize producer has not received enough rains, the same as Zambia.

In Zimbabwe, there are some regions that have also not received rains with the Met Department indicating that the erratic rainfall will continue until end of March.

Areas where crops were planted are already suffering severe moisture stress and no follow-up rains are expected.

And in areas yet to receive the rains, no planting has taken place.

Although there is no formal agricultural assessment report from the responsible authorities yet, it has become clear this is likely to be one of the worst years with respect to agricultural output in 15 years.

The most unfortunate thing is that the country did not have a good harvest season last season. This means the country will have to rely on imports until the harvest of next year.

Despite grain shortages, there is also a possibility of food price increases, particularly maize meal. For instance, reports that prices of maize have increased after Zambia stopped exports show how the drought will trigger price increases.

Zambia, which recorded a surplus in the last season, was exporting maize through the Food Reserve Agency, but suspended exports as it sought to verify the country's food security. During the past three weeks, the landed price of maize rose by about 17 percent to $315 per tonne, according to the Grain Millers Association.

South American countries such as Brazil and Argentina who will have surpluses are faced with a large market.

This is an oligopolistic structure of maize suppliers, which undoubtedly will go into cartels to raise the price of maize. The same may also happen on the local market. Those with little maize will sell at a high price.

From the pricing point of view, it is clear maize prices and related products, which use maize as a raw material such as stockfeeds and other cereals will go up.

While the Government might do little on price controls from source destination, it is our hope that proper mechanisms are put in place to minimise unjustifiable grain prices by importers.

As the local grain dealers seek permits to import maize from South America, the Government should come up with a framework to minimise cases of rampant profiteering.

We do not want a situation whereby the dealers are given permits to import and then go on to take advantage of the situation to charge exorbitant prices.

It should be noted that the increase in maize prices, depending on the magnitude, may cause price increases in livestock, poultry, maize meal, beer and other corn related products.


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