Zimbabwe: Regional Maize Price Up

17 February 2020

Prices of staple maize meal in most SADC countries continue to increase with the entire region grappling with a rise in grain prices both in South Africa and globally, according to the latest Food Price Monitoring and Analysis (FPMA) report of the Food and Agriculture Organisation.

The latest report indicates that prices of maize are rising largely because of weak production prospects for the 2020 crops, tight supplies and weakening currencies, particularly in Zimbabwe.

In Zimbabwe, the FAO said, food inflation rates were significantly high throughout 2019 with prices of maize meal continuing to generally increase in December through to January, despite introduction of subsidies on maize.

"Prices, however, remained generally more than 12 times higher on a yearly basis. This was mainly the result of sustained currency weakness and low domestic cereal supplies, caused by a drought-reduced 2019 harvest and shortages of foreign exchange that stifled the country's capacity to import grains," said the report.

In Zambia, price increases of maize grain and maize products eased in January but remained nearly twice their year-earlier levels following steep hikes since mid-2019 driven by a drought-induced shortage of cereals.

"Further upward pressure was provided by currency weakness and higher energy prices that inflated production costs for millers," the FAO said.

Prices of maize grain were up to twice their year-earlier levels in Mozambique, as the reduced 2019 harvest, caused by extensive cyclone damage, continued to exert upward pressure, while in Malawi, prices of maize grain continued to rise in January, with sharper gains in southern markets.

"The monthly increases reinforced the higher year-on-year levels, with the national average price of maize grain almost double its year-earlier value. In order to incentivise producers to release stocks onto the market, the buying price of maize was recently raised by MWK 70 to MWK 310 per kg," according to the latest food inflation analysis.

In South Africa, wholesale prices of maize grain recorded a small increase in January due to tight supplies from the previous year's crop and concerns over planting delays of the 2020 crop.

Prices, which were at comparable levels to their values in January last year, are expected to be influenced primarily by weather conditions until the start of the harvest in April, with forecasts indicating a higher likelihood of below-average precipitation.

Prices of maize in import dependent Eswatini broadly mirror trends in South Africa, the country's main supplier of cereals, and as of December, they were at similar levels compared to the previous year.

In Namibia, which is also reliant on South African grain supplies to fulfil its import requirements, prices of maize meal were at lower levels on a yearly basis at the end of 2019.

In Madagascar, retail prices of rice held steady in December, as a result of adequate supplies from the first season harvest, and were down from a year earlier, reflecting the recovery in crop production in 2019 that bolstered national availabilities.

In Zimbabwe, prices remained more than 12 times higher on a yearly basis.

"The extremely high levels were mainly the result of sustained currency weakness and low domestic cereal supplies, caused by a drought-reduced 2019 harvest and shortages of foreign exchange that has hampered the country's capacity to import grains," the FAO said.

Production expectations for the 2020 crop, the FAO noted, have also been curbed by a continuation of poorly distributed rains and a lack of purchasing power by farmers, due to soaring inflation rates, which has restricted their access to inputs and led to a reduction in the planted area.

"If the 2020 harvest remains at a well below - average level for a second consecutive year, prices of grain are expected to come under sustained and strong pressure in the coming months," the FAO warned.

International prices of wheat mostly increased in January, overall supported by strong export demand and concerns over production prospects for the 2020 crops in some key producing countries.

In the United States of America, historically low plantings of winter wheat crops contributed to the upward pressure on prices, with the benchmark US wheat (No.2 Hard Red Winter, f.o.b.) rising for the fourth consecutive month and averaging USD 237 per tonne, more than 5 percent higher than in December.

In Argentina, prices increased by more than 10 percent, month on month, mainly due to the strong pace of sales amid tighter exportable availabilities.

Although official crop estimates are still to be released, agricultural experts say preliminary investigations indicate that maize grain production is likely to be below last year's levels in most SADC countries on the back of erratic rains and rising input prices.

Reduced harvests are likely to intensify food insecurity in 2020, increasing the number of people in need of assistance.

Extreme drought that hit the entire region sharply reduced the 2019 harvests, leading to increased food imports for most SADC countries.

Average cereal output for 2019 is estimated at 30,2 million tonnes, about 2,1 million tonnes below the previous five-year average.

In Southern and Eastern Africa, aggregate cereal outputs in 2019 are estimated to have declined by 2,9 million and 2,8 million tonnes, respectively, year on year, on account of extreme weather events, including dry weather conditions in both sub-regions and two cyclones in Southern Africa.

SADC recorded the lowest rainfall in nearly four decades in the 2018-2019 cropping season leading to increased food insecurity and water shortages in the region.

The World Food programme (WFP) estimates that a record 45 million people - mostly women and children - in the 16-nation SADC bloc are gravely food insecure following repeated drought, widespread flooding and economic disarray.

WFP is providing lean season assistance to 8,3 million people grappling with "crisis" or "emergency" levels of hunger in eight of the hardest-hit countries: Zimbabwe, Zambia, Mozambique, Madagascar, Namibia, Lesotho, Eswatini and Malawi.

As of January 2020, WFP had secured just US$205 million of the US$489 million required for this assistance and had been forced to resort heavily to internal borrowing to ensure food reaches those in need.

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