Government's capacity to buy maize in doubt
Government's capacity to buy maize in doubtBy Joan Chirwa-Ngoma
Wed 01 June 2011, 07:40 CAT
THERE are growing doubts over the government’s capacity to meet the K2 trillion required to purchase this year’s maize crop from small-scale farmers, says an industry expert.
Zambia Agricultural Commodities Exchange (ZAMACE) executive director Brian Tembo has since questioned the sustainability of the continued government subsidy on both production and purchases which would translate to US$400 million (almost K2 trillion) on a single crop this year.
The projected K2 trillion, expected to be spent on the close to two million tonnes from small-scale farmers, is above the budgeted K1.23 trillion allocated to the agriculture sector in the national budget.
“But can the country sustain this kind of expenditure?” asked Tembo.
“Whichever way you look at it, for the government to continue subsidising production and purchases, the US$400 million deprives the citizens of the much needed services and also goes to subsidise the region as we will store and sell at lower prices for the benefit of the region.
There is a problem with this sort of business model. The other key issue is that the majority of the maize is smallholder grown and there are therefore quality concerns discounting our maize price on the international market further.”
Following the Food Reserve Agency’s (FRA) announcement that last season’s price of K1.3 million per tonne (which is about US$280 per metric tonne) would be maintained, the South African Futures Exchange (SAFEX) futures price in July when Zambia expects FRA to start buying as moisture content will be within the maximum 12.5 per cent allowable, will be around US $243.
This means that the government will yet again be buying maize at a higher price than the regional competition.
“When it’s time to export, when you factor in the storage and transport and finance charges, we shall effectively sell our maize at a loss.
The point is that the country only expects to consume 1.3 million tonnes of this commodity and we have carryover stocks from last season of over 800,000 tonnes and a bumper crop of three million tonnes! So the surplus will therefore be exported,” Tembo said. “The traditional destination is Zimbabwe.
Zimbabwe will not buy maize until their lean season around September. So factor in storage and also note that they will not just look at Zambia but Malawi (cheaper source) and South Africa (much cheaper source). For export add a differential of about $60 to our price.”
He, however, welcomed the announced bumper harvest.
“We welcome the positive news that Zambia has recorded yet another bumper harvest of maize and other crops among them, cassava, tobacco and the estimated good wheat crop later this year. The country also has healthy carryover maize stocks at over 800,000mt of which 75 per cent or about 636,000 metric tonnes are held by FRA,” Tembo said.
He advised that government's investment in the agricultural sector would better be channeled towards infrastructure development, extension services provision, community dryers for produce, storage, research and development support into better seed, conservation farming, among others.
He further noted that Zambia needed to actively pursue a livestock improvement and disease control policy to help create demand for the bumper maize harvest that was being achieved.
He also noted some delays by government to appoint an agent to act as a licensing authority for the warehouse receipting system.
“Government has achieved some positive strides in the enacted agricultural credits Act No. 35 of 2010 which creates a legal framework for a warehouse receipting system. This Act also recognises the warehouse receipt (issued on deposit of specific commodity into certified warehouse) as a document of title.
However, government is yet to appoint an agent to act as licensing authority as provided in the Act,” Tembo said.
“This further delays the process of certifying storage infrastructure. Certified storage ensures that only good quality commodity is stored. The other much awaited piece of legislation is the Commodities Exchanges Bill which will provide a legal framework for the operation of commodities exchanges and their stakeholders. These interventions will facilitate the progression of Zambia's agriculture sector.”
The government recently announced a maize bumper harvest of well over three million tonnes, a reasonable jump compared to last season’s production, and promised that its agent, the FRA, will purchase all the maize from the small-scale farmers.
Labels: AGRICULTURE, BRIAN TEMBO, MAIZE, ZAMACE
posted by MrK @ 10:12 PM
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