The Zambian maize price needs a free market

IAPRI; maize; FRA; agro

Input costs for commercial maize farmers in Zambia right now are running at about US$1 600/ha (K14 400/ha). At yields of 8t/ha (8 tons per hectare) and a price of US$200/t (K 1 800/t) or K90/bag the commercial farmer will just break even.

It is a little more difficult to work out the input costs of small-scale commercial maize growers. Their infrastructure costs are lower but their transport costs might make it uneconomical to sell maize unless they are close to a depot. The yields of the small-scale commercial farmers are reported to be around 3t/ha (60 x 50kg bags).

Small-scale commercial farmers use fertiliser, but their lower yields should make the fertiliser cost per ton on par with that of the commercial farmers.

The labour costs of the small-scale farmers should also be factored in. As agri-business owners they need to be profitable.

WORLD MARKET

The current global price of maize is generally low, because the market is well supplied.

Unfortunately, Zambian government interference with the maize price last season, did not help the country’s farmers.

Instead of allowing export, when there was a healthy surplus in Zambia, government kept the borders closed for maize exports.

The maize farmers could have made some money out of their maize crop and the government could have earned foreign currency. Some seasons are more profitable than others – that’s the nature of farming and good seasons help the farmers weather the bad ones. The DRC is a valuable export market open for development were the borders to be consistently open for export trade.

As it is, the DRC imports maize from South Africa since its government does not see Zambia as a stable supply source.

PROTECTION, TARIFFS AND A FREE MARKET

It is simple enough to prevent surplus dumping through import tariffs. The wheat market is particularly vulnerable to dumping, especially to the dumping of low quality wheat.

Dumped wheat creates an artificial surplus which in turn creates an opportunity for millers to buy high quality, locally farmed, wheat at low prices, and blend it with cheap, low quality imported wheat.

The agricultural economy of any country is delicately balanced, a balance which in a free-market system is driven by supply and demand. However, dumped produce mostly originates from countries where farmers are heavily subsidised or supported. In this case, the rules of the game are skewed to favour one player, generally the bigger one.

Agriculture is Zambia’s biggest job provider and the multiplier effect of agriculture on the GDP is six plus times greater than its direct contribution to GDP according to a study done in South Africa. Consider the appalling effect of a destroyed agricultural landscape – even a partly destroyed one.

KILL REGIONAL AGRICULTURE AND WAIT FOR THE PRICE RISE

Once local farmers are out of business, and there is dependence on an external source for any essential commodity, it is a done deal that the low prices of imports (even on dumped produce) will gradually become high prices.

So, while the millers, and possibly the traders, and equally possibly the politicians on election campaigns, may gain, in the short term, the long-term outlook is not that rosy for anyone.

In a country like Zambia, where agriculture plays such a vital role in the economy, it is not wise to ignore possible future scenarios.

LET COMMON SENSE PREVAIL

The current development in which government has opened the borders and lifted the 10% export duty is clearly a move in the right direction.

If the state can honour its promise of leaving the borders open for trade in both directions, the Zambian agricultural sector has a far greater chance of making progress and the consumer, too, will benefit from more stable Inshima prices

share this