ZNFU PRESS RELEASE ON THE STATE OF AGRICULTURE, MAIZE AND WHEAT MARKETING IN PARTICULAR
The agriculture sector has been identified as the main employer in the country with the greatest potential to reduce poverty. Its contribution to the Gross Domestic Product has remained below 20% and the sector has recorded marginal growth in recent years.
The 2009 budget recognized this fact and government reiterated its commitment to reverse these worrying trends and agriculture has been identified as one of the priority sectors in a bid to diversify the economy away from the Mining sector. However, recent developments reveal a gloomy picture as the sector is grappling with many challenges ranging from the unstable macroeconomic environment to sector specific issues, especially in relation to crop marketing.
STATE OF THE WHEAT INDUSTRY
The wheat industry is one of the few agriculture sub-sectors which have recorded significant growth in recent years. Most of this growth took place after the year 2000 and has happened because Government Policy has encouraged all the stakeholders in the value chain from farmers, millers and bakers. Consequently, wheat production has increased steadily from about 30,000mt in the 90s to about 190,000mt in 2008 thereby saving the country enormous foreign exchange.
Currently it is no longer necessary to import wheat and Zambia is the only country in Africa that is self sufficient in wheat. The quality of the local wheat is also rated very highly to an extent that it is not necessary to blend the local wheat with imported wheat.
The contribution to the economy of this expansion in the wheat industry has been enormous ranging from increased taxes to government through VAT, tax on profits and job creation throughout the value chain. Wheat production has resulted in an expansion of irrigation capacity in the country which has also facilitated increased production of early maize, greatly improving the food security of the nation.
To achieve this, farmers have had to borrow heavily to finance wheat production over the years. Wheat is generally an expensive crop to grow because it involves huge sunk cost investments in dams, boreholes, irrigation equipment (centre pivots) and other farm machinery.
It is grown during the winter months between April/May and August/September, purely under irrigation which depends on consistent electricity supply and electricity costs are a huge expense in growing wheat aside from other input costs. The wheat industry is an infant industry, which has attracted many new entrants in recent years hence most farmers are still highly indebted to the banks. Therefore, government policy plays a crucial factor in the viability of the industry if it is to continue growing.
Unfortunately, the current wheat marketing season threatens to reverse all that has been achieved thus far. The wheat industry is stuck with an estimated 60,000mt of wheat harvested in September last year which has no market. The underlying cause of this problem is known and has been thoroughly discussed with government.
In September last year, Ministry of Agriculture allowed three millers to import about 7,000mt of wheat and the Union has since established that to the contrary, the millers and/or traders abused the import permits issued by illegally importing up to 25,000mt of additional wheat into the country. In addition government went ahead and agreed to accord wheat from SADC countries the duty free status under the Free Trade Area. This was contrary to the position advanced by the farmers; hence since the SADC FTA took effect last year, there has been a dramatic shift towards importing wheat from South Africa. We have raised concerns over the origin of this wheat because South Africa is a deficit producer of wheat.
Resulting from this, there is currently no market for the local wheat and the price has dropped to uneconomic levels in view of the high costs of inputs for fertilizer and fuel experienced last season. The marketing of wheat was conducive up to the 2007/2008 season because of the long standing agreement with Government that wheat imports were not permitted until the local crop had been sold. However, farmers have witnessed a U-turn on this position leaving local farmers in limbo.
Efforts to resolve
The ZNFU presented various proposals to government on how to dispose of this wheat which included the government facilitating purchase of the wheat through the Food Reserve Agency (FRA), government providing an export rebate to allow for wheat exports into the region and Zero Rating VAT on wheat, wheat flour and bread to stimulate demand in the domestic market. Despite the urgency of this problem we have had no feed back from government even after seeking audience with all the concerned parties to the highest level in government. We are also still waiting for government to take action on the perpetrators of illegal wheat imports.
The Union is greatly disappointed by the lack of action by government in resolving this industry problem which has sent a negative signal to all wheat growers in the country.
Against this scenario, we would like to warn that long term sustainability of wheat production hangs in the balance and this could lead to a shift towards dependency on imported wheat. This would be a major policy reversal which could cost the country dearly through loss of jobs, revenue, foreign exchange savings and all the multiplier effects that accrue to other industries servicing the wheat industry.
At this juncture, we would like to urge the government to remove all export bans on all agricultural products to enable producers pursue private sector driven marketing arrangements for sustainable production.
STATE OF THE MAIZE INDUSTRY
Since the crop marketing season ended in September last year, we have witnessed dangerous developments in the maize industry to an extent that the future of maize production is at stake. All the stakeholders in the maize industry have been fully aware of the general rise in the cost of inputs in producing maize and the general rise in food prices which were expected to follow.
The ZNFU foresaw this last year and engaged Government with a proposal to subsidize fertilizer, the key input, across the board to all farmers. We are all aware that this proposal was not acted upon because the government opted to continue with the Fertilizer Support Programme which as we all know is selective and last year was targeted to reach 200,000 small scale farmers only.
This means a majority of farmers bought inputs at retail prices which were as high as K315, 000 per bag in some parts of the country. To add onto this, the cost of fuel shot up adding on to the transport costs. Therefore, farmers have just harvested a crop that was very expensive to grow. We further observed that when the price of mealie started to rise, after the crop marketing closed, the government spent huge sums of money to subsidize maize channeled to millers in an attempt to keep prices affordable.
Efforts to Resolve the Problem
Against this background, the ZNFU held technical consultation meetings with the Food Reserve Agency (FRA) and the Ministry of Agriculture and Cooperatives and made available the costs incurred by small scale farmers in growing the maize, this showed that for farmers to cover only variable costs a minimum price of K75, 000 per 50 Kg bag should be paid to the farmer. We are also aware that an independent analysis revealed to FRA that based on the costs that prevailed last farming season, a farmer needed to be paid higher price than K65, 000/ 50 kg bag. However, prior to the conclusion of the consultations, a surprise announcement was made by the FRA where it was stated that the FRA floor price had been set at K65, 000 per 50 Kg bag.
The ZNFU managed to salvage the consultation process by meeting with the Minister of Agriculture & Cooperatives and the Permanent Secretary, the Chairman of the Food Reserve Agency and the Executive Director and the Special Assistant to the President for Project Implementation and Monitoring.
At this meeting, the ZNFU presented its case and the Minister of Agriculture & Cooperatives undertook to consult with colleagues in government and thereafter convene a follow up meeting to conclude our discussions. To our surprise, the ZNFU received a letter from the Ministry of Agriculture & Cooperatives recently advising that the floor price issue was closed. Also enclosed were a set of “cooked minutes” which record of the meeting did not reflect entirely what was discussed during the meeting.
We are dismayed that Government has unilaterally decided to stick to the announced floor price making the entire consultation process a one sided show and baseless.
The Supreme organ of the ZNFU, the Council which is made of representation from 58 district farmers associations across the country met in Lusaka and resolved to reject the FRA floor price.
It is regrettable that the Ministry of Agriculture and Cooperatives and FRA have misled government on this issue because they have not taken into consideration the serious implications of the FRA floor price on farming as a business and on the future of maize production. We feel MACO has abandoned its farmers.
We also demand that Government instructs the Office of the Auditor General to conduct an Audit of all the Millers who benefited from the maize subsidy programmes immediately, to ascertain how the benefit of the subsidy was passed onto consumers.
It is common knowledge that mealie meal prices did not come down hence justice demands that all those who may have abused the subsidy programme should be made accountable for profiteering at the expense of consumers and be banned from dealing with government in future.
The way forward
The ZNFU would like to state that as agreed at the Council meeting, District Farmers’ Association leadership should intensify their efforts to:-
· Urge all farmers to ensure that they stagger their sales of maize and only sell their maize at an economic price depending on their location. We are saying; only sell enough maize to meet your immediate needs until you are able to secure the right price for your crop.
· Urge farmers in the various districts to consolidate their maize and use the ZNFU SMS system and the ZAMACE to sell their maize.
As farmers, farming is a business and producers will only be inspired to grow a crop with the right price incentive. However, looking at the FRA floor price, we would like to repeat what we said immediately after the price was announced, that is to say that the K65, 000 per 50 Kg bag is demeaning to farmers. The least FRA could have done is to pay farmers a break even price of K75, 000 per 50Kg bag. With such signals to farmers, the future of maize production in the country hangs in the balance.
The FRA price is a reference price for traders and millers. Currently, into mill prices in Lusaka are ranging between K55, 000 to K65, 000 per 50 Kg bag which is pushing farm gate prices to between K40, 000 and K45, 000 per 50 Kg bag. Government should be aware that small scale farmers are selling their maize at prices as low as K40, 000 and K45,000 per 50 Kg bag. And with the few FRA satellite depots that will be in operation this year, farmers will have to incur higher transport costs to get to the satellite depots, hence, the farmer will be selling at a loss, whether into mill, at farm gate or to FRA, which means the FRA will be as good as a briefcase buyer. This situation will be made worse by the chronic delay in FRA paying farmers. Our honest assessment of these developments is that the ultimate beneficiaries of the announced FRA floor price will be the briefcase buyers, the grain traders, millers and retailers of mealie meal leaving the farmers poorer and consumers languishing. How do we make farming operate as a business if this is what is obtaining on the ground and if Agriculture is a priority sector in poverty reduction!
We would like to remind government that in a surplus year, private sector participation in maize marketing is low which requires a more prominent role of government to salvage farmers from the supply and demand in balance situation.
Two years ago, there was a surplus eminent, government backed the FRA to borrow money, then FRA quickly moved in to mop up the crop by paying the farmer a decent price and exported the excess crop and this resulted in a win win situation for all players. This year, the government has projected a surplus, and this demands government involvement and quick action. If this situation is not carefully managed, maize production will be down next season and the government will have to import. We should not forget that the surplus production we have witnessed this year is as a result of the good prices offered to farmers last year.
In conclusion, it is eminent that there are serious challenges facing the agriculture sector and the future is bleak. We would like to reiterate that the ZNFU is a longstanding seasoned farmer organization such that our objective is to provide timely and genuine advice to government. We therefore pledge to continue to participate in supporting government through strategic partnership.