Analysis: FELIX TEMBO
WHEN the minister of Agriculture announced the price at which Food Reserve Agency (FRA) was to buy maize for strategic reserve, I refused to accept his price though my immediate reasoning was that the government wanted to maintain the prices of mealie-meal. Firstly, it did not make economic sense in that it was the same price which was offered last marketing season.
That commodity was produced when the cost of fertiliser was costing K280 on average. The cost of seed for a 25kg bag was fetching around K200 while other inputs such as herbicides were relatively cheaper then, than they were in November 2015.
The offer price defied the law of economics; when supply is more than demand, prices drop and vice versa. This yearâ€™s maize demand
outweighs supply by far and good enough, demand is not only coming from within but beyond borders such as South Africa, Zimbabwe, Malawi, DR Congo, Kenya, Mozambique, Botswana, just to name a few. However, my understanding was that the government was trying to curb the mealie-meal price increases which were to come with maize price increases.
Some reports reaching my desk are that some commodity traders were already buying at prices higher than K85 per bag especially along border areas. This is inevitable because the demand for the commodity is unprecedentedly high.
Now that the price of maize has been increased by K10, I can foresee the price of mealie-meal going up in August as soon as FRA starts buying maize; it could reach K100.
What farmers need to know is that they are in business and need to be planning well ahead. By now they should have an idea already of how many hectares will be put to each enterprise this season.
With this information already in their planning books, today is the best time to buy inputs for the next planting season (2016/17). There are basically two main reasons which should make them to buy inputs today and not in October. We know that of all inputs that we use in agriculture, most of them are imported except seed (though horticultural seed is also imported).
When these inputs are imported, the price the exporters quote is in American dollars. We know that according to the laws in Zambia, we are only allowed to trade in the local currency; therefore, these prices are converted to kwacha at the ruling rate. Zambia is a mono economy where we depend on copper as the forex earner.
Ever since the prices of copper slumped some two years ago, our kwacha has been depreciating every day and it may continue until copper prices and other parameters change to our advantage.
For instance, a bag of fertiliser costing US$40 means you have to pay K440 now as opposed to K392 you could have paid for the same bag two months ago. Suppose the kwacha continues on the downward trend, the cost of the fertiliser will even increase more in two monthsâ€™ time.
If you bought the fertiliser two months ago, you could have been making a saving of K48 per bag. This meant that you could have already started to increase the profitability of your business (assuming the storage costs are negligible).
This is also true for herbicides that go with the production you anticipate. Unless you will be saving dollars, it will be pointless to keep the money and wait until when you hear God â€˜talkingâ€™ to us that he is about to open the heavenly taps.
The other point farmers need to be aware about is that most input suppliers have a tendency of adjusting prices in August/ September.
Basically, this is the time most of them bring in new stock after taking orders from farmers. Additionally, that is when the new stock of seed would be processed and ready for sale.
Therefore, these will attract new pricing and with the current performance of our currency against the dollar, you expect an upward adjustment. Furthermore, we have mastered the behaviour of farmers when the rains start; they panic and may be forced to buy at any price to beat the planting time. However, a thrift farmer will buy his or her inputs now. This is the wisest thing to do.
Lastly, we know that we are brothers and sisters in this country; no individual is from Mars. We are all urged to be tolerant towards one another.
We will not benefit anything by being violent against our own relatives. For those that feel that they have too much energy, let them fight with the soil so that at the end of the day, they will have something to smile at.
We should also beware of fake seed and agrochemicals including fertilisers. Ensure that the fertiliser bags that you are buying are weighing 50kg and buy seed from the source if you can afford, otherwise, it has to be from recommended distributors.
This author is an agribusiness practitioner.
Analysis: FELIX TEMBO