Keep maize price in check

HARARE - What looks to be the worst drought in southern African has given rise to an old-fashioned commodity rally on markets, with key grain prices jumping to unprecedented levels thus causing food crises in vulnerable parts of the subregion.

Seeking to protect their populations from hunger this time, many countries relying heavily on imports have been held off for now, touting healthy stock levels and hoping other sources will come through and bring prices down.

With so much of Zimbabwe putting faith in a paltry South Africa maize crop, it is little wonder that prices will likely surge as relentless dry weather melts yield expectations for cereals.

Elsewhere in this edition, we report that the much-hyped maize import deal between South Africa and Zimbabwe might be threatened by estimates that the neighbouring country’s harvest could be insufficient to meet its national demands.

According to South Africa’s Department of Agriculture Crop Estimates Committee figures, the country’s maize harvest last year declined by 20 percent from prior year, the smallest since 2007, after the country’s main growing regions did not receive sufficient rain for crops to grow during the planting period. South Africa’s projected crop deficit has seen maize prices jump to record levels, the highest level in the least 17 years, a position that might also impact on the cash-strapped Zimbabwean government buying price.

There are several parallels between the current state of play and food crises of the past few years, including scorching weather, wilting crops and sky-rocketing prices.

Similarities abound on the macro front.

The uncertainty has led to swings in all the markets this time, but the simple common denominator of supply and demand has been the driving force of the latest grain price spike, with weather the only fundamental that matters.

Such frenzied buying leads ultimately to additional food inflation and domestic price rises can be a tipping point in countries with already struggling populations.

State buyers from top maize importing countries are sanguine so far, united in delivering a message of comfort in domestic stock levels and ability to sit out the current price surge.

But Zimbabwe has no strategic stock to talk about.

Importing grain from South Africa, which used to buy from us, leave us in a very uncomfortable position.

Grain SA, a grouping of commercial farmers in South Africa, estimate maize prices to surge by as much as 27 percent if the drought-stricken North West province, at a time we are looking at booking larger shipments in anticipation of supply problems and high prices.

What we want is to regulate the price of grain.

If the price of imported grain is high, it causes  domestic manufacturers to take advantage of the situation and raise their prices.

Then, we would find ourselves in the other ditch of overpriced grain.

Comments (1)

The price of maize has to be kept in check as a way of protecting the vulnerable members of our nation, that is good call dailynews.

inini - 8 January 2014

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