Maize Marketing in Zimbabwe
Maize or 'Corn' as it known in other jurisdictions is a crop developed from a plant grown naturally in South America and has become one of the world's largest food grains. Yellow maize is grown all over the world as a feed source for livestock - poultry, pigs and cattle and white maize is grown as an industrial feed stock to produce starch and alcohol. But in Africa, maize is largely grown as a staple food for the people. In Zimbabwe, most people feel that they have not eaten until they have had 'Sadza' with its associated 'relish' - either vegetable or meat.
It is estimated that we need about 1,8 million tonnes per annum to provide the basic staple in most people's diet, feed livestock and supply industry with raw materials.
Maize is a relatively cheap product - in the United States, probably the largest producer of maize in the world, the current market price in the Midwest, is about US$170 a tonne delivered to the silo. At this price a sizable percentage of all production goes into the production of ethanol which is then used a substitute fuel for motor vehicles. But by far the majority of the crop is used to feed livestock. The same ratio in Africa is probably 70/30 - use as a staple and as stock feed.
Because of its nature and widespread use, maize is regarded in many African States as a strategic commodity. Every government knows that this is one commodity that has to be kept in free supply.
Since the main sources of surplus maize are in the America's and they are a long way from African markets, it has always been policy in Zimbabwe to maintain at least 5 months stocks. Zimbabwe has a very variable climate - this year our main cropping areas have had on average 1200 mm of rainfall - last year it was about 600 mm - half. In fact this is not exceptional as the mean variation in rainfall from one season to the next, over the past century has been 40 per cent. In the main cropping zones of the USA it is only 5 per cent.
For all of these reasons maize marketing has always attracted a great deal of attention and support. From a pricing perspective, when maize is in short supply in the region, prices rise to accommodate the shipping and logistics costs, when the region is in surplus, the opposite happens. So in the past marketing season (April to March) we have seen severe shortages in all regional markets; this has resulted in massive imports running to many millions of tonnes. To give you some idea of what that entails, if imports to the SADC region were 14 million tonnes in the past year, this would entail some 600 sea going ships and 47 000 wagons or road vehicles. The cost would be US$4 billion in purchase and transport costs before the maize could be put into circulation.
In the current year we have South Africa with a potential 14 million tonne crop, Zambia and Malawi with 3 million tonnes each and most other States in the region will either requires fewer imports or be self sufficient. Some 7 to 8 million tonnes will be surplus to demand in exporting countries with perhaps 3 million going to deficit States and the rest overseas.
What this all means is that the basic needs of the maize industry from a marketing perspective are: price stability; adequate and sound storage and a good transport infrastructure that can move maize around in large quantities; and finally good efficient Port facilities to handle the incoming and outgoing volumes when needed.
Prior to Independence, the Government of the day (often called the Farmers Union at work) established an organisation called the Grain Marketing Board. Over the years the GMB established a national net work of Depots and Silos with a combined capacity of perhaps 1,5 million tonnes. In addition the GMB was mandated to maintain stocks at a minimum of 5 months consumption in order to make up any shortages that might be experienced because of drought conditions and before imports could arrive.
The GMB maintained farm gate prices at a reasonable level negotiated annually with the Board by farmers and then sold the maize it had in stock at a price negotiated with the milling industry. Because of the controlled nature of the market for maize, the GMB was given a monopoly and financial support whenever it incurred a loss. Transport costs were met by the Board and in this enabled a standard price which was maintained throughout the country for both consumers and producers.
The GMB at that time was a remarkable organisation, once it was decided to build concrete silos for storage purposes, the Board contracted companies to build them and a system was adopted where concrete was poured on a continuous basis until an individual silo of a standard size was completed.
In this way silos were constructed in all centers of major consumption or production. Maize could then be delivered in bulk straight off the farm, raised in elevators to the top of the silos and delivered to selected units. When required for fumigation or sale purposes the grain was simply dropped down onto conveyors and recycled. Where silos were not justified, the Board built stacks of grain bags and anyone who knows the game, knows how skillful the staff had to be to get that right. Losses to either insects or moisture were tiny.
The Board had a proud financial record and I can think of few corruption scandals although they occurred, in my 20 odd years of association with the Board as an economist. Certainly payments for deliveries and purchases were always made within a few days or immediately at the Depots. In the United States and many other countries all of these functions would be undertaken by the private sector, here because of the magnitude of the financial needs, only the State could carry the responsibility. Prices in the States are set by supply and demand in the form of large markets for commodities such as the Commodity Exchange in Chicago which turns over more transactions in financial terms than the New York Stock Exchange.
From a production perspective, maize is a natural crop for the heavy soils in the main cropping zones of Zimbabwe. It is also a useful crop to follow tobacco and Zimbabwe remains one of the largest producers and suppliers of flue cured tobacco in the world. Research Stations at Henderson in the Mazoe Valley and elsewhere became world renown for crop breeding and hybrid varieties such as SR 52. In fact the Mazoe Valley held the world record for maize yields for a number of years.
Because of our variable climate, large scale commercial farms built over 10 000 farm dams - the largest concentration in Africa, and developed the capacity to put water on crops when they needed it to supplement the rain. At Independence in 1980, they were able, at a push, to irrigate 300 000 hectares, not a great deal, but enough to ensure some stability in supply, delivering from that sector alone, about 600 000 tonnes of maize per annum.
The majority of the crop however, came from the small scale Communal farmers who planted perhaps 2 million hectares a year in an effort to be self sufficient. In a good year, this meant that the country had substantial surpluses and at one stage deliveries to the GMB averaged 2,5 million tonnes per annum. White maize attracts a small premium on world markets and despite UN mandated sanctions, this surplus of a million tonnes a year was sold on global markets, often for conversion into various forms of alcohol.
Today the Government is still the 'Farmers Union' at work but they are of a different hue and character. The GMB is a heavily politicized body which is a shadow of what it once was. The decline has been gradual, in 1992, in my view it saved the country from chaos by importing massive quantities of food when the wet season failed almost completely. It no longer has that capacity and no longer performs the dominant role it played in the past. Pricing policies are an unmitigated disaster with the Government instructing the Board to pay a price for maize at US$390 a tonne which is double global prices and well above regional prices which will average this year at about US$230. The result, farmers have grown maize and ignored other essential crops and the price of maize mean has risen to US$650 a tonne in retail stores - almost double what it was two years ago.
Contrary to what the Ministers are saying, Zimbabwe will have to import maize again this year, half of what we have done this past year but we have still not produced enough to meet demand - but that is another story.
Bulawayo, 7th April 2017