Source: Producer prices and the farmer | The Herald May 17, 2019
. . . the price of taming inflation
Late last month, Cabinet approved a proposal by the Ministry of Lands, Agriculture, Water, Climate and Rural Resettlement to review producer prices for maize, small grains, wheat, soyabeans and cotton.
The adoption of the proposal saw the new producer price for maize and small grains’ being pegged at $726 per tonne, wheat $1 089,68, soyabean $918 and cotton $1 950 per tonne.
“Cabinet has also approved that the 38,5 percent subsidy on the selling price to millers be maintained in order to prevent increases in the retail prices. In US dollar terms, the prices are now aligned to the import parity prices in the region,” said Information, Publicity and Broadcasting Services Minister Monica Mutsvangwa, when she made the announcement.
The announcement has since generated both excitement and anxiety among stakeholders from different lines of trade. Farmers are evidently excited about the development with some even considering crossing the divide from tobacco to the cereals to escape the hassles of price wars that now characterise every season.
But while farmers are rejoicing, the generality of Zimbabweans whose breakfast is incomplete without bread have been left licking bruised egos after the Grain Millers’ Association responded to the announcement by raising the price of bread citing viability pressures.
On the part of farmers, the celebrations may have come a bit too early because there is still some bit of time to take care of before the marketing season for the concerned crops begins and a lot could happen before it eventually gets underway.
For now, the farmers and the nation at large should be praying for a magic wand to quietly blow inflation away and leave the pegged prices intact, i.e. with the same value that they wielded on the day of the announcement. Probably the only way out of this inflationary quagmire, would be for Government to peg the prices in United States dollars whose value will not be easily affected by the goings-on in the local economy. This will surely hedge the farmers’ expected earnings against inflation and ultimately empower them.
The reality on the ground is that the producer prices announced for the season were set in RTGS$ and since the date of announcement, these prices have been losing value against the USD. With each passing day and the exchange rate against the dollar weakening, value is being lost. As such, the producer prices may be unviable by the time the farmers go to the market to sell their produce and later receive their payments that usually take a bit of time to materialise.
As an example, the seed cotton producer price was set at $1, 95 when the interbank exchange rate was at 2,5 percent with a kilogramme of seed cotton selling at US$0,65 then. The rate then fell to the current 3,2 percent, which has then knocked the producer price to US$0,58 per kilogramme.
There is also a high risk that some farmers may end up being tempted to sell to private buyers whose prices may be adjusted in line with the prevailing interbank exchange rate, which will prejudice the country of the much-needed grain to boost food security.
Crops like soyabeans and sugar beans that are usually sought after by most private buyers may also end up in the wrong hands since they are naturally high value products that are unfortunately also produced in small quantities nationally.
It is a fact that farmers would emerge richer if the producer prices were pegged in US$ (one of the acceptable exchanges in the country’s basket of currencies) with the payments being done later but paying close attention to the prevailing exchange rate.
For now, all stakeholders in the various sectors of the country’s agro-based economy need to be playing their part to consolidate the gains made so far in the battle to restore stability and normalcy in the economy. Incidentally, Zimbabwe has for some years had the highest maize price for a tonne in the region, if not in the world, but the producers still failed to break even and fund fresh seasons after selling their produce because of the high costs of inputs they have to contend with every season.
Essentially, the high costs of production have made a mockery of the efforts Government and other stakeholders are making to improve the lives of farmers especially with the periodic producer price reviews and the numerous schemes to make inputs more available and accessible to all and sundry.
Government has also done a lot to make the lives of cotton farmers more bearable after bringing in Cottco to contract some of them and later buy the product at viable prices that farmers were failing to get when the country was still sticking to globally set prices that only make business sense to farmers whose governments heavily subsidise them during production.
The cotton crop in most parts of the country is not yet ready for marketing at the moment yet the new producer price is already feeling the heat of inflation.
The cotton industry has for years been a battlefield littered with price wars to the extent that the majority of producers had gotten to a point where they were saying enough is enough and were quitting even for less paying crops but whose prices had some semblance of being fairly set.
In most cases Government would regulate the prices through the Agricultural Marketing Authority (AMA) and farmers would get something close to the true rewards for their toil instead of being forced to take what someone somewhere felt was good for them.
Tobacco is also one crop that managed to generate a lot of interest among producers on its inception, as merchants and the world as a whole were still coming to terms with the fact that most of the farmers producing the crop were debutants in the industry but were doing very well.
And then came the current suspected collusion by buyers, as they are allegedly collaborating to set impregnable price ceilings that have left the farmers ruing ever being a part of the industry. If only the prices of the golden leaf could be set locally, then there was going to be hope for the farmers but as the situation stands, their joy will for some seasons to come remain silhouetted against the horizon and never come to pass.