Stockfeed shortage looms

Source: Stockfeed shortage looms | The Financial Gazette May 25, 2017

ZIMBABWE is destined for a serious shortage of stockfeed and edible oil after only 20 000 tonnes of soyabean were produced during the just-ended rainfall season, way outside the country’s annual national requirement of 134 000 tonnes.

The 2016/17 season’s harvest is just enough to manufacture two months’ supply of stockfeed and edible oil.

With only 15 percent of the country’s yearly requirement available on the domestic market, a flood of buyers will be forced to chase a small crop, leading to price escalations.
In simple economics, price increases occur where too much money chases too few goods.
In this case, livestock breeders would have to pay through the nose to purchase stockfeed to ensure that the quality of their livestock is not negatively impacted on, otherwise they would end up fetching very little income from their animals.

To bridge the 114 000 soyabean deficit, government will be forced to import, compounding the liquidity pressures that the central bank is currently grappling with.
As of yesterday, soyabean was fetching a price of US$412 per tonne on the South African Futures Exchange.
This translates to a landing price of US$606 per tonne in Zimbabwe, inclusive of a premium on foreign currency on the domestic market.

Going by the least-cost landing price of US$512 per tonne, the country will have to part with at least US$58 million in scarce foreign currency to bridge the 114 000 tonnes deficit.
Experts said the deficit worsened after farmers reduced the hectarage for the crop during the just-ended summer rainfall season.

Soyabean production has been on a steady decline over the past few years.
Last year, farmers produced 47 700 tonnes of soyabean, down from 57 900 tonnes in 2015.
Unlike other crops such as maize and cotton that received substantial financial support from Treasury under Command Agriculture, soyabean production hardly received any.
As a result, farmers had to abandon the crop in favour of those where the availability of inputs such as fertilisers, seed and chemicals were funded by government.

Yields for soyabean have, therefore, remained below the commercial production benchmark, with a national yield of 1,5 tonnes per hectare and 0,5 tonnes per hectare for small growers, whereas yields of up to 4,5 tonnes per hectare are encouraged.
Zimbabwe Farmers Union president, Abdul Nyathi, said the soyabean sub-sector had been grossly underfunded.

What is not helping matters is that the producer price is too low to encourage farmers to produce enough to satisfy demand in the livestock and oil industry.
“With the prevailing cost of production, soyabeans lost value on the market; it became uncompetitive to produce soyabeans. This year, it was lucrative for farmers to produce maize than soyabeans because soyabean is a cash crop that requires high cost maintenance unlike maize,” said Nyathi.
“Maize pricing right now is profitable for the farmers unlike soyabeans considering the fact that for the last five years the prices were very low and in some instances the prices were at par with the maize price of US$390 per tonne,” he added.

Soybean is processed for its oil and protein for the animal feed industry.
A smaller percentage of it is processed for human consumption and made into products including soy milk, soy flour, soy protein, tofu and many retail food products.
Soyabean is also used in many non-food industrial products.

For livestock breeders, a viable alternative would have been to substitute soyacake with sunflower cake.
There is, however, a serious shortage of sunflower seed on the domestic market, which means that imports become untenable.

In South Africa, sunflower cake is readily available and can land in Harare at anything between US$420 and US$470 per tonne.
Bulawayo South legislator and economist, Eddie Cross, is convinced that the long-term solution to the sub-sector’s challenges lies in finalising the contentious issue of security of tenure, the availability of credit, inputs and developing a market for the product.

According to the Livestock and Meat Advisory Council (LMAC) Update Report for March 2017, Zimbabwe imported 78 900 tonnes of soyameal last year, valued at US$47,3 million.
“The average landed price of soyameal in 2016 was US$599 per tonne. As the scarcity of foreign currency intensified at the end of 2016, local soyameal prices surged to US$680 per tonne in December,” the report said.

“The acute shortage of foreign currency payment facilities, tight liquidity conditions and cash shortages continue to dominate the economic narrative of (the) industry,” it added.
Owing to the controversial land reforms of 2000, Zimbabwe has witnessed a huge slump in the production of key crops.

The agrarian reforms disrupted farming activities as land was expropriated from the minority whites and distributed to the majority poorly funded blacks, who also had little knowledge of farming.
The ZANU-PF government has justified the programme as meant to address past historical imbalances.
The haphazard nature that characterised the exercise resulted in Zimbabwe losing its breadbasket status in the region, assuming the status of a basket-case.

Zambia, which used to import from Zimbabwe, absorbed some of the dispossessed white farmers and is now emerging as a major powerhouse in agriculture.

Zimbabwe’s northwest neighbours are expecting to harvest 300 000 tonnes of soyabeans this year and have carryover stocks from 2016 of 100 000 tonnes against their domestic requirements of 120 000 tonnes.
Soyabean is trading at between US$425 to US$480 per tonnes in Zambia while soya-meal is at US$450 per tonnes with exports potentially landing in Harare at US$510 per tonne or US$637, inclusive of a premium on foreign currency.

At these prices, Zambia could pocket a cool US$54,7 million if Zimbabwe is to import the 114 000 tonnes of soyabean from Lusaka.
Importing from South Africa, with a landing price of US$606 per tonne, would chew US$69,1 million in scarce foreign currency resources.