Why South Africa's maize farmers might be better off in Zambia

by Neels Blom

Maize farmers have a saying that goes like this: “Small-scale farmers pray for rain, while commercial farmers pray for drought.”

With the maize harvest just weeks away, there is probably no better time to seek a more rational way of ensuring a stable supply of our staple food. This season’s maize-growing yardstick has to be Zambia, the one country in southern Africa whose crop has exceeded expectations. Other countries in southern Africa started out well, with expectations early in the season to at least fulfil domestic consumption requirements, but the latest crop forecast has again been revised down and it is clear that maize will have to be imported and food aid distributed.

Growing maize as we do in a semi-arid region with an average of 500mm of rain a year, South Africa should not be overly surprised at the poor harvest. Similarly, Zambia’s 800mm should mean a guaranteed success every year, but neither simplistic statement presents the full picture. What it does show, however, is a supply-and-demand tension that cries out to be alleviated.

For South African farmers, erratic rainfall as a production factor is matched only by price volatility. Ironically, the unfolding crop disaster and sympathetically spiking prices on the Johannesburg Stock Exchange’s commodity futures market, Safex, come after ardent efforts in the domestic industry to reduce volatility. The industry body, Grain SA, has encouraged farmers to cut production after maize prices hit a nadir of about R600 ($85) a ton at the end of the previous season, and the banks were happy to refuse seasonal finance to farmers on the grounds that it was in the interest of the entire industry to see a price recovery. Calculated at an average for the entire growing region, and to include dry-land and irrigated cultivation, break-even for farmers in 2006 is at a miller’s price of about R750 ($110) a ton.

The price did recover, of course, holding steady at between R1000 and R1400 ($145 and $200) to a ton for much of the planting and early growing season and holding at record highs of nearly R2000 ($ 300) a ton — and the price volatility is as excessive as ever. At a reduced rate of planting and a disastrously hot and dry spell during the pollination phase earlier this year, only those who prayed for drought and backed it up with a bet on Safex will come out in the black.

This year’s poor harvest is a particularly serious disaster, but it is by no means exceptional; it is in the nature of maize growing in SA. The trouble is that SA’s maize growers find the gamble on the weather and prices irresistible, predictably over planting the year after good prices and under planting the next, when prices have collapsed. The behaviour of SA’s maize farmers has its roots to a great extent in SA’s history of a controlled market, which, in the name of self-sufficiency in the carbohydrate staple, has established a farming culture that is now a vertically integrated and self-perpetuating industry. South Africans all eat maize, either as a miller’s product or as protein harvested from stock feedlots and storage.

Demand alone, however, does not account for the continuing survival of the industry. The fact is, South African maize farmers are particularly effective at producing maize under adverse conditions and remain astonishingly efficient at keeping production costs down to acceptable levels, even with dry-land crop yields as low as three tons a hectare and at six tons a hectare under irrigation.

The question is whether maize farmers, or indeed, the economy should continue in this way. Farmers’ unions, though nominally in favour of the market mechanism, consistently call for government support on the grounds that they provide much- needed jobs in rural areas and that they ensure national food security. This call is heeded to a degree by the government through its support for emerging farmers.

Farmer’s logic dictates that they must look elsewhere to plant maize — somewhere warm and rainy, with sandy loam soils, where there is plenty of land and access is not a political uncertainty. In Zambia, only 13% of the arable land is under cultivation. Though all land is communally owed, 99-year leases assure security of tenure. White farmers who grow maize in areas specifically designated by government are universally critical of many government policies but, unlike in SA, land tenure is not among their complaints.

The growing conditions are so favourable that relatively ineffective dry-land subsistence farmers can produce five tons a hectare with minimal inputs at truly low production costs, though few of the 600,000 small family croppers plant more than one hectare. Still, Zambia’s small croppers produce 75% of that country’s consumption of about 1,2-million tons, including the commercial crop.

South African commercial farmers, who have made the leap of faith to Mkushi and Mpongwe in central Zambia, say this year that their dry-land fields will yield up to seven tons a hectare and irrigated fields more than 10 tons a hectare. Yet, while most of Zambia is climatically suitable for this kind of yield, the country can expect no more than 2-million tons a year because of the relatively low level of agricultural development.

Farmer’s logic alone, however, will not close this huge gap. Their remarkable yields notwithstanding, commercial farmers in Zambia find it as difficult to farm profitably as their South African counterparts. The big difference is that there is nothing that South Africans can do about the weather except pray, while the constraints in Zambia are mostly those of infrastructure and government policy which, theoretically at least, can change.

The constraints are not inconsiderable, however. Directly affecting production is the cost of transport. Farmers add $100 a ton to the movement of any goods, inputs or produce, to and from any port to the landlocked country, and add to that the highest fuel prices in southern Africa. All chemicals and machinery must be imported to Zambia and delays, pilfering and bureaucratic ineptitude pile on the costs.

The main factor, however, is Zambia’s controlled market. While domestic prices are not controlled, the government restricts exports to quotas it may grant once its Food Reserve Agency has established a 250,000 ton reserve from the harvest surplus. This it buys from small-scale producers at a premium to the millers’ price received by commercial farmers. The quotas remain limited, though, which depresses prices for commercial growers and is, in effect, a subsidy to consumers. More importantly, say Zambian industry leaders, it is a subsidy to voters. Another government scheme is the supply of fertiliser to 150,000 targeted small-scale growers, though farmers say corruption and a poor distribution network renders it nearly ineffectual as a factor in the market.

The Zambian government’s presence in the industry provides a degree of security for subsistence farmers — the artificial domestic surplus it creates forces those commercial farmers who can irrigate to plant winter wheat to survive. For farmers who can afford pivot systems, this is a reasonable strategy, but it does explain why farmers might perversely wish for drought that would cut subsistence maize production and give the price benefit of a resultant shortfall to commercial growers. In the past decade, Zambia has had two severe droughts, vindicating the government’s food security policy. But Zambia controls 30% of the groundwater in the region which, if used for commercial irrigation, would ensure a maize supply no matter how severe the drought.

It is obvious what needs to be done : Zambia must open its market if it is to provide an incentive for large-scale maize farmers to develop the industry and secure its food supply, and South Africans must forget about flogging its barren soil and begin exporting its expertise and its capital. That approach is a long-established principle of the Southern African Development Community, but with SA’s government committed to the political expedient of establishing emerging maize farmers and the Zambian government’s dependency on its rural voters, the chances of a rational outcome are slim.

Business Day