New Marketing Policy Threatens Zimbabwean Maize Farmers' Viability

When the government here announced a policy requiring farmers to sell their grain only to the state-owned Grain Marketing Board at a fixed price, Beauty Sandukwa dutifully delivered her maize.
Sandukwa has worked the land for nearly 20 years. This year, she harvested 42 tonnes of maize from 20 hectares.

But she says the government didn’t keep its end of the bargain. “It’s been four weeks now, but I have not been paid,” she says.

The new policy isn’t the only thing causing Sandukwa’s instability. In 2015, she says she signed up to receive farming supplies through a program called Command Agriculture, which first launched that same year. Under that program, the government dictates the types and volume of crops a farmer will produce, as well as the price at which they will be sold. In exchange, the farmer receives supplies, including seeds and fertilizer.

The government said that the program would help replace imported maize with domestic maize. But farmers said the promised supplies were delivered late, or not at all.

Sandukwa says she received 1 tonne of fertilizer through the Command Agriculture program, the cost of which will be deducted when she sells her maize to the Grain Marketing Board. The problem, she says, is that she doesn’t know what that amount will be.

When she needed additional fertilizer and supplies, she says, the government couldn’t provide them. Now, she buys them herself. “l ended up selling one of my cows to cover the costs,” she says.

The new regulation requiring that farmers sell their maize to the Grain Marketing Board was enacted in June. Under that regulation, farmers are no longer allowed to move more than 250 kilograms (551 pounds) of the crop from one area to another, unless it’s being transported to the Grain Marketing Board.

Rockie Mutenha, the general manager for the Grain Marketing Board, says the regulation is meant to keep maize from being smuggled to other countries, as well as to protect farmers from unscrupulous buyers.

The Grain Marketing Board will use the maize to ensure the nation’s food security, Mutenha says.

For farmers, though, the regulation makes growing maize unaffordable. Seeds, fertilizer and other supplies were purchased using U.S. dollars, which was the gold standard currency in Zimbabwe when the growing season began. But the Zimbabwean government has since issued its own currency, which swings wildly in value.

Mutenha says the Grain Marketing Board has increased its fixed price per tonne from 726 Zimbabwe dollars ($72) to 2,100 Zimbabwe dollars ($208) to account for inflation.

But that’s not adequate, says Antoinette Chigwe, the chief economist at Commercial Farmers Union, a major farmers’ organization. If the government continues to force farmers to sell to the Grain Marketing Board, many will likely abandon farming in upcoming seasons, she says, or break the law.

“They may need to look for more lucrative markets,” Chigwe says.

Full article...

Will the revived Uganda commmodity exchange avoid the problems of the old one?

Grain traders embrace new commodity exchange body is the headline of a story in Uganda's New Vision newspaper.

The Minister of Trade and Cooperatives said,  “I’m glad that Uganda National Commodity Exchange has been put place and will work hand-in-hand with the warehouse receipt system to license and monitor our warehouses. This has been long overdue. You know that the grain industry has been in existence, but almost informally, with everybody dealing in grain or owning a maize mill, without any regulations. Our neighbours are walking in and out buying our commodities without any structure,” she said.

New Vision reports that the UNCE  has been incorporated as the new body responsible for structured trading of grains in the country. It replaces the now-defunct Uganda Commodity Exchange, which had been grappling with an array of operational setbacks and a low capital base since inception in 1998.

How will the new exchange be different from the old defunct one?

A report elsewhere says, ' Unlike the Uganda Commodity Exchange, which was fully owned by government, UNCE is largely a private-sector owned, with government owning just 20 per cent stake through the Uganda Development Corporation.'

Between 30 and 40 per cent of grain produced annually in Uganda is said to be lost due to lack of proper and modern storage facilities, let alone poor, undeveloped and unstructured marketing systems.

While a commodity exchange may be a good thing towards a regulated market, experiences in other countries have shown that it cannot be expected to solve the many problems involved in the supply chain of various commodities. There are many production, post-harvesting handling, marketing and distribution issues that need to be dealt with long before a centralised infrastrcuture like a commodity exchange can provide maximum benefits.

What is the average quality of the commodities to be brought to the exchange for trade? If low, then having a fancy exchange will not make those low quality commodities anymore marketable than they would have been. How good is the road infrastructure to get those commodities from scattered regions of a country to the exchange? If poor, they make get to the exchange when they have already lost a lot of their potential market value, and the transportation costs to the exchange on those poor roads may not be compensated by the prices they will fetch. And so on and so forth.

While a marketing free-for-all does often jeopardise poor rural farmers against visiting buyers in whose hands all the marketing advantages exist (access to information, finance, transportation, storage etc), there has sometimes been a naive belief that a commodity exchange can be a cure-all for the problems that plague a supply chain. Commodity exchanges in other African countries have in some cases failed because many other problems they were hoped they would solve needed to be tackled at earlier points in the supply chain.

 African Agriculture 

Plans for Tanzania commodity exchange advanced

There is excitement in Tanzania about the impending establishment of a commodity exchange. Neighbour Uganda is also on the brink of launching a commodity exchange.

The issues it is hoped an exchange will solve are similar in both countries, as are the challenges to success.

African Agriculture

Uganda: middlemen benefit from crops trade at expense of farmers

“Unlike traders who make instant profits, we farmers work on probabilities. Even if you work hard, it’s the traders to decide which prices to give us.Apart from saving my family from starvation, I hardly show a major achievement from farming.”

This is the lament of struggling Ugandan farmer Vincent Mpoza.

Paul Kibwika, the head of Extensions Education at Makerere University College of Agricultural Sciences, adds, “Agricultural value chains in Uganda are not coordinated. There are many actors whose relationship is that of exploitation. Everyone tries to exploit the other instead of having a mutual relationship where everyone can benefit.”

“Farmers, being at the extreme end on the production side of the chain, are always the most disadvantaged because they are at the mercy of other actors, mainly traders,” Kibwika explains.

full article...New Vision

Can cotton farming in Africa be made viable again?

Chido Makunike

Cotton farming in many African countries has declined over the decades.  Once a lucrative export crop whose farming was accessible to even small scale farmers, the cotton sectors in many African countries are a shadow of their former selves.

Among the challenges are global prices that are no longer as consistently profitable for farmers, the rising cost of inputs, comparatively low yield productivity, and the challenge of competing against countries that subsidize their cotton sectors. Many African countries that used to have important cotton ginning operations have seen them shrivel in the face of hard-to-beat competition (China), leaving the farmers even more vulnerable to distant market forces.  

An important part of Burkina Faso's coping strategy is to now rely on gene-modified seed for up to 40% of its cotton planting to try to increase per hectare yields. Good overall cropping conditions in the current 2012/13 growing season have yielded forecasts of 532,000 tonnes of cotton in the versus 414,000 tonnes last year.

In some countries organic cotton provides an interesting niche market for small numbers of farmers. But generally, the fortunes of African cotton farmers have been declining over the years.
 
Cotton farmers and buyers were this year engaged in price stand offs with each other in at least two countries; Zambia and Zimbabwe. Buyers were accused by farmers of offering much lower prices than they had promised at the start of the season. The buyers protested that a global cotton glut had driven down prices.
 
Governments had to be seen to intervene, and they made threatening noises against the buyers, but short of subdising the farmers in one way or another, which is always short term, there is little they can do. Regulating the sector can address various important issues, but price is the least amenable to regulation.

Rakesh Machanda explains some of the difficulties the cotton sector in Zambia faces, but his example could apply to many other countries. In that country a group of cotton farmers outraged at prices set on fire a truck carrying cotton lint. As in other countries, the 2010/11 prices had encouraged more cotton farmers to plant the crop, accounting fora rise in out put from 180,000 tonnes to this year's 200,000 tonnes.
   
He explains that the farmgate price of cotton In Zambia this year was half that of 2011. Smallholder cotton farming is labour-intensive at every step, and wages in Zambia in 2012 are double what they were in 2011, according to Machanda. Even before factoring in all other costs, this is obviously a losing proposition for the cotton farmer.

In an article entitled 'Cotton farmers’ return to field in doubt,' the Sunday Mail (Zimbabwe) said many discouraged farmers were likely to abandon growing the crop in future seasons, which is not at all surprising given the economics of farming it. This death of the cotton sector by attrition has been observed in many other countries over the years.

According to the article, 'Most farmers said they got an aver­age of $120 per hectare’s production, which was less than half the cost they incurred on inputs. This year cotton marketing was dis­rupted by a price impasse between gin­ners and farmers, with the former offer­ing as low as $0,29 per kg while the latter wanted at least $0,85.'

The price gap between farmers and buyers was huge, "and this season proved that even government cannot save us," said one farmer. The Zimbabwean government in July tried to help the farmers by decreeing prices of between 77 and 84 US cents per kilo for their cotton, but buyers ignored this and offered an average 35 cents a kilogramme.   

The cotton marketing situation was much the same in Malawi. Farmers were left grumbling about merchants' price offers (average US 36 cents/kg), which were below their costs of production and half the average prices of the 2010/11 season. That season's prices actually enticed many more farmers to grow cotton this season, causing Malawi's 2011/12 cotton harvest to rise to 244 000 tonnes compared to only 52 000 tonnes in 2012/11, according to a report President Joyce Banda presented to parliament in May.

Many of the farmers who took to growing cotton did so after having abandoned maize, whose bumper harvests in Malawi in recent years have lowered prices. Not even government assistance with various inputs was enough to make the farmers break even.

The problems of cotton farmers in some parts of Malawi (Zambia and Zimbabwe too) were compounded by long dry spells early in the 2011/2012 rain season, forcing some of them to replant up to three times.

The governments of the three neighbouring countries have pledged to get together to see how they could 'protect the interests of cotton growers.' But the various market and production forces they are trying to cushion their farmers against are probably more powerful than anything they can. 

Farmers in Malawi also suspect collusion between the cotton buying companies because they were said to all be offering the same price. If so, this would be a real-world example of how the 'free market' gospel often doesn't work as intended in undeveloped markets, and why governments often feel compelled to intervene in the marketing of crops.


The harsh environments (hot, dry, often marginal soils) in which cotton is often grown are not readily suitable for other crops, and certainly not many that fetch hard currency on the international market.

Burkina Faso's location in the dry, arid Sahel and cotton's role as the second most important foreign currency earner mean that despite the declining economy of farming it, there are no quickly, easily obvious alternatives. So the country has gladly received a $90 million grant from the World Bank to increase its cotton production, but it remains to be seen whether this will improve the sector's intrinsic viability/competitiveness in the face of global cotton trends, or whether the money would have been better spent to begin to explore how Burkina Faso can earnestly begin to reduce its economic dependence on cotton.  

The good/bad cotton marketing season of recent years are of course entirely normal. But the general trend over many years suggests that small scale cotton farmers in most African countries will find cotton an increasingly difficult crop from which to make a viable, let alone profitable living. It is time to help cotton farmers identify new niche crops.  


African Agriculture

Benefits of grain export bans debated in Tanzania

Tanzania is one of many African countries where the availability of key grains like maize, all of them mostly rain-fed, can be very unpredictable from season to season, depending on the climate.

 When there is a shortage of these grains for one reason or another, the food security (and therefore political) implications are so pressing that governments feel forced to intervene. Governments that make a lot of noise about the necessity of other countries opening up their markets more, suddenly have no qualms about instituting measures like price controls and export bans.

A meeting held in Tanzania to discuss the pros and cons of these periodic grain export bans had a number of speakers saying they not only don't achieve the intended result (securing local supply in a time of shortage and keeping prices 'reasonable'), they cause a number of other problems as well, including inviting retaliation from trade partners. In any case, another speaker said, where rice dynamics favour farmers or traders exporting rather than selling on the local market, they will find a way to get the commodity to the more lucrative market, export ban or not.

Prediction: Particularly for maize, for the foreseeable future no amount of research, data or arguing will stop African governments interfering with maize marketing at one level or another, including banning exports (or trying to) when there shortages. ALmost all African governments panic when there is a maize shortage.     

African Agriculture

If the price of cotton fell by more than 50% since you planted, would you bother to harvest your crop?

Farming is a business, various ‘experts’ constantly tell farmers, as if they didn’t already know.

Other ‘experts’ preach the religion of the free market to governments, warning them to resist the temptation to interfere in the pricing or marketing of crops.

Here’s a current, real world example of how it is neither easy nor straightforward for governments to leave small scale farmers completely to the whims of the market.

Global cotton prices have slumped this year. Farmers in an area of Zambia who took up cultivation of the ‘white gold’ cash crop are in deep trouble because this year’s selling price is as low as half of last year’s. This is obviously a calamity for them.

The economics of the crop are so bad this year that the cotton farmers in Bbondo ward are reported to be leaving their ripe crop un-harvested in the fields, with some considering burning it.

As ZANIS (news agency) reports, ‘The farmers have decided to suffer double loss by not harvesting the crop only to sell at a give-away price.’

They are being urged to at least harvest the crop for storage, possibly for a time of better prices. That sounds like perfectly logical advice, but it assumes that the farmer can afford to hire labor to harvest and store the crop. This assumption is probably invalid where the bottom has fallen out of the cotton market. An already indebted farmer (seed, pesticides, fertilizer) who has no prospect of recovering his costs and paying his debts, let alone making a profit, must ponder if it makes sense for him to sink deeper into debt to harvest a crop that is a write-off for him anyway, no matter what he does now. And even if he wanted, the usual sources of credit (inputs vendors, family or local loan sharks, etc) are probably largely closed off anyway in a situation where everybody knows how low cotton prices are.

Some of these farmers abandoned maize to grow cotton. Zambia’s maize bumper harvests of recent years have been great for the country’s food security, but surplus means the price for farmers aren’t so great. Although the maize price is controlled by government to try to strike a balance between affordable prices for consumers and a motivating price for farmers, this is not an airtight system.

When the market is flooded, the producer price drops, especially in remote areas where the power of government edicts is often only theoretical. The government may announce a minimum price, but whether they will come to your remote village to buy your maize at that price is something else altogether. You may have to sell to private sector middle-men, whose offered price will be much lower than the government price in a time of surplus.

So these farmers have lost in a number of disastrous ways. They encounter not just huge losses on their cotton, but many of them possibly ruin, or at least years-long hardship from an investment that went very sour. Even if they would like to salvage their crop by harvesting and storing it, they may not be able to afford the added labor costs/losses of doing so. It is a sign of how bad the situation is when a farmer who has tended his or her crop in harsh conditions for months contemplates cutting his losses by abandoning it!

For those farmers who abandoned maize cultivation to devote all their resources to cotton, the situation is even more grave. They put all their eggs in one basket so cannot count on at least some income from maize proceeds. If they had counted on the ‘extra’ income from cotton for purchasing their maize needs, they don’t have that money and they don’t have any household maize stocks to fall back on.

Well, that’s how business is. Sometimes you win big, other times you lose big. ‘Farming is a business,’ tough luck, better luck next time, end of story.

But it cannot be the end of the story for the government concerned. It must be seen to be doing what it can to soften the blow for the farmers.

A councillor in Bbondo ward ‘has called on government to intervene in the pricing process and consider the plight of cotton farmers by adjusting the cotton price upwards.’

The free market/IMF-type response to this is that governments shouldn’t interfere in the workings of the market by fixing or shoring up prices. (At least in poor countries-rich countries are allowed to suspend the religion of free markets when it suits them-subsidies, price various supports, etc.)

The government may not be able to save the situation for these farmers, but neither can it be seen to have completely abandon them simply because that is the free market gospel according to the IMF and others.

The farmers have learned some very expensive lessons which they will no doubt be incorporating into how they do things in future, but they are also in deep trouble now, not tomorrow.

At least the farmers hadn’t planted GM cotton, whose itnputs costs are far higher, and whose seed cannot be saved in case you don’t have the money to buy new seed the following season, as is likely the case for the cotton farmers of Bbondo ward. But with the Alliance for a Green Revolution in Africa (AGRA) on the loose and with a presence in Zambia, it may be just a matter of time before the famous/infamous ‘Bt cotton’ is introduced. It will be recalled that the higher (often borrowed) costs of growing GM cotton have caused many farmer suicides in India when things didn’t go according to plan.

When the selling price of your crop drops as much as it has done with cotton this year, the ‘old fashioned,’ scorned, ‘low-yielding’ non-GM seed currently in use may be remembered with much fondness for a bad year still giving them the possibility to battle on the following year. Ts he armchair agriculturalists in various salaried isalaists ethose who say it is

African Agriculture

A second wave of formal commodities trading takes hold in Africa

African countries are often urged to open up their agricultural markets by their 'development partners', but this is not as straightforward as it must seem to those dispensing this advice. Particularly for key 'political' food security crops like maize, there are times when there are very strong pressures for governments to be involved in their pricing and marketing.

In the 1990s, when the religion of 'structural adjustment' as defined by the International Monetary Fund reigned, many African countries established commodity exchanges. Among the positives they were designed to deliver were greater market information, more transparency in pricing and better prices and terms for farmers.

Almost none of the countries that seriously tried to have functioning commodity exchanges then still do. The reasons for the experiment not working quite as intended are many and varied, and depend on who you ask. The result is that there are sectoral auctions held (e.g. tea at Mombasa, Kenya or tobacco in Harare, Zimbabwe) but almost no countries with all-encompassing commodity exchanges. In particular, government price controls on maize are the norm rather than the exception.

Ethiopia is a recent exception to the rule. For a few years it has run a much-hyped commodity exchange. The  positive hype seems to mainly emanate from the exchange itself, so it is difficult to say whether it will in the long-run avoid the problems previous efforts in other countries have encountered.

But for now, other African countries are impressed and several seem eager to apply the Ethiopian example to their own circumstances.          

That is what 'Africa takes a second shot at commodities trading' in the Financial Times (UK) is about.

Writes Eleanor Whitehead, 'The ECX has been credited with giving farmers access to real time pricing information, improving profits and productivity, reducing market segmentation and boosting export quality. The stabilisation of domestic supply chains is also supporting agro-processors and exporters, diminishing concerns about once rampant contract default. All since its launch in 2008.'

Tanzania is just one country that has gone to the ECX to learn its secrets. others said to be in talks to have the Ethiopians help them set up their own exchanges are Ghana, Mozambique, Rwanda and Nigeria.

The article says 'Hopes for greater success this time around are higher because – unlike before – countries are learning from an African success rather than trying to transplant exchange models wholesale from more sophisticated Western economies.'

Eleni Gabre-Madhin, CEO of the ECX, is quoted as already excitedly looking at the possibilities of collaboration with other African exchanges.

“If more African countries build commodity markets we can start to cross-list and create regional indices: an African coffee index, a West African cocoa index, an East African coffee index, a cotton market – and
develop an African presence in global markets,” Eleni Gabre-Madhin says.

It sounds good but caution is required. Cross-border exchanges are an excellent idea given African countries' small and scattered production of many agricultural commodities, but it it is not difficult to foresee some of the structural problems that would prove daunting, as well as the political ones. Certainly there are a lot of in-country marketing problems that national exchanges could play a big role in helping ameliorate.

However, African governments are very unlikely to completely leave political food security crops like maize (or rice, even though most is imported, and mostly by private players) to the vagaries of the market.  And even in Ethiopia, if there is global glut of its economically key coffee crop, don't expect the government to just shrug and say, ''Oh well, the depressed prices for our main export crop is just a symptom of how the market works.'' Expect strong attempts by government to interfere with production/pricing to try to firm up those prices, ECX or no ECX.

Whitehead points out that one British purchaser of coffee through the ECX has cautioned its customers that it cannot vouch for the exact origins of the coffee (traceability). So clearly there is a lot of work still to be done for purchase through the ECX to be considered a seal of approval, but it is fairly early days yet.

African Agriculture

World Bank advice for Zambia to stop setting maize price is a tall order politically

According to Reuters, The World Bank has urged Zambia's government to stop setting prices at which it buys maize from local farmers and allow the prices to be determined by the market to promote sustainable growth in the agriculture industry.

This is all very well,and sounds like good advice in theory, but has not always worked out so well in practice in the many African countries that have toyed with liberalizing their maize sectors. The standard mantra that this will lead to greater competition, increased and more stable maize supply and better prices for consumers often simply doesn't work out that way in countries with markets that are not well developed.

For instance, monopolies or a few dominate key player will often take advantage of liberalization to obviously squeeze the highest possible price out of the consumer. People may still buyer 'expensive' maize, especially in times of scarcity, but this can have political consequences because of the unfortunately too important role of the crop in the diets of many Africans. Consumers/voters expect maize to always be available, and at prices they consider affordable. When either condition does not obtain, the anger is often directed at the government. An excuse by them that they can't do much about the supply and price of maize 'because the World Bank advised us to leave price setting and marketing to the private sector' would simply not work politically, or practically for that matter.

It is somewhat surprising that the bureaucrats at the World Bank keep knocking their heads against the wall over this. You would think that after decades of giving this advice and having it rejected or fail to deliver the promised results, they would have thought to abandon their orthodoxy, think outside the box and offer more realistic advice for the stage of market development of most African countries.

For sure, setting an 'official' price for an important crop like maize also has its own problems. They include the hindrance of the development of a properly competitive market, as the WB points out. When the price set by the government is lower than that which farmers feel is necessary to make a reasonable return on their investment, shortages and other distortions result.

The Reuters article points out: 'The government normally buys the maize at higher prices than those offered by private buyers to ensure higher returns for the farmers. It then sells it at reduced prices, locally and within the region. The World Bank said the policy was costly and not sustainable in the long term and urged the government to review it.

While it is not hard to understand the political justifications of keeping maize prices low for citizens (i.e. voters!) it is not at all clear why the Zambian government passes on those below-market prices to foreign buyers as well.

There are problems with both the WB's unrealistic advice as well as the Zambian government's unsustainable  price policy. It seems neither group of bureaucrats is willing to think of a middle ground that considers both capitalist market imperatives as well as political realities.

African Agriculture    

Why are African farmers poor even when their products are in big demand?

Blogger Opiyo Oloya asks this very relevant question in a post featured in Uganda's New Vision newspaper, titled Grandma is still poor even as the rich sip her coffee in high places.

Oloya just scratches the surface of this vast, important topic but does well for doing so, as it is one that should be closer to the formulation of many agricultural interventions than it is.

Oloya gives the example of cashew, a much prized nut; far more 'exotic' than peanut, whose international retail price Oloya says is as high as $24/kilo. African countries produce asmuch as 34% of global supply, but their farmers are not the primary beneficiaries of the supply chain.

There is a thriving trade in Indians buying raw cashews in Africa to go and process in their country, before on-selling to Western and other markets, obviously enjoying much bigger mark-ups than the farmers. Coffee is another notorious example.

Oloya further asks, ''If these commodities are so lucrative, why are Africa’s farmers toiling in the hot sun, day in and day out, in a never ending cycle of poverty?''

If anyone had the defintieve answer to this question, they would be a billionare. It has been the subject of countless head-scratching studies, but abiding solutions have proven elusive, for all kinds of reasons.  

Oloya cites 'poitical troubles' at the top of the list of reasons for this state of affairs, mentioning the recent coup in Guinea Bissau, the tiny West African country that depends on cashew export for most of its formal foreign exchange earnings (it is said to now be a major transit point for the shipment of cocaine and other drugs from Latin America to Europe.)

But the reality is that small farmers marketing/pricing probems in most countries are perennial, with political upheaval probably only accounting for the ocassional worsening of their already difficult lot.

The relative lack of production-country processing/value-addition is a reality that applies to cashew, coffee and many other crops. But processing of any significant commercial scale is beyond the scope of most small scale farmers anyway. Even if there were more in-country processing that took place, would that necessarily directly benefit the farmer-producer?

But this is notto nitpick Oloya's commentary. Oloya does well just by pondering the subject, which needs to keep on being raised until some practical answers can be found.

African Agriculture

Zambia considers setting up crop marketing board

According to the Times of Zambia, the government is considering setting up a central authority to be in charge of the marketing of various crops.

The newspaper quotes Agriculture minister Emmanuel Chenda as saying the country's current system in which the Food Reserve Agency (FRA) was the main buyer of key crops like maize was not satisfactory.
Chenda is said to have complained that amongst the problems FRA faced were poor accountability, storage facilities and quality.

Previous media reports have indicated a litany of other challenges, including the FRA delaying to pay farmers for delivered maize.

At the start of the current rain season in October 2011, there were also reports of exposed, unprotected FRA maize being rained on. The government was quick to insist that the problem was limited to a few FRA depots, and that the rain exposure was light and brief enough that the affected grain could be dried and saved.

Zambia has enjoyed bumper harvests of southern Africa's main staple crop in recent years, apparently overwhelming the country's silos. It has exported maize to several neighboring countries.


Most governments in predominantly maize-eating African countries play some role in its marketing because of its critical role for food security. But government-controlled maize (or other staple crop) marketing systems have a very uneven record in Africa. There is very frequently a clash between market forces and governments' desire to keep 'political' crops like maize affordable. Almost no African governments are willing to risk leaving maize prices entirely to market forces, especially in times of shortage, such as due to drought. But imposing price floors below prevailing market prices discourages farmers, and/or means governments subsidizing end-user prices, which is expensive and unsustainable.

Zambia's plans for a crop marketing board appear to be in their early stages, with Chenda asking for suggestions from citizens.

Africa is not growing the food commodities China imports

On the face of it, it should be a logical tie-up. China, with its burgeoning middle class and shrinking arable farmland, is facing increasing strains in its agricultural sector to meet domestic food demand. Africa, with its vast stretches of fertile but underdeveloped farmland would appear to be a natural partner to help the world’s most populous nation meet its food needs.

Yet for all the polemics surrounding Chinese “land grabs” in Africa the continent remains a bit player in Beijing’s food security strategy – at least according to this new report from Standard Bank.

The numbers served up in the report certainly offer food for thought.

Food consumption in China over the past decade has increased at an average annual rate of 23.4 per cent (or five time faster than in India) from $57bn in 2000 to $463bn in 2010. The figure is expected to double to over $1,000bn by 2015 as income growth fuels food demand further.

Within this, average per capita consumption of meat in China is expected to rise from 71.2kg in 2010 to 82kg by 2015 – China currently consumes half of the world’s pigs each year.

Higher demand for meat in turn causes a spike in demand for agricultural produce that feed animals – namely corn, wheat and soybeans. Adding to the supply tensions, industrial activity has also spurred demand for certain agricultural commodities. i.e – car manufacturing has stimulated demand for rubber, and textile manufacturing for cotton.

So why is it that Africa – whose wealth of energy and natural resources have long caught the eyes of Beijing – remains on the sidelines when it comes to agricultural trade with the Asia powerhouse?

As Standard Bank noted, the majority of Chinese agricultural imports come from Asia and the Americas. Total China-Africa trade in agricultural goods amounted to less than $4bn, compared to $100bn between the two for the year.

From the report:

…there is a clear disconnect between the agricultural commodities which Africa principally exports and those which China is increasingly importing. In comparing lists of the top ten Chinese agricultural imports with the top ten African agricultural exports, Chaponniere et al (2009) show how only two commodities, cotton and rubber, emerge – and even these products remains relatively modest.

One reason is that boosting domestic agricultural production is a key plank in Beijing’s long-term food security policy. At the moment, China is a net exporter of food and has enormous stockpiles of most soft commodities. Thanks to state support, China’s agricultural output is expected to increase by 26 per cent in 2019. Another reason is agriculture in Africa simply does not enjoy the same economy of scale and subsidies that make food products from Asia and the Americas so much more competitive.

Standard Bank – being the Africa bulls that they are – thinks the relative undeveloped nature of Africa’s agricultural sector can be an attractive proposition for a country like China, particularly as demand-overhangs, driven by demographics, continue to develop. According to the Food and Agricultural Policy Institute, for example, China will adjust from a net wheat exporter of 2.3m tonnes in 2007/8 to a net importer of 1.4m tonnes in 2017/18, while cotton imports will double from 3m tonnes to 6.1m tonnes. Meanwhile, the report reckons that 60 per cent of the world’s available and unexploited cropland is in Sub-Saharan Africa.

According to Simon Freemantle and Jeremy Stevens, authors of the report:

In Africa, two core areas create an allure for China. First, given the manner in which the continent’s agricultural sector has persistently underperformed, the provision of develop-mental and technical assistance allows Beijing an important avenue in fostering and building deeper bilateral ties. And, second, Sub-Saharan Africa’s (SSA)immense and largely untapped agricultural potential is being increasingly viewed by China as a cog in an unfolding and inclusive food security strategy. For now, China’s strategy is overtly developmental, and, though commercialism inspires many of the cooperative farming projects, profits are generated almost entirely in local and regional markets.

However, it is notable that for all Standard Bank’s bullishness about China in Africa there is little current evidence to back it up. Trade between the two – while rising – is low and direct investment by China in Africa is minuscule by its own standards. According to the report, Chinese activity in Latin American agriculture has been substantially more pronounced than in Africa. Thus, predictions of massive Africa-specific growth in the future must be treated with caution – especially given the rising backlash against Chinese investment on the continent.

Perhaps that should be the report’s real message.

Financial Times

Zimbabwe:Chinese investors accused of unfair cotton sector business practices

by Wongai Zhangazhanga

AICO Africa Ltd, one of the leading companies in Zimbabwe's cotton sector, says it lost millions of dollars because of unfair business practices by Chinese investors who he accused of clandestinely buying cotton from contracted farmers.

Pat Devenish, Aico group chief executive officer tsaid his company lost about US$10 million dollars last year after Sino-Zimbabwe allegedly purchased cotton from farmers contracted by the local industry.

“I think we lost US$10 million in March 2010 following farmers breach-selling to Sino-Zimbabwe Holdings,  who had not invested in the production.  That is a lot of money,” Devenish said.

In July last year, Zimbabwe cotton players took steps to stop SinoZim from using political muscle to allegedly purchase cotton from farmers contracted by other companies in the industry.

In court papers filed at the High Court, the Cotton Ginners Association of Zimbabwe (CGAZ) accused Sino-Zimbabwe Holdings of using “political gurus” — including Zanu PF ministers and party youths — to buy the crop from farmers contracted with members of the CGAZ.

The CGAZ represents the interests of local companies involved in the production and buying of seed cotton as well as the ginning and marketing of the product.

Represented by Scanlen & Holderness law firm, CGAZ accused Sino-Zimbabwe Holdings of buying cotton at inflated prices from growers who signed contracts with its members throughout the country.

Sino-Zimbabwe Holdings was operating in Gokwe, Kadoma, Mhangura, Mount Darwin, Bindura, Guruve, Mutoko and Raffingora. Sino-Zimbabwe Holdings, however, rubbished CGAZ’s accusations, arguing in an opposing affidavit that the applicant “is scared of competition” and was abusing the courts.

Sino Zimbabwe director Jimmy Zerenie said the company had not induced anyone to do business with it and had not purchased any contracted cotton.

“The applicant has various other remedies available to it which includes but not limited to suing for breach of contract if there is such a breach between applicant and its contracted farmers.”

“The First respondent has not induced any contracted growers to breach the law. If anything, the first respondent has complied with the law and has operated in a very transparent way,” read Zerenie’s affidavit.

He said the application was misleading the court and that there was no evidence placed before the court to substantiate the allegations of political interference. However, the High Court ruled that the matter was not urgent.

Devenish told Standardbusiness that although contract farming with small-scale holders was profitable, recording a US$7 million profit in March 2011, side marketing remained the biggest problem.

“You will get a company like Cottco or Cargill spending a lot of money funding the production of cotton only to discover that someone who hasn’t invested in the production of cotton will then be licensed to buy.

“So really, that is why statutory instrument 142 is so important because what that does, it says you can only buy cotton if you have invested in its production. So that’s really an important issue to us,” he said.

Section 14 of Statutory Instrument 142 of 2009 makes it obligatory for contracted growers to sell their cotton seed to the company that supported them in terms of the contracts.

Members of CGAZ are all signed up as contractors and buyers with the Cotton Marketing Technical Committee in terms of the law.

The law states that seed cotton produced by a grower in terms of a contract with a company can only be sold to the contracted company.

The Standard

Zimbabwe launches commodities exchange

by Tom Minney

The new Commodities Exchange of Zimbabwe (COMEZ) is open, but no date is yet set for the start of trading. At the launch on 14 January, Industry and Commerce Minister Welshman Ncube said the exchange would be managed by the State, banks and farmers’ unions, according to a report in Bloomberg’s Business Week.

Zimbabwe previously had a thriving Commodity Exchange, which was closed in 2001 when the Government gave the monopoly on corn and wheat trading to the Grain Marketing Board. COMEZ will end the GMB monopoly, although the State will continue to play a strong role.

Bloomberg quotes Ncube saying: “We should create a transparent, open and accessible commodities market where both buyers and sellers can participate knowing the prevailing prices.”

To start with the new commodities exchange will trade only grains, cereals and oil seeds. The chairman of Comez, Wilson Nyabonda (the previous president of the Zimbabwe Commercial Farmers Union) said that private investors would be able to acquire shares in COMEZ.

Zimbabwe needs 2.09 million metric tons of corn (maize) the staple food according to the UN World Food Programme and the Food and Agriculture Organization, but the last harvest was 1.35 million metric tonne (mt) and 1.68 million Zimbabweans depend on food aid. The winter wheat requirement is stated at 410,000-450,000 according to some sources, and the harvest was reported at 10,000 mt.

According to a recent report in the businessdigest of the Zimbabwe Independent, agriculture in Zimbabwe is recovering well, particularly tobacco, partly aided by subsidized fertilizer. However, there is a huge need for financing to rehabilitate irrigation schemes and improving farms, as well as supporting the recently settled “A2 farmers”.

There is a trend to set up commodity exchanges, with strong backing from donors. The leader in Africa is SAFEX, the commodities and futures arm of South Africa’s JSE Ltd. Next is the new and fast-growing Ethiopia Commodity Exchange. There is an Agricultural Commodity Exchange for Africa (based in Malawi but serving smaller farmers in 5 countries) and Nigeria has Abuja Securities and Commodities Exchange. ZamACE in Zambia is active , followed by Uganda Commodity Exchange. Malawi and Kenya ACEs for the domestic market appear to have run out of donor funding, according to web reports and the Kenyan Government and the East Africa Grain Council are considering a replacement in Kenya. Projects and studies are underway in Ghana and Tanzania and Sudan is watching developments with interest.

Commodity exchanges are part of a move to try to revitalize agricultural productivity in Africa and should be seen as part of a holistic solution, including agricultural extension, support infrastructure for small farmers including quality warehousing, and finance as well as market price information.

African Capital Markets

Europe’s food security challenged by Africa’s growing trade with Asia

by Caroline Henshaw

Africa’s farmers will look to the east for new export markets as growing trade links with Asia trump Europe’s historical ties to the continent, according to a study from an influential Harvard professor.

In his new book, entitled The New Harvest, released on December 2, Professor Calestous Juma argues that with improvements in infrastructure, more sympathetic governments and new biotechnology, Africa could feed itself in a generation and become a major exporter.

But as concerns mount over increasing volatility in world food markets, Europe risks being left behind as a key partner to tap the huge potential of African agriculture.

Juma said, “Africa is going to turn more and more to Asia because of the change in traditional trading patterns.”

The UN’s Food and Agriculture Organization estimates an extra six million hectares need to be brought under cultivation every year for 30 years to feed an additional 2.3 billion people by 2050. And with sub-Saharan Africa estimated to hold up to 60% of the world’s remaining uncultivated farmland, many expect it to become the driver of world food production.

Mineral-hungry Asian countries have dramatically increased their investments in Africa following the 2007-8 commodities boom, when prices for many products reached record highs. Bilateral trade between China and Africa has grown to more than $100 billion in the past ten years, while direct investment from the Asian giant increased nearly six-fold.

By comparison, Europe’s relationship with Africa has become more aid-centric, Mr. Juma said. The EU is responsible for more than 60% of overseas development aid worldwide, including around €800 million per year to agricultural development in sub-Saharan countries.

“What’s africa’s looking for is know-how, not money.”

Juma noted that other issues such as allowing the use of genetically modified crops, which has “become an ideological position rather than a pragmatic position,” are also barring farmers from accessing the EU’s market.

“If the EU does not change its position to reflect Africa’s interests in the way it designs its policies it is going to lose it as a partner.”

Wall Street Journal

AGRA, partners commit $42m to link African farmers to markets

by Emmanuel K. Dogbevi

The Alliance for a Green Revolution in Africa (AGRA) together with its partners, are committing $42 million into a programme that will connect small holder farmers in Africa to local, regional and international markets.
The other partners are the Bill and Melinda Gates Foundation, the Rockefeller Foundation, and the Swedish government and Danida.

AGRA has said in a press release that it has been encouraged by the markets programme’s success in its initial three years and increasing demand for market services to join hands with the other partners for this latest initiative.

According to the press release the programme's activities support value addition by promoting grades and standards, facilitating development of  low cost small- and medium-scale processing facilities for drying, sorting and packaging; increasing demand for commodities by developing markets for alternative uses, such as processing cassava for animal feed; promoting an enabling environment by improving access to credit and addressing inappropriate policies that create major challenges for a variety of stakeholders across staple food commodity value chains in Africa.

The markets’ program is currently overseeing $14 million in investments through 17 projects in six African countries, expected to directly benefit over half a million farmers, it said.

Through support to the Cereal Growers Association, for example, a group of 86 women farmers in Kenya were trained in production and post-harvest handling skills and linked to World Food Program’s (WFP) Purchase for Progress.  They sold $400,000 worth of maize. Such partnerships will provide smallholder farmers a secure market for basic grains, encouraging them to adopt productivity enhancing technologies, produce more and earn higher incomes, the release added.

AGRA said Africa’s regional market for food staples is for example valued at $150 billion and demand is expected to double by 2020. African farmers could substantially increase their income simply by meeting this domestic demand, it indicated.

The programme According to AGRA is initially targeting 4.9 million farmers living across 13 countries, and it is improving the market infrastructure for Africa’s core food staples—cassava, maize, millet, rice, sorghum and grain legumes.


Ghana Business News

Mauritius launches exchange for African commodities

by Jean Paul Arouff

A commodities and currency exchange will go live in Mauritius on October 18 offering a local platform for investors worldwide eyeing Africa's rich resources.

Commodity-hungry economies such as China are increasingly eyeing investment opportunities in Africa.

'Mauritius is the gateway to Africa. We feel that in the next 30 to 40 years Africa will play a very important role in the financial life of the globe,' said Venkat Chary, chairman of the exchange, known as the Global Board of Trade (GBOT).

The exchange will offer Mauritius rupee/U.S. dollar, dollar/rand, euro/dollar, British pound/dollar and Japanese yen/dollar pairings.

'We are going to begin small and then expand the array of commodities and speed up the ramping-up process, which works very successfully with the MCX in India,' Chary said.

Mauritius is one of Africa's best performing economies, politically stable with a highly-educated workforce and in a time zone that allows daytime business with Asia and America.

Chary said GBOT would at a later stage offer derivatives.

'It can be stock futures, index futures and so on. So many things can be done now,' he said, but added easy liquidity would determine the exchange's success. If you come to me at 11 a.m as a buyer and if I am going to reply to you at 3.30 p.m as a seller, that's not a good market. A good market is where every second there are exchanges. That is the kind of liquid exchanges that we would like to set up,' he said.

Joseph Bosco, GBOT's managing director and chief executive, said the exchange would start with twelve brokers.

It would also be looking at opportunities in Uganda, Tanzania, Nigeria and Egypt, but did not view other exchanges in the region as rivals, he said.

'Many countries have got three to four exchanges,' he said.


Reuters

Another drought feared in Kenya

by Michael Onyiego

As World Food Day approaches, Kenya stands at a crossroads in its fight to end hunger. The east African nation boasts one of the largest economies on the continent, with a highly developed agricultural sector ranked as one of the world's leading exporters of tea, coffee and flowers.

But despite its potential, Kenya is one of the most food-insecure nations on the planet. United Kingdom-based risk consultants Maplecroft ranked Kenya 21st among 163 countries in their 2010 Food Security Risk Assessment. The consultants, who frequently collaborate with the United Nations, rated Kenya as 'high risk," placing it ahead of such countries as Pakistan, at 30; and Iraq, at 59.

Environmental factors play a large role in Kenya's food insecurity. Much of Kenya's eastern and northern regions are fairly dry, and inhabitants rely on seasonal rains to survive. In 2008 and 2009, unusually light rains proved disastrous, sending food prices up and triggering massive shortages.

But according to the managing director of the Rockefeller Foundation's Africa Program, Dr. James Nyoro, the problem has as much to do with structural issues in Kenya's economy. "This is ironical because when you look at the infrastructure, Kenya is doing better than all the others within the region. But you are talking about a huge population; you are talking about very well advanced horticultural system, very well advanced coffee and tea systems. So Kenya has utilized most of its good potential to produce high-value exports. And as a result of that it has traded off producing food."

The gap between supply and demand has been growing in Kenya since the 1990s, but Kenya's producers have not moved to meet the increased need.

According to Nyoro, Kenya lacks a modern commodity exchange that can take advantage of its production potential. Farmers must instead rely on what he calls "extremely unpredictable prices" set by the government to sell staple crops such as corn.

"Kenya has not been able to put in an efficient food marketing system that ensures that if you invest as a small scale-farmer or medium-scale farmer in maize production that at the end of the season you will be able to get a good market and get your returns," said Nyoro. "The marketing system has not been very well established and it has been kind of monopolized by the National Cereals and Produce Board which is a government body."

Early 2010 turned out to be a season of surplus for Kenyan farmers. Higher than average rainfall helped speed the recovery from consecutive seasons of drought.

But early reports of a "La Nina" weather system have analysts predicting another season of drought in the coming months. Nyoro warned that Kenya will have to build up its national grain reserves through imports to prevent famine.

The Kenyan government seems to agree. The Ministry of Agriculture has just announced it will double the reserves from 360 million kilograms to around 720 million kilograms in anticipation of a shortfall.

In Northeastern Province, one of the country's driest regions, officials also are working to keep harvests from failing. According to the Provincial Director of Agriculture, Shikuku Mushieni, farmers are being given tools to make the most of the marginal rains.

"The government, through the Ministry of Agriculture, has supplied a total of 30 tons of assorted drought-tolerant crops and we are distributing it to the farmers throughout the province," said Mushieni. "Secondly, we have irrigation schemes along the two major rivers, River Tana and River Dawa, where farmers are working in groups and planting various crops. Therefore, we look forward to a season whereby the little rain that shall be received - the farmers will be able to use it effectively to produce food for the province."

In 2009 the Kenya Food Security Steering Group - made up of officials from Kenya, the United Nations, NGOs and the Famine Early Warning System Network - estimated 3.8 million people were in need of emergency food assistance from September until February. A recent assessment by the group found that nearly 2 million would need food assistance through December of this year.

VOA

South Africa looks to China market for surplus maize harvest

by Hopewell Radebe

The South African government has brought hope to grain farmers who are struggling to find alternative markets to dispose of surplus maize following a bumper crop that drove prices down.

Agriculture, Forestry and Fisheries Minister Tina Joemat- Pettersson said SA is talking to China about a much-needed alternative market. The government is also hoping to attract new investment in agro- processing plants, she said.

SA, the continent’s largest producer of maize, produced a surplus of about 4-million tons for the 2009-10 season, but strict competition rules mean farmers are not allowed to pool the surplus in order to sell it internationally to the highest bidder.

“We’ve had our first round of negotiations with the minister of agriculture as well as the minister of imports in China,” Ms Joemat- Pettersson said ahead of her departure for China. She said that although China does not import maize as a necessity, “they import value- added products which would be cattle feed and poultry feed, so the discussions we are having would be to use some of the maize for value-addition, which would then mean that we set up systems for agro-processing for the surplus maize that we do have”.

Argentina, Brazil and China between them account for more than 60% of total maize output in the developing world, with China alone accounting for 45%.

The Agricultural Business Chamber welcomed the department’s efforts, saying that if the deal goes through it will “help stabilise the price” to acceptable levels.

John Purchase, CEO of the chamber, said if the minister succeeds in negotiating a long-term agreement with China, it will encourage farmers to plant more of the grain to supply a big market such as China. Grain SA, the body that represents most of SA’s maize, wheat and soya producers, last week estimated that up to 10800 small farmers face bankruptcy due to a record maize harvest of 13-million tons, which has driven prices down. It warned that almost 30% of commercial farmers could be out of business by next season.

In August, Grain SA chairman Neels Ferreira called for the interventions of the departments of trade and industry as well as agriculture, forestry and fisheries, saying the farmers want an urgent solution, given the danger of their produce being wasted because they cannot dispose of all of it in the local market.

He said the government also needs to reopen the debate on the ban on using maize for biofuel, imposed in 2008 when world maize stocks were dwindling and there was fear of compromising food security. Allowing maize to be sold for biofuel use would contribute to SA’s production of oil and also help the country reach its objectives for renewable energy, he said.

Grain SA estimated that the renewable energy, or biofuel, option would add 9% to the volume of oil produced in SA, create an extra 39% of protein feed for animal use, and add to the production of commercial carbon dioxide. It also estimates that 105000 jobs could be created by the biofuel process.

BusinessDay

Poor marketing holding back farmers

by Allan Odhiambo

Poor commodity marketing systems in east and central Africa are holding back the fight against hunger by denying food producers appropriate compensation, analysts said.

“Farmers are often victims of their own success and this leaves most of them frustrated,” Dr Seyfu Ketema, the executive director of the Association for Strengthening Agricultural Research in Eastern in Eastern and Central Africa (ASARECA) told delegates attending a food security conference in Kigali.

“A common call in this region is that farmers improve their production but unfortunately when they do so they are often left stranded with the extra produce,” he added.

Analysts said lack of well compensating marketing systems had discouraged growers who are already faced with escalating costs of production as the prices of key input such as fertiliser keep rising after the volatility of global prices of crude.

“Farm gate prices are often low even when prices at other levels are booming. We need to query where the missing link is and have it fixed for the sake of growers,” Dr Michael Waithaka, an agronomist, told the forum.

Growers of key cereals in Kenya as well as their counterparts in the wider eastern and southern Africa region are currently facing a dilemma following bumper harvests of crops that came with the recent good rains. With such huge harvests, farmers often resort to selling their produce at throw away prices rather than let it go to waste.

In Kenya, a national steering group, the Kenya Food Security Steering Group (KFSSG) has already raised the red flag following a trend in which maize farmers in some key growing areas, overwhelmed by huge harvests that came with good rainfall since December, are selling their produce for a song.

Growers in some parts of the country are currently selling maize for as low as Sh1,000 for a 90 kilogramme bag, half the normal price.

Milk producers in Kenya are also facing major challenges after production outstripped the processing capacity following good rains. This has led to the prices of the commodity falling sharply in recent weeks while in some cases farmers even resorted to pouring out their produce.

Dr Lydia Ndirangu, an analyst with the Kenya Institute for Public Policy Research and Analysis (KIPPRA), said maize prices in Kenya are expected to rise towards July when the current marketing window closes.

“What we are seeing in Kenya and other countries in the region would have been avoided with effective marketing systems. The desperation among the farmers is a clear pointer to the rot in the marketing system,” said Adrian Mukhebi, the chairman of the Kenya Agricultural Commodity Exchange.

Several countries, including Kenya, and Ethiopia have made attempts to set up commodity exchanges to cushion producers against price volatility.

“Unfortunately the commodity exchange in Ethiopia is yet to fully become vibrant. Growers are still caught by the swings of the production cycle,” Dr Tadesse Worako, an agronomist from Ethiopia said.

Dr Mukhebi said a commodity exchange based on the warehouse receipt system would be launched in Kenya within a month. “We look forward to having an operation warehouse receipt system because it would provide the much needed buffer for vulnerable groups,” he said.

The official said the KACE had already licensed four depots run by the National Cereals and Produce Board (NCPB) at Moi’s Bridge,Kitale, Bungoma and Eldoret to support the system when it is launched. Under the system, growers would deliver the produce to depots for storage and be issued with receipts.

“These receipts will serve as a guarantee for payment. Farmers who have the receipts would be free to walk to a bank and redeem cash of up to 80 per cent of the value of the commodity they are holding at the warehouse and waiting to sell,” Dr Mukhebi said.

The KACE also plans to have a regional commodity exchange for the East African Community (EAC) whose members are heavily reliant on a cross-border of key staple commodities such as maize.

“With the EAC common market coming into full operation in July we plan to go even further and have a common platform for everyone to trade on. Our markets are reliant on one another and it would only be better if we interlinked them,” the chairman said.

Dr Mukhebi said under the planned regional commodity exchange system, partners would adopt a common standard for the produce traded to help set price rates.

Business Daily