GRAIN millers have called on Government to review its Statutory Instrument 122 of 2014, noting it is ‘flawed’.
The instrument makes it mandatory to buy maize at the US$390 floor price per tonne.
Furthermore, the statutory instrument in section 3 (1) empowers the Minister of Agriculture Mechanisation and Irrigation Development, to announce minimum producer prices of grain at the beginning of each marketing season and outlaws any other pricing arrangements.
However, millers argue that the law is not flexible to contract farming which requires parties to agree on pre-planting prices, whereas according to the instrument the floor price is announced at the beginning of the selling season.
Grain Millers Association of Zimbabwe chairman, Tafadzwa Musarara said if not reviewed, the instrument will lead to serious food shortages.
“If contract farming is disenabled as it is the case now, maize production will be way below national requirement and serious food shortages for the staple food will occur which will lead to serious starvation and malnutrition,” said Musarara.
Government recently admitted that there is no fiscal space to provide for farming inputs on loan to farmers for the 2014/15 farming season.
On the other hand, millers expect to produce more than 500 000 tonnes of maize through contract farming in the 2014/15 agricultural season following the success of the association’s pilot project last season.
In the 2013/14 agricultural season, the millers contracted farmers to produce about 100 000 tonnes of maize following a strategic plan to promote maize production locally.
Another ‘flaw’ highlighted was the inflationary effect caused by the mandatory floor price of US$390.
According to the Government Gazette; “Any company or individual that engages in the buying of grain producers at the price less than the minimum price or designated buying point, shall be guilty of an offence and liable to a fine not exceeding three months or both such fine and such imprisonment with the grain also purchased forfeited to the State.”
It said the law comes amid calls by farmer organisations and individuals that traders were fleecing them off their hard-earned cash by buying grain at cheaper prices.
Private players have been offering between US$270 and US$310 while Government’s grain reserve, the Grain Marketing Board (GMB) since the beginning of this marketing season, has been purchasing maize at the state-sanctioned price of $390 per tonne.
However, millers argue that the price is not commercially viable and has since suspended buying maize from local producers.
Musarara said while an upward revision of the price would cushion farmers from the harsh economic environment, the development would have an inflationary effect on the price of the staple and other downward industries such as brewery and stock feeds.
“Millers have stopped the purchase of maize across the country because the price of $390 has become highly excessive,” Musarara said.
“The price will create serious and unprecedented inflationary pressures in the economy as it will trigger the prices of milk, maize meal, eggs, poultry, beef, baby food, livestock feeds and many other very important basic necessities to go up by more than 20 percent.
“This will see many already struggling families fail to provide adequate food for their families and consequently affect national food security.”
However, Deputy Minister of Agriculture, Mechanisation and Irrigation Development responsible for Cropping, Davis Marapira said millers were being selfish as they want to realise huge profits at the expense of farmers.
“The US$390 per-tonne price is viable, but millers are being selfish and want to make artificial profits, without considering farmers also need to till the land,” said Minister Marapira.
“It is very unfair that private buyers are complaining over the maize producer price.
“Some have been reaping off farmers buying maize at US$2 per bucket which translates into US$120 per tonne.
“Surely where will this leave farmers?”
Minister Marapira said millers were free to approach Government for consultations, provided farmers are also part of the consultation process.
Economists have concurred with millers, describing the instrument as a counterproductive move, with the potential to drive up maize prices and potentially lead to serious shortages.
Economic analyst, Tilda Sibanda, said Government should let the market freely set the prices as this enhances competition and high yield production.
“Price floors do not only hurt consumers who have to pay more, but also make the entire grain industry less competitive,” said Sibanda.
“Once millers raise their prices, the rest of the sector in the chain will have to do the same to recover costs and remain afloat.”
The country’s 2014 maize production rose 82 percent to 1,46 million tonnes, enough to meet annual domestic needs for the first time since 2003.
However, if not resolved early, this collision between millers and Government might affect the country’s 2015 maize production taking into account the inflexibility of contract farming and stalling the 2013/2014 marketing season.