By Professor Sheunesu Mpepereki
LET us look at the pricing of soyabeans.
There is no government control or floor price.
International prices are often benchmarked on the prices at the Chicago Board of Trade (CBOT) and can be accessed on the internet.
Last season prices ranged from about US$480 to US$600.
Prices start lower and firm up as the marketing season progresses.
Currently prices on offer range from US$520 to US$600 per metric tonne.
Soyabean farmers are encouraged to register with Government agency responsible for marketing issues for all crops, the Agricultural Marketing Authority (AMA).
This way they will receive information on prices, buyers and sellers of soyabeans and other crops via e-mail.
Farmers are free to contact AMA for more marketing information on how are local soyabean prices determined.
Soyabean prices are not controlled by Government, but by market forces.
The Agricultural Marketing Authority gives regular updates on the prices of various crops based on international markets.
One can import soyabeans from Brazil, for example.
The price quoted for the consignment to reach Harare includes the price of the beans, the transport and the insurance (CIF).
One hears of prices ‘CIF Harare’ which is what you pay for a tonne to land in Harare.
A company requiring soyabeans can buy locally from a Zimbabwean farmer or they can import.
The decision to import or buy locally is governed by what is termed the import parity price.
If farmers demand a price higher than that at which the company can pay to import from outside Zimbabwe, the company will import as it will be cheaper and will increase profits.
Farmers have to watch this import parity price and use it to negotiate a price for their crop.
Usually local prices will be slightly lower than import prices.
There are other factors that determine soyabean prices: the cost of production. Normally the farmer is supposed to total up his production costs and add a percentage mark-up to come up with a fair selling price.
Production costs include inputs, labour, transport, packaging, equipment, repair and maintenance.
Clearly if the farmer manages his/her business efficiently, minimising wastage, this keeps production costs down, thereby increasing profits.
An example is the application of the recommended 3 X 50kg bags of ammonium nitrate (AN) top-dressing (worth approx. US$120,) per hectare of soyabean versus using one packet of Rhizobium inoculant worth only US$5 for the same area (1 ha).
Clearly, it is cheaper and more profitable to use the Rhizobium inoculant.
The farmer who top-dresses soyabean with AN will have higher input costs; they will demand a higher price for their tonne of crop to cover the higher production costs and find no buyers.
Their price will not be competitive.
This will be too expensive compared to soyabeans from farmers who have lower input costs.
In Zimbabwe, farmers tend to demand high prices, often way beyond what the market can afford and also well above import parity prices.
I get phone calls from many people asking, “where can I sell my soyabean where prices are better?”
I then ask what price the farmer has been offered only to discover that it is a lucrative price, often well above what other buyers are offering.
It is important that farmers shop around for the best price, but it is equally important that they recognise and accept a fair market price.
Some farmers find themselves stuck with tonnes of soyabeans in December, well after the regular marketing season because they have been waiting for that ‘good super’ price which often never comes.
Farmers also need to appreciate that buyers are businesspeople who need to make some profit when they resell.
This is not to give buyers a licence to fleece farmers.
There must be a balance based on the real costs that each party must bear.
We sometimes call the buyers middlemen and give the impression they cheat farmers.
Some may be fly-by-night operators, yes.
But many are genuine businessmen and women participating in the expanding and indigenising economy.
The presence of middlemen represents the entry of indigenous people into the soyabean value chain.
But often, middlemen are important in gathering the harvest from remote corners where larger operators do not go because tonnages are too small. Transport costs are higher and farmers in remote areas may sell at a slightly lower price because the transport to town is borne by the buyer.
Like all games, there is need for regulations in soyabean marketing.
A statutory instrument is already in place to regulate contract farming arrangements.
I must stress the importance of contractors and farmers keeping to their agreements.
Side-marketing is a sore issue.
More education is needed for farmers and business persons to appreciate that business contracts must be honoured all the time.
The Agricultural Marketing Authority is constantly reviewing the marketing situation to regularise and level the playing field.
We shall further explore marketing issues and small to medium scale processing in the next article.