Crop marketing

It is wrong that the issue of the maize floor price has now been politicised.

The Food Reserve cannot be expected to start buying maize when the moisture content is above 12.5 percent, as doing so would introduce the problem of mycotoxins including fusarium which is dangerous for human consumption.

At the same time it is wrong to equate the Food Reserve Agency to a grain marketing board. The role of the agency is to purchase and store a strategic reserve on which the State can fall back in time of shortage or national calamity.

In contrast a grain marketing board, such as our former National Marketing Board (Namboard) has the responsibility to purchase and store maize.

The current marketing model relies on private sector participation. Millers and other traders are expected to play their role in purchasing, transporting and eventually milling the maize. In this arrangement FRA does not purchase maize for immediate consumption, but as strategic reserves and only offloaded on the market many years after the harvesting season. The fact that the FRA has become involved in marketing and as buyer of last resort has been the result of the “political” nature of the crop and mostly under political influence to stabilise the market.

The participation of FRA in maize marketing has generated a number of problems including the spectre of maize subsidy which is anathema considering the vast amounts involved. As a strategic reserve institution FRA must wait until the crop complies with humidity specification to permit long-term storage.

This however, does not preclude buyers from sourcing maize from the market  nor does it preclude millers from purchasing directly from farmers at negotiated prices. 

The notion that farmers cannot determine the price at which they can dispose of their maize defies the free market logic. It is in fact a throwback to the  price control mechanism that applied during the socialist era.

In a situation of perfect information in which we live the market should be able to establish a fair price for any commodity.

 Already the various farmers organisations have indicative prices for the various commodities. These prices obtain their parity from ruling international prices.

It is true for example that local maize is sold at lower price than the ruling  “market” prices because the Government has “political oversight” to ensure that mealie meal is always affordable.

In return millers will usually wait to buy maize from FRA because it is cheaper. Other take advantage to buy from FRA to export and earn the ruling international market price which is always higher.

This price distortion is a factor that must be accepted.

A time must come, and the sooner the better, when Government will not interfere in maize and maize meal prices to ensure that the market is allowed to operate freely.  This will of course affect the consumer who must bear the full brunt of the realistic price of maize meal- an eventuality which most Governments will not want to face.

In the circumstances the FRA must operate in an imperfect situation where it is both a strategic reserve holder and buyer of last resort as commanded by Government.

However in the area of providing a store for the strategic reserve FRA must buy when the maize is dry. Any departure from this requirement has dire consequences such as the crop getting rotten or weevils attacking the grain. It would be highly irresponsible for the FRA to rush into buying maize when the weather conditions are not favourable for maize to be stored for a long time.

Although traditionally Government had been announcing the floor price in June or July, the two months have always not been suitable as they are ‘cold months’ which prevent the proper drying of the maize crop.

Therefore, farmers targeting FRA as the buyer of their maize must be patient.

However, farmers should not only target FRA for their maize as there are many other business houses which buy maize for various needs.  Farmers who are desperate for money should scan the maize market and choose business houses, which buy maize for immediate processing into other products.

Categorized | Editorial

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