HomeBusiness DigestAgric production estimates up in smoke?

Agric production estimates up in smoke?

By Admire Mavolwane

THERE is a maxim, popularly referred to as Murphy’s Law which says: “If there is a possibility of several things going wrong, the one that will cause the most damage will be t

he one to go wrong.”

A corollary normally appended to the famous adage reads: “If there is a worse time for something to go wrong, it will happen then”.

Whether the above law could be said to apply to the Zimbabwean situation or not, evidence on the ground seems to suggest so.

Official real GDP growth is forecast between 3,5 to 5%, predicated upon a 28% growth in agricultural production.

The working assumption and the attendant efforts were all directed towards the achievement of a flue-cured tobacco crop size of 160 million kg.

Everything that could go wrong did, and the target had to be revised down to between 100 and 112 million kg.

Even then, private opinion is of a crop size of between 80 and 85 million kg. A wide spectrum of factors including late planting, disease, insufficient inputs, reduced reaping, and curing capacity, meant the guess estimate figures had to be scaled down.

However, a problem which had been foreseen by many in the sector and seems to have caught the authorities with their pants down is the issue of pricing at the auction floors.

As early as January this year, it was known that international prices would not be favourable as a result of relatively poor quality local crop and international market oversupply due to an above average Brazilian crop.

This would in turn impact negatively on the auction prices, thus threatening the viability of growers. Surprisingly, and maybe not so, no measures had been put in place to insulate the tobacco farmers from the ravages of the international markets. Although we have in the past been against subsidies, international events like this at least warrant interventions through stop-gap measures in the form of quantified subsidies.

At the moment, merchants are said to be offering US$0,90/kg, against last year’s average of US$2,11/kg whilst the growers would require a price of at least US$3 to break even, before talking of making the whole exercise worthwhile to them.

The other important foreign currency earning crop, cotton, has seen production targets being revised downwards several times. Initially estimates of approximately 400 000 tonnes were being thrown around; by the end of December 50 000 had been debited from that figure and by mid-February the numbers had come down to between 250 000 and 310 000 tonnes.

An unfavourable rain distribution pattern characterised by prolonged dry spells, shortages of top dressing fertiliser, ammonium nitrate and reduced funding all impacted negatively on yields.

A similar pricing dilemma exists in the “white gold” industry with merchants proposing to reduce their producer price from the $1 800/kg in 2004 to $1 040/kg, whilst the farmers are looking for a minimum $4 200/kg.

The stand-off is a result of a significant softening of international lint prices now trading at around US$0,56/lb compared with the lofty levels of US$0,80c/lb last year. Reduced demand from major producer and consumer China, resulting in a market oversupply, has been cited as the major reason for the softer prices. Negotiations for a support price are ongoing.

The situation becomes critical, if one considers the impact this will have on the farmers and the agriculture industry. Unviable prices are likely to push farmers off the fields as many of them have debts and inputs to repay. At the end of the day, the farmers are not likely to get a profit from their endeavours.

Although tobacco growing areas are not necessarily the same as cotton growing areas, the impasse between growers and merchants is likely to lead to a switch into other crops. However, this may not happen given the fact that alternatives are limited.

It comes as a welcome relief to many economic watchers that figures and estimates are at least available for important commodities like tobacco and cotton. Impact on economic variables can be assessed and evaluated.

What is worrying, however, is that when it comes to commodities that have to do with bread and butter issues, no official figures or even estimates, accurate, reasonable or otherwise, are forthcoming from the authorities.

The country is still waiting with bated breath for confirmation of the 2,4 million tonnes of maize produced in the 2003/4 season.

With the 2004/5 harvesting season of cereals, particularly maize that made it to maturity already underway, it appears as if no assessment of production has been done, and if it was indeed done, the figures are not publicly to hand. As a result, no estimates have been put forward of what the country is likely to produce, how much it would need to import and from where, given the fact that the whole region was affected.

Zambia, from where we were reportedly importing our grain, has since suspended exports. We will not dwell on the issue of wheat at the moment; suffice to say bread shortages have started to be experienced in some parts of the country.

The other major crop and foreign currency earner that was projected to record an increase in production was sugar.

Recent developments regarding the listing of major sugar cane producing estates for compulsory acquisition and the unresolved illegal occupation of portions of cane land are expected to see cane deliveries being significantly lower than in 2004.

Out-growers’ cane production has been constrained by shortages of ammonium nitrate and consequently sugar production is estimated to remain at last year’s levels.

As the collary to the law implies, this could be the worst time for the economy. The unfavourable international tobacco and lint prices could well mean reduced foreign currency inflows.

One can safely conclude that given what has happened, the 28% growth in agricultural production, which contributes 17% to the GDP and accounts for a third of the foreign currency earnings may not be attainable and hence the real growth in GDP estimate is beginning to look a bit over-optimistic at this point in time.

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