Open Forum
with
Tafadzwa Musarara
ON the fifth of last month, Russian Prime Minister, Vladimir Putin, announced that due to a heat wave induced drought, all Russian wheat exports are banned until December 31 this year.
Last week, Putin extended the ban to late 2011, thus after the next harvest.
For Russia to lift the ban late next year, they should receive way above normal rains to replenish the soil moisture lost during this current wave. This is very unlikely.
Russia, according to US Department of Agriculture, accounted for 14 percent of the world exports in the first half of 2010 making it the third biggest world wheat producer.
Consequently, wheat prices on the Chicago and Johannesburg exchanges reached record highs in 23 months. World wheat production is expected to fall by 5,1 percent as global cereal markets experience price surges.
In Mozambique, seven people have died during the bread riots with the police after the government announced a 25 percent price increase. The whole of the Southern African Development Community is expected to experience the same fate.
My colleague and counterpart, Fransicus Werilang, the chairperson of Flour Mills Association of Indonesia, contends that the days of cheap wheat are gone and the Russia crisis may spark price increases of other staple foods.
On the eve of the announcement of flour price by the Grain Millers Association of Zimbabwe (GMAZ), out of courtesy, I called the director of the Consumer Council of Zimbabwe (CCZ), Rose Siyachitema, and advised her of the same.
Oh Gosh! She went mad and asked whether local millers send “your gonyets (lorries) to collect wheat from Russia”.
As if not enough, Finance Minister, Tendai Biti, in a wide-ranging interview with the Zimbabwe Broadcasting Corporation television, shot down the increase, describing the hike as “greed” and dictated by “economic gangsters” who wanted to reverse the economic stability that the inclusive government has allegedly achieved so far.
Local flour price went up by 20 percent as a result of a 90 percent world wheat price increase. This resulted in a 20 percent increase in the price of bread and other related products.
It must be noted that our local bakers have an option to import their own flour duty and VAT free. The reason the bakers proceeded to increase price was that the imported flour had also increased.
Be as it may, Zimbabwean bread is still much cheaper at US$1,10 per loaf compared to the South African loaf at R10.
The problem that we have with some of our leaders in this country is not that they can’t manage crisis. No. The major handicap is that they cannot indentify a calamity coming.
The Food and Agriculture Organisation (FAO) has called for an emergency meeting in Rome on the 24th of this month to discuss this global crisis that threatens consumers.
Similarly, I humbly call upon the government of Zimbabwe to immediately set up a working committee to craft mitigatory measures as bread and other wheat-related products will be luxury to many.
Zimbabwe’s last year wheat harvest was less than 50 000 tonnes against a national annual consumption of 500 000 tonnes.
Regrettably, in 2010 government did not commit money to fund the winter wheat crop, but nevertheless, expects the flour prices to stabilise. Was it not a good idea to deploy US$50 million of the International Monetary Fund Special Drawing Rights into wheat farming in May and recover it in December?
As it stands, with less than 20 000 tonnes in the Grain Marketing Board silos, the country is fully exposed to price shocks that occur on the market. If more farmers had grown wheat as in the past, they were going to smile all the way to the bank due to this year’s expected higher producer price.
Our wheat imports are bought by local millers, direct or indirectly, from SAFEX. This exchange is responsive to prices obtaining on the Chicago Futures Exchange, the world’s biggest commodity exchange, on real-time basis. Therefore, the Russia wheat export ban tremendously affected the stocks inventory on the world markets and as a result prices went up affecting all the wheat stocks anywhere in the world.
I hope with this fact, Madam Siyachitema is enlightened.
Also to note, a third of Pakistan is under floods. Flour is their staple food. The floods have, in addition to killing thousands of people, also destroyed wheat fields and wheat stocks. A lot of wheat has to be imported into Pakistan for relief aid. The same situation obtains in North Korea and China. We are now seeing the manifestation of global warming.
In view of the foregoing, it is important to note that more flour price increases are imminent and the coalition government has to put mitigatory measures in place now. It’s unfair to call us, the millers, greedy when we react to genuine price increases.
Market forces are very rude and cannot be patronised or massaged. I expected the CCZ to press government to re-build strategic grain reserves for maize, wheat and rice so that consumers are cushioned from the unexpected as is the case with other progressive countries.
Millers are genuine businesspeople like any other, but lack the financial wherewithal to provide farmer support and subsidies to avert price increases to consumer.
In fact, millers are equally hamstrung with the current liquidity challenges that are affecting all other companies. Aggravated by the uncontrolled imports, finance to fund local farmers becomes more invisible.
The national leadership must depoliticise the land issue and support all the farmers in the field so that we grow our own food. Price controls will simply invite the catastrophe of yesteryear.
To date, the local milling industry has credit lines of more than US$25 million extended by foreign grain suppliers in the form of Collateral Management Agreements.
Any attempts by the government to put controls on prices without addressing the fundamental issue of wheat supplies, will scare away these supplies.
Insulting and “assaulting” millers will not make bread and maize meal affordable.
Many foreign grain suppliers are keen to do contract farming in Zimbabwe provided that they are granted the permission to export their produce, should they wish. I think in the absence of government funding, this is a good way to recapitalise farming.
I like the East African idiom that says: “If you don’t own a cow, don’t cry when the price of milk goes up.”
- Tafadzwa Musarara is the national chairperson of GMAZ.
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Show/Hide commentswritten by sonofsoil, September 12, 2010
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In my consultations with the millers, Musarara's submission fully represent the industry position.Criticise his facts but musamutuke. Thats why this country fail to progress because we end up shouting at each other than engage on facts on grounds.