Spotlight On: Zambian Corn

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Background

The decline of global copper prices makes Zambia’s shift away from mineral dependence particularly well-timed. And a shift towards agriculture makes sense for a country that boasts such significant, untapped potential. Central Zambia in particular has fertile soils and dependable rainfall—growing conditions that have attracted and supported smallholder and commercial farmers alike. The overwhelming majority of Zambian farmers are smallholders, with about 75 percent of farmers operating on less than 5 hectares of land. Approximately 17 percent of farmers are on medium-sized plots between 5 and 20 hectares, and the remaining 8 percent are large-scale farmers on more than 20 hectares of land. This 8 percent of large-scale farmers is significant, especially when compared with other countries on the continent (except for South Africa). However, such farmers are playing a decreasing role in corn production over time, as they increasingly opt to grow higher-value, exportable crops including soybeans, cotton and sugar.

Like the rest of the region, and indeed sub-Saharan Africa more broadly, Zambia produces mostly white corn, which is preferred over yellow corn for human consumption. In fact, about 90 percent of all African corn produced is white corn: highlighting the importance of this variety, and the corresponding irrelevance of yellow corn in the continent. A few countries in the Americas, like Mexico, also prefer white corn—but most global production is of yellow varieties. This preference for white varieties means that African countries are less likely to be impacted by price fluctuations spurred by corn super-producers Brazil and the United States, which harvest mostly yellow corn. Such insulation can be a good thing when global prices are on the downswing, but it also means that Zambia does not benefit much when global prices soar due to weather disruptions in major producers.

Not only is it important to note that Zambians prefer white corn: it is also important to note that Zambians eat a lot of corn—an estimated 100 kilograms per capita, per year. The food security of Zambia (along with Zimbabwe and Malawi—both consume corn in similar quantities) is thus intrinsically tied with its ability to produce enough corn.

Zambian corn production

This obsession with corn offers the necessary context to discuss the massive increase in corn production that Zambia has achieved. In 2000, Zambia was producing about 1 million tonnes of corn each year on close to 600,000 hectares of land. This year (2014), Zambia announced record-high production of 3.3 million tonnes on 1 million hectares of land. Not only did the total amount of land dedicated to the cultivation of corn jump significantly—average yields also grew, from about 1.7 tonnes per hectare in 2000 to 2.5 tonnes in 2013.

The yield increase is at least in part due to the country’s Farmer Input Support Program (FISP): a massive, costly and somewhat controversial subsidy program introduced by the government in the 2002/2003 growing season—just after Zambia had emerged from a devastating drought. Through the subsidy scheme, “vulnerable but viable” corn farmers are provided with seeds and fertilizers at below-market prices. In May 2014, the government announced that it was aiming to increase the number of FISP beneficiaries to 1 million farmers in the next planting—a slight increase, as the figure for the 2013/2014 planting season was about 900,000.

The introduction of the subsidy scheme has impacted the market for and landscape of agricultural input providers in the country. In terms of fertilizer, the government decides each year the total size of the subsidy, and goes on to request tenders from the 13 major fertilizer-importing companies active in the country. Many of these are South African, but a few major ones like Greenbelt are Zambian. The government typically selects two winning bids, and the winners supply the entirety of the fertilizer necessary for the FISP (in 2013 this was about 200,000 tonnes of fertilizer). Farmers, through farmer-based organizations, pay a small fraction of the true cost of their fertilizer (which is particularly steep in Zambia, as the cost of transport is high for the landlocked country). The process for seeds is largely the same, with the government also operating through a tender process. The country’s seed industry is often celebrated as one of the best in the region, and Zambian farmers have relatively strong exposure to hybrid seed varieties. Estimates suggest that improved seed adoption rates are close to 90 percent.

Despite the success of the program in increasing production, FISP has a number of opponents. Critics pointed out that the program is inefficient, and that those running it repeatedly fail to deliver fertilizer and seeds on time, meaning that either these inputs arrived too late for farmers to make use of them, or that they delayed planting until the inputs arrived. Both of these can have seriously negative repercussions for crop outcome. Critics also point out that FISP benefits relatively well-off farmers more than it benefits the poorest of the poor. Supporters of the program, however, point out that the scheme succeeded in increasing overall corn production. This ensures that there is always sufficient supply, and helps to tackle poverty in a different way.

The supply increase has undoubtedly helped stabilize corn prices throughout the country. The prices that farmers receive for their goods have also remained stable, due to the fact that the biggest buyer of corn is the government through its Food Reserve Agency (FRA). The FRA buys corn from farmers at above-market prices, and in turn sells this corn to millers at a lower price, absorbing the difference. The FRA periodically reviews and adjusts the prices offered to farmers, with the most recent review occurring in June of this year, when the price was revised from 65 to 70 Kwacha (equivalent to $11.34 in June 2014) per 50 kg bag of corn. This was the first hike since 2009. Many—including the Zambian National Farmers Union—maintain that this price floor is still too low, and makes it impossible for farmers to afford inputs (which in turn keeps yields low). They claim that the FRA price consistently fails to keep up with inflation. Inflation and currency depreciation were major issues that Zambia grappled with throughout the 1990s and 2000s. In August 2000, one US Dollar was equal to 2,780 Kwacha. After years of inflation rates of between 12-22%, the exchange rate eventually jumped to one US Dollar for 4,769 Kwacha. In August 2012, the Bank of Zambia announced that it would rebase its currency such that 1,000 old Kwacha would equal 1 “new” Kwacha.

Zambia’s Food Reserve Agency was established in 1995 and tasked with ensuring national food security. Since then, the parastatal’s mandate has been expanded, and it now acts as the major buyer, storer and marketer of Zambian corn. Members of the Zambian National Farmers Union are quick to point out that the FRA is not doing enough. It is not paying farmers enough, and is doing so late (the FRA is supposed to pay farmers within 10-14 days, but fails to do so in many instances). However, critics of the broader system argue that the FRA has actually pushed corn prices higher for consumers—which has negatively impacted not only urbanites, but also the 50% of smallholders that are net buyers of corn. On the other hand, FRA supporters argue, although these prices are higher, they are relatively stable. Nonetheless, FRA has undoubtedly overstepped its original idea of becoming a “buyer of last resort,” and has instead become the only real buyer. Private actors have been crowded out by the system.

The FRA currently holds about 1.3 million tonnes of corn in its stores—more than double the organization’s original target of about half a million tonnes. The size of its stores is due to the fact that the FRA guarantees that it will purchase surplus corn from farmers, of which there have been increasing amounts in recent years. Such surpluses can often be sold to other countries in the region, but when the crop has been good throughout the region, the potential to increase exports is diminished.

Corn trade, marketing and GMOs

Zambia’s corn imports have been falling throughout the past decade, only spiking in years with particularly bad harvests, like 2013 when late rains and a worm infestation dramatically reduced production. Even then, imports were a fraction of what they were in the early 2000s.

Now that Zambia’s corn production exceeds domestic supply, it has become a major exporter of the grain—a dramatic shift for a country with a history of export bans and restrictions for corn. This year will be no different, as production reached an all-time high. The issue this year, however, is that production throughout Southern and Eastern Africa was high, meaning that most countries are not looking to import significant amounts of corn. This year’s predicament highlights Zambia’s pressing need to find new potential markets for its corn.

Finding a market for the surplus is particularly important for Zambia, as its storage facilities—owned and operated by the FRA—are generally of poor quality. The rate of post-harvest loss for grains stored in FRA facilities can be up to 25 percent.

Some of the marketing woes that Zambian corn farmers face would be addressed with a commodity exchange, but the history of such exchanges in Zambia is rocky. An exchange was started in 1994 by the Zambia National Farmers Union and the Commodity Research Institute. It offered spot and futures liquidity in corn and wheat. Despite initial success, the initiative ultimately failed due to government over-intervention in crop markets, which in turn distorted prices and incentives for participation.

In 2007, a group of traders resurrected the idea, establishing the Zambian Agricultural Commodity Exchange (ZAMACE). ZAMACE dealt in crops including corn, wheat, soybeans, and sunflowers, and even developed quality standards for these crops. Participation in the exchange was limited but growing, and corn made up less than one-third of the total trading. The outlook for corn in the system was reasonably positive until in 2011, when the FRA bought a particularly large amount of grain at above-market prices prior to an election. This was widely seen as counterproductive and a contributing factor for the collapse and demutualization of ZAMACE the following year. Although it was supposed to return in 2012, legal holdups have translated to continued delays. ZAMACE has not yet resumed operations. The Agriculture Minister had indicated in September 2014 that the exchange should be operational by the end of 2014, but it seems unlikely.

GMOs

Like most other African countries—except for South Africa—Zambia has a strict policy regarding GMOs.

In 2002, Southern Africa was suffering through its worst drought in ten years. The crisis left 13 million people food insecure and in need of emergency assistance. More than 2 million of these people were Zambians. Despite the gravity of the situation, the Zambian President Levy Mwanawasa famously rejected genetically modified food aid. President Mwanawasa stated that he would not allow Zambians to eat “poison,” and turned away shipments of GM corn from the United States. This move that was met with widespread criticism. It remains unclear the extent to which this decision was driven purely by a belief that GM crops were bad, versus a belief that allowing the importation of GM goods could impact Zambia’s ability to market all of its goods as “GM-free.” Zambia exports a significant amount of produce to countries in the EU, which values GM-free goods. However, President Mwanawasa maintained his hardline stance on the issue, even after the grain was milled so that there was no chance of it being replanted. It seems unlikely that the rejection was to keep Zambia GMO-free for marketing reasons.

The language surrounding GMOs in Zambia has since softened. Current leaders emphasize the need for public debate and research, having largely abandoned the logic of GM goods being “poison.” Policies, however, remain unchanged and the country still does not allow genetically modified goods to be produced or imported. This is unlikely to change anytime soon for corn, especially because Zambia has managed to increase production through traditional means. Rather, it is much more likely that any foray into the world of genetic modification will begin with non-food crops, like cotton—of which Zambia is also a major producer. Indeed, members of organizations like the Cotton Development Trust (CDT) have been at the forefront of the effort to encourage research and development of biotechnology.

Conclusions

The Zambian corn sector today is entirely different from that of a decade ago. Production has skyrocketed, productivity is growing, and the country is a major regional powerhouse in the grain trade. There are, however, many aspects of the sector that require improvement and investment. The FRA, for example, needs to become more efficient, to increase and improve its storage capacity, and to become a true, apolitical buyer of last resort. Furthermore, there is some concern that although the corn policies have succeeded in their overall goals of increasing production of the staple crop, they may also be inadvertently making Zambia more of a monoculture than before, with little attention paid to the need to diversify crop production.

Zambia could, for example, begin to prioritize increasing its production of wheat. The country is already a fairly significant producer of the grain, harvesting enough to meet domestic demand. When small and medium-scale farmers have access to the right inputs, they have been successful in cultivating wheat despite its typical association with commercial farmers. Currently, it’s mainly consumed by middle-class and urban Zambians, and this demographic is slated to grow as the economy itself grows. Furthermore, Zambia is unusual in its self-sufficiency in wheat. Most countries in Southern and Eastern Africa are forced to import the grain from places like Pakistan, Russia, Brazil, and Argentina. Zambia may find wheat a more lucrative export market than corn.

Ultimately, the outlook for Zambian grain production—and agricultural production more broadly—is positive. The country is only just beginning to scratch the surface of its potential. About 43 million hectares of Zambian land is classified as medium to high potential for agricultural production, and yet just 14% of this land is currently being farmed. Zambia has a bright agricultural future. In the coming years it will likely stay in the headlines for all the right reasons.

Source link : https://www.gro-intelligence.com/insights/zambia-corn-production

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Publish date : 2023-03-11 23:49:15

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