Voluntary Report - public distribution

Date: 1/31/2006

GAIN Report Number: RH6001

RH6001

Zimbabwe

Grain and Feed

Monthly update

2006

Approved by:

![](media/image1.wmf)Scott Reynolds

#### **U.S. Embassy, South Africa**

Prepared by:

Herman Germishuis

Report Highlights:

The ailing Zimbabwean economy continues to experience foreign currency
stress leading to agricultural input shortages. As a result the 2005
corn crop is only expected to reach 850,000 tons from 1.3 million
hectares. This is still an improvement on the 2004 crop. The 2005 wheat
production is only expected to reach 95,000 tons. Shortages will have to
be imported.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Unscheduled Report

Pretoria \[SF1\]

\[RH\]

## **Summary** {#summary-1}

The ailing Zimbabwean economy continues to experience persistent
shortages of foreign currency resulting in shortages of critical raw
materials such as seed, fuel, fertilizers and chemicals. As a result,
the country was poorly prepared for the 2005/6 farming season. Timely
production and importation of critical inputs has been a problem.
Zimbabwean farmers may be unable to take advantage of the good rains in
the 2005/2006 cropping season because of the serious shortage of inputs.

Area under corn production is estimated at 1.3 million hectares. Corn
production is expected to be between 800,000 MT and 900,000 MT. Even
with enough rains, Zimbabwe will not be self-sufficient in corn and will
have to import more food after the May harvest.

Wheat production from the 2005 winter plantings is estimated to be
95,000 MT against an optimum national requirement of about 350,000 MT.

## 

## **Corn**

  ------------------- ---------- --------- --------- ---------- --------- ----------
  PSD Table                                                               

  Country             Zimbabwe                                            

  Commodity           Corn                                                

  1000 HA             2003       Revised   2004      Estimate   2005      Forecast

  1000 MT             USDA       Post      USDA      Post       USDA      Post
                      \[Old\]    \[New\]   \[Old\]   \[New\]    \[Old\]   \[New\]

  Market Year Begin              05/2004             05/2005              05/2006

  Area Harvested      1365       1365      1200      1200       1300      1300

  Beginning Stocks    46         130       33        0          133       200

  Production          900        900       550       550        900       850

  TOTAL Mkt. Yr.      287        400       800       1200       300       500
  Imports                                                                 

  Oct-Sep Imports     233        300       700       1185       400       500

  Oct-Sep Import U.S. 0          0         0         0          0         0

  TOTAL SUPPLY        1233       1430      1383      1750       1333      1550

  TOTAL Mkt. Yr.      0          0         0         0          0         0
  Exports                                                                 

  Oct-Sep Exports     0          0         0         0          0         0

  Feed Dom.           25         125       25        125        25        125
  Consumption                                                             

  TOTAL Dom.          1200       1430      1250      1550       1250      1550
  Consumption                                                             

  Ending Stocks       33         0         133       200        83        0

  TOTAL DISTRIBUTION  1233       1430      1383      1750       1333      1550
  ------------------- ---------- --------- --------- ---------- --------- ----------

Production

The 2005/2006 rainfall season started late and a high percentage of the
maize crop was planted in December. Rainfall since December has picked
up, with most parts of the country having received more than 75% of
their mean rainfall to date. However, in Matebeleland South less than
75% of normal rainfall has been received this far. Climate experts have
predicted that Zimbabwe would continue receiving normal and above normal
rainfall until the end of March.

The area planted to corn in 2005/06 season is estimated by The
Department of Agricultural Research and Extension (AREX) to be about 1.3
million hectares. This is a preliminary estimate. AREX is currently
conducting the first crop forecasting survey. This area is much lower
than the government target of 2 million hectares. The major reason for
the low maize plantings is the shortage of inputs such as fertilizer,
seed and fuel. The country had about 26,000 MT of hybrid maize seed and
about 5,000 MT of open-pollinated seed available, against a national
requirement of 51,000 MT. Although there were plans to import the
deficit of 20,000 MT from neighboring countries, importation had not
taken place by the end of October due to the shortage of foreign
currency. Before the implementation of the land reform in 2000, Zimbabwe
required 36,000 MT of seed to satisfy the domestic demand for maize.
However, due to the lower national yields that are being attained, the
area planted to maize has to increase substantially to ensure
self-sufficiency in maize. Hence, the higher seed requirement.

There has been a very limited supply of fertilizer on the market. The
local fertilizer industry is capable of producing about 450,000 MT
annually, 60% of which is used for cereal production. The industry
imports raw materials, mainly ammonia, potash, sulphur, micronutrients
as well as finished products needed to ensure a balanced range of
fertilizers. The unavailability of foreign currency to import the
necessary raw materials has been the main cause of the poor

availability of fertilizers this season. Coupled with this, fertilizer
prices are government controlled and the existing prices are not viable.
The following table shows historical sales of fertilizer since 1999.

  -------- --------- --------- --------- --------- --------- --------- ---------
  Year     1999      2000      2001      2002      2003      2004      2005

  Total    561,000   459,000   438,000   420,000   320,000   333,000   287,000
  -------- --------- --------- --------- --------- --------- --------- ---------

There was a 48.8% decline in fertilizer consumption between 1999 and
2005. The decline during 2000 and 2001 was primarily due to the
challenges of the agrarian reform program and price controls.
Thereafter, the local market was characterized by shortages and
consumption in those years is not an accurate reflection of demand.
Fertilizer producers could not produce to historical levels because of
inadequate supply of raw materials, unavailability of foreign currency
and price controls. Fertilizer use would have been higher during this
period had adequate fertilizer been available. Availability of
fertilizer for the 2005/2006 season has been the worst ever, with
companies having either no stocks or very low stocks of finished
products at the start of the season. A foreign exchange allocation of
US\$5 million versus a requirement of US\$35 million in November did not
significantly improve supply. The government is planning to consolidate
the fertilizer sector by merging all the fertilizer companies to form
the National Fertilizer Company, but this will not solve the problem of
low fertilizer production that was experienced at the start of this
season.

The shortage of fuel, tractors and spare parts resulted in inadequate
tillage and thus contributed to the low area planted to corn.

The government's input support that benefit small scale farmers started
moving inputs in November, but because of logistical constraints and the
shortage of fuel, many farmers received inputs late and the maize crop
will not benefit the from the full potential of the rainfall this
season.

This season the government's input support program also distributed
inputs to a scheme dubbed "Operation Maguta" that is being implemented
by the army, police and officers in the President's office. This
ambitious scheme had planned on planting 200,000 hectares under corn but
is estimated to have planted roughly 12,000 hectares. Also in a bid to
meet the basic minimum requirements for strategic crops, the government
came up with a target-oriented model, the Command Agriculture model. The
program had set a target of 1.5 million hectares of corn in 2005/6
season and would have cost the government Z\$6 trillion to implement
(Z\$100,000 = US\$1). Each province was required to select 200 farmers
to participate in the program. This program however never got off the
ground because the government could not afford the Z\$ 15 trillion due
to other pressing priorities.

The high inflation that has eroded the purchasing power of the majority
of the Zimbabwean population also contributed to the low area planted.
Inflation rose from 124% at the end of March to close the year at 585.8%
in December 2005. Due to the high costs of production, farmers have had
to revise their production targets downwards.

Uptake and utilization of land on the formerly highly productive
commercial farms is still quite low and is estimated to be 40%.

Due to shortages of fertilizer and chemicals as well as high weeding
requirements, yields may also be affected.

## **Policy** 

In August 2005 the government of Zimbabwe revoked all title deeds of
commercial farms. By implication, all agricultural land is now state
land and the new government law curtails the former owners' rights to
contest the acquisition of their farmland in the courts.

## **Consumption**

# Optimum per capita consumption of corn is estimated at 120 kg per year, giving a total human requirement of 1.41 million MT per annum for the Zimbabwean population estimated at 11.75 million. Demand for feed is estimated at between 125,000 MT to 250,000 MT per annum. However, consumption is also affected by the erratic supply of grain. 

## **Trade**

The government has made considerable progress in procuring corn from
South Africa to meet the shortfall after last season's poor harvest of
about 550,000 MT. The government declared its intention to import 1.2
million MT of corn to cover the deficit between the 2005 harvest and the
next harvest in April/May 2006. From May 1 2005 to 20 January 2006,
about 780,964 MT of corn had been procured from South Africa. The
foreign currency that Zimbabwe earned from exports and a US\$25 million
loan from the African Export Import Bank (Afreximbank) were the sources
of funds for the grain imports.

At the current rates (about 88,000 MT/month), the government will manage
to import just over 1 million MT of its targeted 1.2 million MT. Food
aid to the tune of 300,000 MT has been pledged. If the food aid pledges
are honored, then the national deficit will be met.

**Stocks**

All the corn imports are being milled and deployed to the markets. There
are no stocks of corn.

**WHEAT**

  ------------------- ---------- --------- --------- ---------- --------- ----------
  PSD Table                                                               

  Country             Zimbabwe                                            

  Commodity           Wheat                                               

  1000 HA             2003       Revised   2004      Estimate   2005      Forecast

  1000 MT             USDA       Post      USDA      Post       USDA      Post
                      \[Old\]    \[New\]   \[Old\]   \[New\]    \[Old\]   \[New\]

  Market Year Begin              07/2003             07/2004              07/2005

  Area Harvested      30         30        35        35         46        35

  Beginning Stocks    100        0         100       0          100       0

  Production          90         90        140       105        140       95

  TOTAL Mkt. Yr.      170        170       130       130        150       100
  Imports                                                                 

  Jul-Jun Imports     170        170       130       130        150       100

  Jul-Jun Import U.S. 6          6         0         21         0         0

  TOTAL SUPPLY        360        260       370       235        390       195

  TOTAL Mkt. Yr.      0          0         0         0          0         0
  Exports                                                                 

  Jul-Jun Exports     0          0         0         0          0         0

  Feed Dom.           0          0         0         0          0         0
  Consumption                                                             

  TOTAL Dom.          260        260       270       235        290       195
  Consumption                                                             

  Ending Stocks       100        0         100       0          100       0

  TOTAL DISTRIBUTION  360        260       370       235        390       195
  ------------------- ---------- --------- --------- ---------- --------- ----------

**Production**

Wheat output in 2005 declined to an estimated 95,000 MT. Inadequate
tillage, high production costs, late planting and a shortage of
top-dressing fertilizer were some of the reasons for the low output.

The producer price of wheat is Z\$9.9 million/MT (Z\$100,000 = US\$1).
However, farmers view this price as unattractive because of the high
production cost of wheat arising from sharp increases in input costs
such as fertilizer, herbicides and harvesting.

The Grain Marketing Board (GMB), which has the monopoly to purchase
wheat, is cash strapped and failed to pay wheat farmers promptly upon
delivery. This is a disincentive to growing the crop next season.

**Consumption**

Optimum annual domestic consumption of wheat is estimated at between
350,000 MT and 400,000 MT. In reality consumption is much lower. In 2005
the country produced 95,000 MT. The difference is made up through
imports, mainly from South Africa.

Due to the limited availability, GMB has been rationing wheat to
millers. Since the beginning of January 2006 weekly allocations of wheat
to millers have been reduced from 6000 MT to 4000 MT.