Required Report - public distribution

Date: 7/7/2005

GAIN Report Number: RH5007

RH5007

Zimbabwe

Grain and Feed

Annual Report

2005

Approved by:

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

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

Prepared by:

Harry Germishuis

Report Highlights:

Zimbabwe\'s 2004 corn crop, just harvested, is estimated at 550,000
tons, well short of the estimated demand of 1.5 million tons. While the
poor state of the economy is limiting effective commercial demand, the
Government is doing well in acquiring supplies. Since the start of the
new marketing season in May the Grain Marketing Board has imported
228,000 tons from South Africa in two months. This puts them well on
target to reach the goal of 1.2 million tons for the season. The
availability of foreign exchange is the main limiting factor that may
curtail imports. The 2005 wheat crop is estimated at 140,000 tons, about
half the required amount.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Pretoria \[SF1\]

\[RH\]

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

Zimbabwe faces a huge corn deficit before the next harvest in March
2006. Production is estimated at 550,000 MT for the 2004/2005 season
against an estimated demand of nearly 1.6 million ton, implying that the
country has to import more than 1 million tons before the next harvest.
The government has declared that it will import 1.2 million tons from
South Africa during the current 2005/06 marketing year.

Poor rainfall distribution and lower than average rainfall resulted in
large scale crop failure. Contraction in production also occurred in the
former highly productive commercial farming sub-sector, as a result of
the land reform program. Limited tillage capacity in prime farming
areas, the late start to the season as well as the unavailability of
necessary inputs contributed to this decline in production. Government
supplied tillage services have remained inadequate to cater for the
needs of the resettled farmers who do not have the necessary implements.
Other constraints to production were inadequate fertilizers,
particularly ammonium nitrate and a shortage of fuel.

Wheat planted in 2005 is estimated at 46,000 hectares, below the
targeted 80,000 ha. Late disbursement of working capital and inputs,
shortage of tillage services and fuel and inadequate irrigation
facilities contributed to the lower than planned area planted. Vandalism
of irrigation equipment and failure to maintain what existed before the
land reform has reduced the potential area under irrigation. Wheat
production in 2005 is estimated at roughly 130,000 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      1300       1365      1200      1200       1300      1350

  Beginning Stocks    46         130       46        0          46        0

  Production          900        900       550       550        1100      900

  TOTAL Mkt. Yr.      300        400       650       900        200       600
  Imports                                                                 

  Oct-Sep Imports     233        300       650       500        200       500

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

  TOTAL SUPPLY        1246       1430      1246      1450       1346      1500

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

  Oct-Sep Exports     0          0         0         0          0         0

  Feed Dom.           25         25        25        25         25        25
  Consumption                                                             

  TOTAL Dom.          1200       1430      1200      1450       1300      1500
  Consumption                                                             

  Ending Stocks       46         0         46        0          46        0

  TOTAL DISTRIBUTION  1246       1430      1246      1450       1346      1500
  ------------------- ---------- --------- --------- ---------- --------- ----------

# **Production**

# 

The 2004/05-summer rainfall season started late, with most parts of the
country only receiving effective planting rains in December 04 and
January 05. The late start of the rains resulted in corn being planted
after the optimal planting dates. About 91% of the corn crop was planted
during December and early January whereas in a 'normal' season, nearly
all the corn is planted by the end of December.

The 2004/05-production season was characterized by erratic and poor
distribution of rainfall. Most parts of the country received below
average rainfall particularly the southern half of the country
(Matebeleland, Midlands, Masvingo and Manicaland Provinces). A prolonged
dry spell that prevailed between late January to end of March affected
large parts of the country. With the exception of a few isolated areas
in the north, the country remained dry for the rest of the growing
season.

# One of the major production drawbacks in the 2004/2005 season was the unavailability of sufficient tillage equipment in prime farming areas. Services could not match demand, which further delayed planting. This was particularly critical for newly resettled farmers most of whom do not have the necessary implements. The erratic supply of inputs such as diesel, fertilizer and chemicals also exacerbated the situation. There was a critical shortage of top-dressing fertilizer. The limited amounts of ammonium nitrate became available when soil moisture was inadequate for its application on dry land crops.

Generally, the dry land maize crop performed poorly. The average yield
for the current season is around 0.46 MT/ha. The poor rainfall, input
shortages and also the reduction in area planted on the high yielding
commercial farms largely account for the low yield. Most farmers with
irrigation facilities did not irrigate corn, preferring cash crops such
as soybeans and tobacco with prospects of better income.

Corn harvesting started in March and is largely completed. The area
harvested is estimated at 1.2 million hectares, 14% down from the
previous season's 1.365 million hectares. The decline can be attributed
to the late rains, the severe drought, the unavailability of an
alternative cash market and the lack of a pre-planting producer price
announcement which discouraged many newly resettled farmers from
planting corn.

# Official crop estimates are not readily available in Zimbabwe. The National Early Warning Unit (NEWU) is a multi-stakeholder forecasting committee that includes the Department of Meteorological Services, AREX, NGOs, the SADC Regional Early Warning Unit and the Ministry of Finance and Economic Development and is chaired by the Central Statistical Unit (CSO). But it did not meet this year. However, the Department of Agricultural Research and Extension (AREX) carried out three crop forecasting surveys: a preliminary, mid-season and a post-harvest crop survey. The post-harvest estimate carried out at the beginning of May put the corn crop at 591,472 MT. Our estimate of the 2004 (year of planting, MY 2005/06) crop is 550,000MT, the lowest on record. 

The following table shows corn production data from the 2002 year of
planting:

  ----------------- ----------------- ----------------- -----------------
  Year of planting  2002              2003              2004

  Area (1,000 ha)   1,355             1,365             1,200

  Yield (MT/ha)     0.59              0.60              0.46

  Production        800               900               550
  (1,000MT)                                             
  ----------------- ----------------- ----------------- -----------------

# There is a general agreement that Zimbabwe faces a huge grain deficit. The country will have to import more than 1 million tons of maize to satisfy domestic requirements, but it is unlikely that the government will attain this goal. Importation will be hampered by the serious shortage of foreign currency. Commercial imports will have to be augmented by food aid. The Government of Zimbabwe suspended food aid distribution by international agencies in mid 2004 and it is not yet clear whether distribution will resume this year.

# 

# The results of the food security and vulnerability assessment by the Zimbabwe Vulnerability Assessment Committee (ZimVAC) to be made available in July is going to be critical for the implementation of food assistance to Zimbabwe.

On 3 April 2005 the Government of Zimbabwe announced a producer price of
Z\$2,248,024/MT (US\$225) for MY 2005/2006 up from Z\$750,000/MT
(US\$75) in MY 2004/2005. (US\$1=Z\$10,000 on the July 5 auction).
However, farmers are not selling much to the Grain Marketing Board
(GMB). On-farm retention is high due to the drought, farmers preferring
to retain grain for household food security or local informal trading.
It is estimated that of the 900,000 MT corn produced in the 2003/04
season, intake by the GMB was only about 400,000 MT.

Millers, however are buying maize from the GMB at Z\$600,000/MT,
(US\$60) implying a consumer subsidy of Z\$1.6 million (US\$165) per
ton.

**Policy:**

The government of Zimbabwe insists on the importation of Biotech free
corn. If GMO corn is supplied it has to be milled before delivery.

Corn remains a controlled crop, which can only be marketed through the
Grain Marketing Board.

In an effort to increase corn production in the new, 2005/2006
production season, the Government is making funds available to corn
growers at a concessionary rate of 5% interest compared to commercial
rates of 180%.

To increase control of the agricultural industry, the Government is
re-establishing the Agricultural Marketing Authority (AMA), a parastatal
that will be charged with regulating the marketing of agricultural
products (except tobacco and pigs) to ensure fair pricing. AMA is
expected to be fully operational before the end of the year. It will
coordinate its activities with other parastatals that regulate the
marketing of particular products such as the GMB. There are reservations
about benefits to be derived from the AMA; there is little doubt that
AMA will form an unnecessary link in the marketing chain.

Outlook on corn production:

The forecast for the crop to be planted in 2005 is for an increased area
and bigger crop, as the government increases incentives for maize
production. The seed requirement of about 55,000 MT will be met through
local production and imports. It is anticipated that the country will
import 20,000 MT of seed for the 2005 plantings.

## **Consumption**

Per capita consumption of corn is estimated at 120kg per year. For
2005/06, human consumption requirements, based on the population
estimate of 12 million, (11.635 million in 2002 census, growing at 1.1%
per annum), is estimated at 1.440 million tons. Feed demand is estimated
at 25 to 50,000 tons, giving a total demand of about of 1.5 million
tons. With the rest of the economy in turmoil or decline, and
unemployment very high, the purchasing power of consumers are low and
consumption will probably only reach about 1.4 million tons if the
supplies are available.

## **Trade** 

The country needs commercial and food aid imports of more than a million
tons of corn to cover the deficit before next season's harvest in March
2006. The Government has declared its intention to import 1.2 million
tons of corn from South Africa. It is highly unlikely that the
government alone can achieve this. Zimbabwe is facing a severe shortage
of foreign exchange. The country introduced a foreign currency auction
system in January 2004 to allocate the scarce foreign currency resources
and to stabilize the exchange rate. The large gap existing in the
foreign exchange demand and supply sides has put the auction system
under enormous pressure in recent months. Surging demand that has seen
up to 93% of the bi-weekly bids rejected. Currently, US\$12.5 million
per auction or US\$100 million per month is available to importers but
demand now exceeds US\$100 million per auction. The critical shortage of
foreign exchange has led to the resurgence of the parallel (black)
market. Early in July the auction price reached US\$1=Z\$10,000 compared
to the official rate of US\$1=Z\$6,200.

The fall in production and low average prices of tobacco and cotton have
reduced the anticipated foreign exchange earnings thereby worsening
Zimbabwe's foreign exchange position. Corn imports will compete with
other critical sectors of the economy mainly the petroleum, energy and
manufacturing sectors for foreign exchange.

At this stage Zimbabwe is importing corn from South Africa. The current
low price of corn in South Africa is an advantage although
transportation capacity to Zimbabwe is a major challenge. Road
transportation costs between \$85 and \$100/ton, compared to rail at
\$40 to

\$60/ton. Apparently the South African railway company, SPOORNET,
allocated 200 railcars (44 MT in bulk) to the lines running north.
Turnaround times have been very slow, exceeding two weeks, and the
number of cars had to be increased. The 200 railroad cars should allow
about 20,000 tons to be moved per month. Road transport is quicker and
more reliable than rail and is used extensively. The following table
contains weekly shipments of corn from South Africa to Zimbabwe since
January 1, 2005.

  ----------------------------------- -----------------------------------
  2005, Week                          Metric tons

  01/01 -- 01/07                      1,616

  01/08 -- 01/14                      8,682

  01/15 -- 01/21                      8,753

  01/22 -- 01/28                      15,642

  01/29 -- 02/05                      11,830

  02/06 -- 02/11                      6,014

  02/12 -- 02/18                      5,191

  02/19 -- 02/26                      7,778

  02/26 -- 03/ 04                     8,562

  03/05 -- 03/11                      8,557

  03/12 -- 03/18                      5,401

  03/26 -- 04/01                      7,041

  04/02 -- 04/08                      7,522

  04/09 -- 04/15                      5,877

  04/16 -- 04/22                      9,430

  04/22 -- 04/29                      9,134

  04/30 -- 05/06                      7,709

  05/07 -- 05/13                      13,314

  05/14 -- 05/20                      46,032\*

  05/21 -- 05/27                      9,512

  05/28 - 06/03                       9,928

  06/04 -- 06/10                      9,140

  06/11 -- 06/17                      48,553 \*\*

  06/18 -- 06/24                      19,545

  06/25 -- 07/01                      12,115

  TOTAL IN 2005                       302,908

  Season to date since May1, 2005     228,058
  ----------------------------------- -----------------------------------

\* Includes a shipment of 31,500 tons from East London through
Mozambique.

\*\* Includes shipment of 38,650MT from East London through Mozambique.

The GMB imported 205,000 MT of corn from South Africa between May 1,
2004 and the end April 2005 (MY04/05), or about 17,000 tons per month.
From the beginning of the current season on May 1 to July 1, 228,000 MT
of corn were imported from South Africa, although the shipments by sea
may not have reached its destination yet. That amounts to 114,000 tons
per month, which should allow the GMB to reach its goal of 1.2 million
tons in twelve months. The total quantity to be imported this season
will depend on the funds available but we do not see it exceeding
750,000 tons. The constraints include transport bottlenecks;
availability of foreign exchange and the insistence on GMO free corn,
which complicates matters. The shortfall will have to covered by food
aid; we showed total imports of 900,000 tons in the PS&D, including
150,000 tons of aid.

The question of the availability of non-GMO corn is interesting, only
about 20% of the SA crop has a biotech component, 15% of the white corn
and 30% of the yellow. The current white corn crop is estimated at about
7 million tons plus a carry over of about 2.4 million tons to total 9.4
million tons. Theoretically 8 million tons should thus be GMO free. The
problem is more related to distribution, getting the right quantities
nearest to the customers. This problem will also face potential donors.

The table below summarizes cereal food aid deliveries to Zimbabwe from
international donors over the past two marketing years.

Cereal food aid deliveries and pledges to Zimbabwe in 2003/04 and
2004/05

+-----------------+-----------------+-----------------+-----------------+
| Donor           | 2003/04 (MT)    | ## Donor        | 2004/05 (MT)    |
+-----------------+-----------------+-----------------+-----------------+
| European Union  | 23,100          | European Union  | 12,000          |
+-----------------+-----------------+-----------------+-----------------+
| India           | 50,000          | NGOs            | 2,500           |
+-----------------+-----------------+-----------------+-----------------+
| USA             | 27,800          |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| WFP             | 221,200         | WFP             | 126,100         |
+-----------------+-----------------+-----------------+-----------------+
| Total           | 322,100         | Total           | 140,600         |
+-----------------+-----------------+-----------------+-----------------+

(Source: FAO/GIEWS -- April 2005)

A big portion of these supplies originated in South Africa and is
included in the SAGIS figures above.

## 

## **Stocks** 

Having exhausted all the grain reserves, ending stocks for 2004/2005
marketing year were zero. Ending stocks for MY 2005/06 are also forecast
to be zero as the country battles to import enough corn to satisfy the
nation's needs.

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         35        46

  Beginning Stocks    100        0         100       0          100       0

  Production          90         90        140       140        140       140

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

  Jul-Jun Imports     170        170       130       79         150       0

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

  TOTAL SUPPLY        360        260       370       270        390       270

  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       270        290       260
  Consumption                                                             

  Ending Stocks       100        0         100       0          100       0

  TOTAL DISTRIBUTION  360        260       370       270        390       270
  ------------------- ---------- --------- --------- ---------- --------- ----------

####### Production

Wheat is planted in winter (April -- May) under irrigation on
large-scale commercial farms and is harvested in September. Wheat
competes with barley although only about 10,000 hectares of malting
barley are grown annually. Barley is more attractive to growers because
unlike wheat, its marketing is not controlled. Late payments by the GMB
have discouraged wheat producers. National Breweries, the major
contractor for barley, also supplies most of the production inputs.

Planting of the 2005 winter wheat crop is complete. The Government of
Zimbabwe has provided Z\$600 billion (Z\$6200 = US\$1 official rate) for
production of 80,000 hectares of wheat in 2005. Bureaucratic loan
application and processing procedures delayed the disbursements of funds
and inputs, and this target area was not achieved. Tillage services
could again not match the demand, thus delaying planting. The planting
deadline for wheat is mid-May. Planting beyond this period results in a
loss of 10 to 15% of yield for every week's delay thereafter. Wheat
planted after May risks being spoiled by early summer rains in October.
Up until the end of May an estimated 23,000 hectares of wheat had been
planted. However, some farmers were still planting wheat in June, citing
inadequate tillage (tractors and fuel) and irrigation facilities as the
major reasons for the delay in planting. By mid-June an estimated 46,000
hectares of wheat had been planted.

The newly resettled farmers who make up the bulk of wheat producers have
little experience in growing the crop and consequently the average wheat
yields have declined from about 4.5 MT/ha in 2002 to about 4 MT in 2004.
Whilst the average yield of wheat is expected to increase significantly
as farmers gain more experience with the crop, the anticipated yield of
the 2005 crop is not expected to increase due to the delayed planting of
about half the current crop. The shortage of ammonium nitrate fertilizer
and inadequate irrigation facilities will further compound the
situation. It is reasonable to assume an average yield of 3MT/ha

for the 2005 crop and a total wheat production of around 130,000MT,
similar to the 2004 wheat output.

To ensure self-sufficiency in wheat, Zimbabwe should have at least
155,000 hectares under winter wheat.

The current producer price of Z\$1,749,128 per MT is far below
production costs of about Z\$8 million per hectare. The producer price
of wheat for 2005 is yet to be announced despite the start of the
season, and this factor has contributed to the reduction in area
planted. The high production costs have also discouraged producers with
some opting to grow contract barley for private companies providing
inputs.

## **Policy**

The government of Zimbabwe has set aside Z\$1 trillion (Z\$6200=US\$1)
to support the rehabilitation of irrigation. The funds will assist
farmers to purchase irrigation pipes, water pumps and center pivots.
Availability of foreign exchange to import essential irrigation
components poses a major challenge to this program.

**Consumption**

Wheat demand is estimated at between 350,000 MT and 400,000 MT annually.
The per capita consumption of wheat is estimated to be 29 kg per year.
Based on a population of 12 million, the wheat requirement for the
2005/06 marketing year is estimated at 348,000 MT. The country thus
requires at least 7,000 MT of wheat each week to satisfy domestic
consumption. However, wheat consumption has increased this year due to
the limited availability of maize. Weekly demand for wheat by millers
has increased to 9000 MT, but the GMB is battling to supply.

**Trade**

Zimbabwe traditionally imports about 50,000 MT of hard wheat to blend
with the local wheat to enhance baking quality of the flour. The country
will have to import between 240,000 MT and 265,000 MT of wheat in
2005/06 to satisfy demand estimated at 350,000 MT. This is not likely to
happen and it is expected that the country's imports to augment the 2005
crop will be similar to those of the past season.

The table below shows wheat imports for the July 2004/June 2005
Zimbabwean season as shown on the SAGIS website. These figures only
reflect trade through the South African transport system.

  ------------------------ -------------- ------------------ -------------
  Import Trade             through        South Africa       only

  Country                  Zimbabwe                          

  Commodity                Wheat                             

  Time Period              July/June      Units:             MT

  Imports for:             2004/05                           2005/06

  U.S.                     21035          U.S.                

  Others                                  Others             

  Argentina                39345                              

  South Africa             11015                              

  Canada                   7530                               

  Total for Others         57890                             0

  Others not Listed        0                                  

  Grand Total              78925                             0
  ------------------------ -------------- ------------------ -------------