Required Report - public distribution

**Date:** 6/27/2006

**GAIN Report Number:** RH6009

RH6009

**Zimbabwe**

Grain and Feed

**Annual report**

2006

**Approved by:**

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

#### U.S. Embassy

**Prepared by:**

Herman Germishuis

**Report Highlights:**

Zimbabwe\'s corn crop planted in 2005 is now estimated at 1 million MT
produced on about 1.4 million hectares. This is a significant
improvement on the previous season\'s 550,000 MT but still short of the
1.6 million MT annual demand. About 45,000 ha. under irrigation were
planted for the 2006 wheat crop, which is expected to yield 135,000 MT.
Both corn and wheat will thus have to be imported again this year.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Pretoria \[SF1\]

\[RH\]

Summary

After a late start, Zimbabwe generally experienced a favorable rainfall
season in 2005/6. However, the country failed to take full advantage of
the good rainfall due to input shortages at the beginning of season and
faces a corn deficit in consumption year 2006/07.

After assessing field and rainfall data and satellite imagery, our
revised production estimate for the current corn crop is about 1 million
MT from an estimated area of 1.4 million hectares. While this is a
significant improvement from the 550,000 MT from the 2004/5-corn crop,
it is still short of the annual domestic demand of 1.6 million MT. The
country will have to import about 600,000 MT of corn to alleviate the
deficit.

The national average yield is estimated at 0.72 MT/ha, which is low
given the favorable season. The shortage of inputs such as fertilizer,
seeds and chemicals, the delay in planting, as well as leaching of
nutrients adversely affected yields.

Planting of the 2006 wheat crop is now complete with about 45,000
hectares planted. Production is expected to reach 135,000 MT with the
deficit to be made up by commercial imports.

Exchange rate: Z\$101,000 = US\$1 (official)

Z\$350,000 = US\$1 (parallel market)

###### CORN

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

  Country             Zimbabwe                                            

  Commodity           Corn                                                

  1000 HA             2004       Revised   2005      Estimate   2006      Forecast

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

  Market Year Begin              05/2005             05/2006              05/2007

  Area Harvested      1200       1200      1300      1400       1300      1450

  Beginning Stocks    0          0         0         25         0         0

  Production          550        550       900       1000       900       1100

  TOTAL Mkt. Yr.      1050       1040      600       500        600       500
  Imports                                                                 

  Oct-Sep Imports     719        550       900       900        600       600

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

  TOTAL SUPPLY        1600       1590      1500      1525       1500      1600

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

  Oct-Sep Exports     0          0         0         0          0         0

  Feed Dom.           75         75        75        125        75        75
  Consumption                                                             

  TOTAL Dom.          1600       1565      1500      1525       1500      1550
  Consumption                                                             

  Ending Stocks       0          25        0         0          0         50

  TOTAL DISTRIBUTION  1600       1590      1500      1525       1500      1600
  ------------------- ---------- --------- --------- ---------- --------- ----------

Production

The 2005/6 season started late most parts of the country only receiving
effective rains in December. A high percentage of the corn crop was thus
only planted in December. About 15 to 20% of the corn area was planted
late, in mid January to early February, and its peak moisture demand
period coincided with the rainfall tail-off period thereby reducing the
probability of a meaningful harvest from the late-planted corn crop.

Despite the late start, rainfall in most parts of the country was normal
to above normal with the exception of the southeastern and southern
parts of the country (Manicaland, Masvingo and Matebeleland South
provinces) that experienced a long dry spell in February and March. This
mid-season drought damaged crops and consequently reduced harvests in
these areas.

As a result of poor planning by the government and the scarcity of
foreign currency, the country was ill prepared for the 2005/6 farming
season and could not take full advantage of the good rainfall.

There was a very limited supply of fertilizer available. The local
fertilizer industry has the capacity to produce enough fertilizer for
the market (about 450,000 MT annually), 60 % of which is used for cereal
production. The industry imports the raw materials, mainly ammonia,
potash, sulphur and micronutrients. A severe shortage of foreign
currency curtailed importation of adequate raw materials. The industry
only received 15% of its foreign currency needs and could only produce
40% of the required compounds and 30% of the nitrogen top-dressing
fertilizer. Consequently, a significant proportion of the corn crop did
not receive any inorganic fertilizer this season, greatly reducing yield
potential. The incessant rains up to the end of January also resulted in
leaching of nutrients particularly from sandy soils that were already at
sub-fertile conditions, compounding the effects of the fertilizer
deficit. Communal farmers who traditionally produce between 60 to 70% of
the nation's corn are predominantly on sandy soils where substantial
leaching took place.

The chronic shortages of foreign currency resulted in poor availability
of other critical raw materials such as fuel for tillage and chemicals
for weed control. Insecurity of land tenure remains a major constraint
to long-term development and investment on farms. The government has not
yet given security of tenure to beneficiaries of the land reform program
thus locking out private sector participation in the financing of
agriculture.

The area planted to corn is difficult to ascertain, as the majority of
corn producers are now small-scale farmers at subsistence level.
According to the seed industry, about 40,000 MT of hybrid corn seed was
available this season of which 26,000 MT was produced locally and 14,000
MT was imported. An estimated 5,000 MT of open-pollinated varieties was
also available. Assuming all the seed was planted, at a seed rate of 25
kg/ha this would have resulted in a corn area planted of about 1.8
million hectares. However, it is apparent that hybrid seeds were not
always available. Government seed distribution was late and erratic and
some areas, particularly in Matebelelend South, did not receive
government inputs. In some areas farmers planted lower yielding second
and third generation hybrid seeds.

Official statistics and estimates for corn are not available. The
Government cancelled a joint post-harvest assessment mission between
UNDP and AREX in April 2006 preferring instead the Central Statistical
Office (CSO), a department in the Ministry of Finance, to carry out the
survey and produce estimates.

Based on field data, rainfall data and satellite imagery, our revised
estimate of this season's harvest is 1 million MT. While it is a big
improvement over last season's 550,000 MT it is still short of the
domestic requirement of about 1.6 million MT per annum. This estimate is
based on a harvested area of approximately 1.4 million hectares. It must
be borne in mind that the majority of corn producers are small-scale
farmers at subsistence level. Area estimates can be quite subjective and
yield can be difficult to quantify.

Deliveries to the Grain Marketing Board (GMB), the state-controlled body
that is the only legal buyer of corn, are likely to be very small.

The following table shows corn production data from the 2003 year of
planting:

  -------------------------- --------------- --------------- -------------
  Year of planting           2003            2004            2005

  Area (1,000 ha)            1,365           1,200           1,400

  Yield (MT/ha)              0.60            0.46            0.72

  Production (1,000 MT)      900             550             1000
  -------------------------- --------------- --------------- -------------

The 2005/6 national average yield of corn is estimated at 0.72 MT/ha,
lower that the 1990's communal farmer average yields of 0.9 MT/ha.
Factors that contributed to lower than expected yields are poor
availability of fertilizers, leaching of soil nutrients, quality of
seeds and the effects of the mid-season drought in some parts of the
country.

Consumption

Actual consumption figures cannot be measured as a large proportion of
the crop is consumed at subsistence level and does not reach the silos.
Total annual domestic consumption is therefore estimated based on per
capita consumption and national population.

Per capita human consumption is estimated at 120 kg per person. Based on
the 2002 census population of 11.6 million growing at 1.1% per annum,
the 2006 population would be 12.1 million. However, the impact of
HIV/AIDS whose prevalence is rate is about 24% and migration
(particularly to neighboring countries) has affected population
statistics. The CSO projects a population of 11.8 million for 2007.
Thus, the 2006/07 human consumption requirement based on a population of
11.8 million is 1.4 million tons. Seed requirement is estimated at
51,000 MT whilst feed requirement is estimated at between 125,000 MT and
250,000 MT giving a total domestic consumption is 1.6 million to 1.7
million MT.

However, consumption is also influenced by the supply of the grain and
disposable income. Annual inflation is rising and reached an
unprecedented 1193% at the end of May, eroding the purchasing power of
the majority of the Zimbabwean population. Domestic consumption may fall
to below 1.6 million tons due to the combined effect of low disposable
income and the projected corn deficit.

Trade

Following the crop failure of 2004, the Government of Zimbabwe declared
its intention to import 1.2 million MT of corn to make up the shortfall
from the 550,000 MT crop. It imported and paid for 1.04 million tons of
corn from South Africa from May 2005 to April 2006, a remarkable
achievement considering the scarcity of foreign currency. The tobacco
and cotton crops that traditionally bring in substantial foreign
currency were low in the 2004/5 season and resulted in lower exports and
lower foreign currency earnings than anticipated.

The corn deficit for MY 2005/6 is about 500,000 MT that the government
is expected to meet through imports. The government has already
announced plans to continue importing about 1,000,000 MT from May 2006
until next season's harvest in April 2007 in order to build up the
country's strategic grain reserves. This is unlikely to be achieved due
to the Zimbabwean government's insistence on white GMO free corn, which
is in short supply in South Africa, after farmers voluntarily cut back
corn area planted by about 45%.

Due to the smaller crop in South Africa, corn prices are high and
Zimbabwe will struggle to raise enough foreign currency to meet the
costs of the intended imports. Zimbabwe may also buy from other sources,
including neighboring Zambia, which has an exportable surplus. However,
the Zimbabwean insistence on white GMO free corn will compound the
problem. Any biotech corn will have to be milled near the ports of
entry.

  ------------------------- --------------- ----------------- ------------
  Import Trade Matrix                                         

  Country                   Zimbabwe                          

  Commodity                 Corn                              

  Time Period               May/April       Units:            1000 MT

  Imports for:              2004/05                           2005/06

  U.S.                      0               U.S.              0

  Others                                    Others            

  South Africa              205             South Africa      1,040

  Total for Others          205                               1040

  Others not Listed         0                                 0

  Grand Total               205                               1040
  ------------------------- --------------- ----------------- ------------

The following table shows the monthly MY 05/06 imports from South
Africa.

  ---------------- ------------------ ------------------ -----------------
  Month and Year   White Corn (MT)    Yellow Corn (MT)   Total (MT)

  2005                                                   

  May              107,205            Nil                107,205

  June             95,166             Nil                95,166

  July             95,274             Nil                95,274

  August           87,327             Nil                87,327

  September        87,553             Nil                87,553

  October          87,412             715                88,127

  November         91,218             514                91,732

  December         77,232             124                77,356

  2006                                                   

  January          63,442             1,059              64,501

  February         134,423            4,703              139,126

  March            75,830             2,843              78,673

  April            27,815             769                28,584

  Total            1,029,897          10,727             1,040,624
  ---------------- ------------------ ------------------ -----------------

The table below shows the weekly imports of corn from South Africa since
the beginning of the new marketing MY 06/07 season in May 2006.

Weekly imports of corn from South Africa (May 2006 to date)

  ----------------- ----------------- ----------------- -----------------
  2006, Week        White Corn (MT)   Yellow corn (MT)  Total (MT)

  04/29 -- 05/05    4,158             117               4,275

  05/06 -- 05/12    4,308             118               4,426

  05/13 -- 05/19    4,032             29                4,061

  05/20 -- 05/26    9,473             Nil               9,473

  05/27 -- 06/02    7,896             Nil               7,896

  06/03 -- 06/09    4,679             Nil               4,679

  06/10 -- 06/16    1,710             Nil               1,710

  Total to date     36,256            264               36,520
  ----------------- ----------------- ----------------- -----------------

Prices

The government has increased the producer price for the 2006/07 selling
season to Z\$31.3 million per ton from Z\$2.2 million in the 2005/06
marketing season. The new price was expected to cushion farmers against
inflation and rising production costs, but inflation at the end of May
reached 1193%, up 151% from the April rate of 1042%. Continued rises in
inflation will negate the expected financial benefits of the new corn
producer price.

**WHEAT**

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

  Country             Zimbabwe                                            

  Commodity           Wheat                                               

  1000 HA             2004       Revised   2005      Estimate   2006      Forecast

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

  Market Year Begin              07/2004             07/2005              07/2006

  Area Harvested      35         35        35        35         35        45

  Beginning Stocks    100        0         100       0          100       0

  Production          105        105       95        120        95        135

  TOTAL Mkt. Yr.      130        130       150       90         150       100
  Imports                                                                 

  Jul-Jun Imports     130        130       150       90         150       80

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

  TOTAL SUPPLY        335        235       345       210        345       235

  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.          235        235       245       210        245       235
  Consumption                                                             

  Ending Stocks       100        0         100       0          100       0

  TOTAL DISTRIBUTION  335        235       345       210        345       235
  ------------------- ---------- --------- --------- ---------- --------- ----------

Production

Planting of winter wheat is complete with about 45,000 hectares having
been planted. Only 10,000 hectares had been planted by mid May, the
recommended planting cut-off date that ensures attainment of optimum
yields. However, the Department of Research and Extension (AREX) urged
farmers to continue planting wheat into mid June. Planting after May
results in an estimated loss of 10 to 15% for every week's delay and the
crop faces a big risk of being spoilt by early summer rains in October.

One of the major reasons for the delay in wheat planting was inadequate
tillage capacity (tractors, spares and fuel). Most of the newly
resettled farmers who now make up the bulk of wheat producers do not own
farm machinery and rely on hiring tillage services. Demand for services
outstrips supply, delaying planting.

Inadequate irrigation facilities were also a major constraint to wheat
production. The country has a maximum potential of 65,000 hectares that
could be put under irrigated winter cereals but some of the irrigation
equipment and infrastructure has been vandalized. Although there is
potential to rehabilitate irrigation infrastructure so as to utilize the
entire 65,000 hectares, the Irrigation Association of Zimbabwe estimates
that complete rehabilitation could take 3 to 4 years if there is
adequate foreign currency to import the necessary spares.

Late disbursement of funding and inputs also contributed to the delay in
planting. High production costs, the unknown producer price, and late
payments for the crop by the GMB discourage production. The wheat price
for the 2005 crop resulted in marginal viability and was not a good
incentive for farmers to grow wheat in 2006 given the escalation in
production costs. Electricity outages have become more frequent and are
disrupting irrigation activities, which will adversely affect yields.

There was an estimated 8,000 MT of wheat seed available for the 2006
crop, enough to plant 88,000 hectares. Wheat area planted this year is
about 45,000 hectares, similar to last year's 46,000 hectares. The delay
in planting caused about three quarters of the crop to be planted after
the recommended cut-off date and will result in lower than optimum
average yields of around 3 MT/ha. This will result in a wheat output of
about 135,000 MT, a substantial drop from the 329,000 MT produced in
2001.

Consumption

Domestic wheat demand is estimated at between 340,000 MT and 400,000 MT
annually although in reality consumption is much lower. Per capita
consumption of wheat is estimated at 29kg/year for an estimated
population of 11.8 million, giving a wheat requirement of 343,000 MT for
2006/7. By implication at least 6,500 MT of wheat are required weekly to
satisfy domestic consumption. Wheat supplies to millers have been
erratic and due to limited availability GMB has been rationing wheat to
millers at about 4,000 MT per week or 208,000 MT per annum.

Trade

The country is expected to produce 135,000 MT of wheat and will have to
import the balance of 205,000 MT in order to satisfy domestic demand.
Formal imports, if any, are more likely to reach 100,000 tons. Informal
wheat and flour imports probably continue.

Under normal circumstances, Zimbabwe imports about 50,000 MT of hard
wheat annually to improve the quality of the locally grown wheat. The
unavailability of foreign currency has curtailed wheat imports and the
country has been unable to officially import significant quantities of
wheat from and through South Africa since October 2005. Currently a
shortage of wheat is a looming and the country will have to resume wheat
importation up to mid October when the new crop is harvested.

The table below shows official wheat imports from and through the South
African transport system for the period October/September 2004/5 and
2005/6. Unofficial and flour import data is not available.

  ------------------------- --------------- ----------------- ------------
  Import Trade                                                

  Country                   Zimbabwe                          

  Commodity                 Wheat                             

  Time Period               Oct.-Sept.      Units:            MT

  Imports for:              2004/05                           2005/06

  U.S.                      10215           U.S.              0

  Others                                    Others            

  Argentina                 63325           Argentina         1575

  South Africa              3842                               

  Total for Others          67167                             1575

  Others not Listed         0                                 0

  Grand Total               77382                             1575
  ------------------------- --------------- ----------------- ------------