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ZIMBABWE: Govt raises producer prices to attract more grain
IRIN News
May 05, 2005

http://www.irinnews.org/report.asp?ReportID=46972

JOHANNESBURG - In a bid to induce Zimbabwean farmers to sell more of their stocks to the state's Grain Marketing Board (GMB), government has increased the maize producer price.

The official Herald newspaper reported that the maize producer price for the 2005/06 marketing season had been increased by almost 300 percent from Zim $750,000 (about US $122) to Zim $2.2 million ($359) per metric tonne.

"The new producer price would be effected on deliveries made from the beginning of the marketing season on 1 April. The new price ... is expected to enhance farmers' viability by ensuring that they get a positive return on their investment," the Herald noted. Farmers would be guaranteed a 20 percent return after allowing for overhead costs.

Economist Dennis Nikisi told IRIN: "The hope is that it will induce any farmer who might be withholding their maize for on-farm consumption, or those who might be tempted to side-market maize - remember, maize is a controlled specified crop, which means it is only sold to the GMB - [so] this is ... a strategy to induce those farmers who might be holding stocks to sell to the GMB, and encourage them to plant a higher hectareage of maize in the next cropping season."

As to whether farmers would be enticed into selling more of the staple crop to the GMB, Nikisi said "the problem is that there's not much of it [maize] around anyway", and as for encouraging farmers to plant more maize, he believed the producer price increase would not be enough of a counterweight to the rising cost of inputs.

"Look at the price of fertiliser - it has escalated; the same has happened with the price of pesticides and fuel. Every other input is on the rise, and even though the [maize] producer price is up, without holding down the costs of inputs that go into the production process, it's like a dog chasing its tail," he remarked.

Nikisi added that, at the end of the day, an increase in the producer price was likely to have a snowball effect.

"The implication, basically, is that if the producer price is going up ... it translates into a higher price for mealie [maize] meal; with a shortage already in the market, this means there will be even higher prices for mealie meal on the black market, which the majority of the poor will not be able to afford," the economist pointed out.

This, in turn, could lead to worker demands for higher wages. "If people demand higher wages, the cost of production will increase and everything else will rise in price, and this feeds into the inflation problem," Nikisi noted.

The Consumer Council of Zimbabwe estimated that an average family of six would need Zim $2.4 million ($392) per month to cover basic expenses such as food, shelter and transport. "If you earn anything below that then you cannot make ends meet - it's a dire situation," Nikisi said.

According to a report by the US-funded Famine Early Warning Systems Network, "the manufacturing minimum wage rate for the month of January 2005 ... could only cover about 38 percent of the required minimum household expenditure".

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