Government has backed maize sellers into a corner using its financial muscle and policy setting authority.
But experts warn that while Capital Hill’s three-pronged strategy of slashing maize buying prices, banning exports and importing more are helping to drive down prices, it could ruin the local grain industry and discourage production and off-take.
In slashing the price of buying maize for the strategic grain reserves by 23.6 percent from K1 100 per kilogramme (kg) or K55 000 per 50kg bag to K840 per kg or K42 000 per 50 kg bag, the National Food Reserve Agency (NFRA) has dispatched a strong signalling effect on the downward spiral of the product’s prices in local markets.
NFRA’s new maize buying price is around 10 percent lower than the cost of producing a kg of maize, which the Farmers Union of Malawi (FUM) pegs at K938.24.
The agency’s new price also violates the gazetted farm-gate price of K1 050 per kg that would have allowed reasonable mark-up for sellers.
In a statement on Tuesday, NFRA justified the decision, saying it follows market research, which has shown significant decreases in maize prices nationwide.
NFRA, alongside its sister State run Admarc are the largest single buyers of State-funded maize in the country.
Compounding the local traders’ high-cost inventory headaches is government’s importation of more maize, roughly 200 000 metric tonnes from neighbouring Zambia.
Reacting to the new NFRA price on Monday, Grain Traders Association of Malawi president Grace Mijiga Mhango said when prices for goods are going up and cost of living is already unbearable, a farmer is being squeezed more.
She said: “Legally government is going against their own gazetted price. It is definitely going to be a big loss and maize off-take in the coming season will be low for traders.”
FUM executive director Jacob Nyirongo said in an interview on Monday that the new price is exploitative to farmers and unlawful.
Civil Society Agriculture Network board chairperson Driana Lwanda said minimum farm-gate prices are calculated based on break-even points using gross margins, as such, traders will be making a loss with the new prices.
Meanwhile, agriculture policy expert Tamani-Nkhono Mvula has urged government to lift the maize export ban to enable farmers to export the maize legally.
The Ministry of Agriculture, Irrigation and Water Development declined to comment.
