Speculation drives up maize prices

Maize prices have gone up by about 18 percent within a week, a development Grain Traders and Processors Association of Malawi has blamed on speculation.

Business News spot checks in some selected produce markets show that a 50 kilogramme (kg) bag is now selling at between K9 500 and K10 000 from last week’s K8 500.

In an interview yesterday, Grain Traders Association of Malawi president Grace Mhango faulted the rising maize prices on the market, which she said is speculative.

She said: “Our market is an extreme speculative market.  There is news that World Food Programme [WFP] will soon be buying maize and the anticipated speculative prices are ranging between K200 to K230 per kg; hence, the price rise.

“The demand in the region is also high with Kenya looking for 1.2 million tonnes, Zimbabwe 775 000 tonnes and Democratic Republic of Congo 600 000 tonnes.  I do not have official figures from Mozambique, but with such demand, Malawi and Zambia are the only countries with decent volumes, so the rule of demand and supply is taking course.”

In an interview, Consumers Association of Malawi (Cama) executive director John Kapito expressed shock with the escalating prices, which he said hits hard the minimum wage earner.

“I am very shocked with how the price of maize has escalated within such a short period.

‘But while this is making it tough for the consumers, it is even worse for the minimum wage earner, who out of K25 000, has to cough more for food. Economically, this is quite bad as well,” he said.

A recent study by the International Food Policy Research Institute (Ifpri)  found that Malawi has the highest level of maize price volatility compared to other sub-Saharan Africa countries, observing that the local maize market is not transparent enough to facilitate traders’ planning, which would likely help stabilise both volumes and prices.

This means that prices in different markets do not follow the same patterns, which suggests poor integration between markets in different locations both within and between regions.

Maize, as part of the food component, impacts the country’s economy given that it accounts for 45.2 percent in the consumer price index, which is an aggregate basket of goods and services for computing inflation.

Reserve Bank of Malawi (RBM) spokesperson Mbane Ngwira said the central bank will have to use the estimated prices in the model to see the impact this could have on inflation, which has been in single digit lane since last year.

Malawi’s year-on-year inflation is currently at 8.9 percent as of May this year, according to the National Statistical Office (NSO).

This year’s maize surplus was estimated at 355 000metric tonnes out of a total output of 3.3 million MT.

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