OPINION

Implications of the drought in the United States

Eddie Cross says Zimbabwe will no longer be able to rely on cheap maize imports from its neighbours

The Impact of the Drought in the United States

The US generates about a quarter of global GDP and about the same volume of basic foods. However, it is the largest producer of food surpluses and perhaps as much as half of all the basic foods traded emanate from the USA. Under these conditions a small variation in US agricultural output has a disproportionate impact on global food stocks and prices.

At the beginning of the current season (basically March to October) the summer position was forecast to produce near record crops of maize and soya beans. Yields were predicted to exceed 2011 and both stocks and output looked positive. Since then the US has experienced dry, hot conditions and almost 85 per cent of the summer crop has been damaged. Wheat was ready to reap early in the summer and so was less affected.

As a consequence prices for corn (maize) and soya have surged and are expected to rise even higher in the next few months as the full impact is appreciated in global markets. Stocks, already at low levels in relation to global demand, are expected to fall even further and this situation can be expected to impact the global food situation quite seriously. This situation is developing against the backdrop of tight supply and higher prices that have already pushed some 50 million people back into abject poverty around the world.

Corn and soya are the basic feed stocks of a whole range of industries - pigs, poultry, dairy and beef as well as an important staple food for billons of people. Maize (corn) is the staple food in most countries in Africa and is only challenged by root flour (cassava) and rice in a small number of countries. The emerging situation in the USA and in global markets is therefore likely to have a serious impact on Africa, which, in 2011 was the biggest food deficit region in the World importing some 150 million tonnes of maize grain from surplus regions.

The question is what impact is likely on Zimbabwe? This is not as easy a question as might be thought at first glance. Since the implementation of the land grab in 2000, agricultural output from both small scale and large scale agriculture (Peasant and Commercial) has declined by over 70 per cent. This synergistic association between the two sectors is unexpected and highlights the mutual dependency of the two main agricultural systems in Zimbabwe.

In the current year the maize grain deficit will be about 1,2 million tonnes or two thirds of our total demand. The deficit last year was about the same although official figures deny this. Imports of maize grain and maize meal ran consistently over 100 000 tonnes a month in 2011. This is in addition to donor funded food aid for about 15 to 20 per cent of the population. In respect to soya beans, our consumption demand is probably about 120 000 tonnes, of which about 30 000 tonnes is produced locally. In the case of wheat we now import virtually all our requirements at about 350 000 tonnes per annum. Wheat production has declined from near self sufficiency to a bare 7000 tonnes this winter.

In a world market environment characterized by low stocks and drought affected production, the food outlook in Zimbabwe is not good news. It renders us vulnerable to market shifts and possible difficulties in securing supplies. In the latter regard, we face the additional threat this year of a general decline in regional supplies. Zambia and Malawi both have reduced harvests and limited export surpluses. South Africa, which had a 9 million tonne carry over three years ago will have limited stocks this year and a shortfall of about 500 000 tonnes in current production.

This is in sharp contrast to the regional situation that has prevailed in recent years when Zimbabwe simply had to collect supplies on a daily and weekly basis from neighbouring States at very low prices. It is possible, given the tight stock position in the region, that regional States may suspend exports to secure their own supply positions for domestic consumption. If this was extended to halting exports of meal, it would immediately create a crisis here given the three month lead time on supplies from overseas.

What is a bit of a mystery is the fate of the 400 000 to 500 000 tonnes of maize taken into stock by the GMB over the past two seasons at great cost, funded by the Ministry of Finance. While some has been lost to poor storage management, a great deal seems to have simply disappeared. This may be partly explained by the "Grain Loan Scheme" which is simply a means of maize distribution to local populations on a "never never" basis and therefore virtually for nothing. But it is a factor that should be investigated by the State, not just because it has cost us a couple of hundred million dollars but also because it has made us more vulnerable to the global and regional food crisis.

What is inevitable is that food prices are going to rise. Already there has been a general rise of about 15 per cent in food prices in South Africa and this will inevitably be reflected here depending on the exchange rate to the US dollar. The price increases will affect all meat and dairy products as well as eggs. Prices for maize meal have already risen - partly because of rising regional prices for the grain and the deepening global market crisis arising out of the drought in the mid west of the USA.

Nothing illustrates to global village character of 21st Century markets than the food situation. One area of the world has a drought - the worst for 25 years, and the whole world pays the price and there is almost no time lag in the market response. At the same time, this development emphasizes the cost of the ill considered land invasions in terms of our basic food security needs. The failure of the Zanu PF fast track land reform exercise will touch every Zimbabwean family this year. In a situation where market forces should elicit a strong production response from the farmers, the incentives of high prices will fall like seed on stony ground in Zimbabwe. In other countries farm incomes will rise as farmers respond to the new incentives.

Eddie Cross is MDC MP for Bulawayo South. This article first appeared on his website www.eddiecross.africanherd.com

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