Government minimum price for maize this year is discouraging farmers to sell maize to State grain trader Agriculture Development and Marketing Corporation (Admarc), a situation analysts said threatens food security in the country.
Admarc has borrowed K2.5 billion from the local market for the purchase of maize.
But a week after its markets opened, some farmers have told Weekend Nation that the price, at K150 per kilogramme (kg), is too low and they prefer to sell their produce to vendors who are offering between K180 and K230 per kg.
“I can’t sell my maize at K150 when vendors are willing to give me K230 per kg, so most of us have sold our maize to vendors,” said one of the farmers, Samuel Dickson of Sande Village, Senior Chief Chikowi in Zomba.
The development puts into question Malawi Government’s rationale in setting minimum farm gate prices when Malawi is a liberalised economy where market forces determine prices.
Admarc officials in the markets we visited confirmed that since opening the markets last Tuesday, supply has been low and some markets have been temporarily closed due to lack of produce.
As of Wednesday, Mwanje Admarc market in Chiradzulu only managed to buy six kgs of maize while another market at Mauwa in the same district bought around 40 kgs.
At Thondwe in Zomba, the market has temporarily been closed due to lack of supply, an official said.
Admarc spokesperson Agnes Ndovi sounded hopeful on Wednesday that the areas where maize inflows are high will compensate areas with low inflows.
She said: “Indeed the inflow of maize is different from district to district or even region depending on the volumes harvested in that area and competition in the area. However, the areas where inflows are high will compensate areas with low in flows.”
She said Admarc was still optimistic that it will meet its 16 000 metric tonnes (MT) target it wants to buy from the K2.5 billion loan.
But Weekend Nation spot-checks show that the target is under threat. In all the three regions on Tuesday and Wednesday none of the market officials we spoke to bought more than 1 000kg (10 bags weighing 50 kgs).
In Lilongwe, most of the outlets either remain closed as officials are yet to start receiving the funds or had no maize supply from farmers.
While snap checks in Mzuzu showed that depots were closed, with some officials we found there, saying no communication had come through on when the money will be sent to them.
This year, government set K150 per kg as minimum price for maize. But vendors are offering between K180 and K250 per kg.
The silent justification of this practice is that the vendors are operating in a liberalised and free market. Free market system refers to an economy where the government imposes few or no restrictions and regulations on buyers and sellers.
In a free market, participants determine what products are produced, how, when and where they are made, to whom they are offered and at what price—all based on supply and demand.
Agricultural experts, including Farmers Union of Malawi, have faulted government’s tendency of buying farm produce from farmers late, saying it does not benefit smallholder farmers as vendors take advantage of the delay to buy at a below gate prices.
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.
The report observes that the local maize market is not transparent enough to facilitate traders’ planning, which would likely help to 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.
Agricultural expert and former director at Civil Society Agricultural Network (CisaNet) Tamani Nkhono-Mvula said Tuesday he was not surprised Admarc is facing challenges because most of the maize has already been bought by middlemen.
He blamed government to allow Admarc to borrow K2.5 billion in July, saying the ideal month to obtain loans for the maize purchases was in March.
“This is a perennial problem. If government and Admarc want to buy from smallholders then the most realistic time to buy is in March or April not now,” he explained.
If Admarc fails to meet its target, it means the taxpayer will be the losers as they will shoulder the interest which will be accumulated from of the K2.5 billion loan.
The taxpayers’ will also pay higher to buy maize when vendors start reselling the commodity on the market during the lean period of December and March, said Nkhono-Mvula.
And if Admarc fails to repay the loan—which is probable—it is the taxpayer who is likely to shoulder the burden.
Just last year, government forked out a K45 billion bailout package to Admarc after the grain parastatal failed to repay loans it got from local banks to finance a maize buying spree that went bust.
And in 2017, Treasury also paid K23 billion of Admarc loans—again after mismanaging grain trading.n