Experts have spoken against the government’s move to cap fertiliser prices in the Affordable Inputs Programme (AIP), saying it may compromise the programme if global fertiliser prices move upwards as the agricultural season approaches.
Minister of Agriculture Lobin Lowe announced last week that government will buy AIP fertiliser from suppliers at a capped price of K27 000 while beneficiaries will contribute K7 500 per 50 kilogramme bag.
In an interview after publishing a research paper last week on why Malawi is experiencing a spike in fertiliser prices, Mwapata Policy Institute research fellow Christone Nyondo said government has no control over the cost of fertiliser as the largest price mark is influenced by external market forces at around 90 percent.
He said: “Surges in prices of fertiliser are mostly driven by external forces which are outside the control of the government.
“For instance, Free on Board [FOB] prices jumped by around 112 percent compared to the same time last year and considering port charges and other transport logistics, we have seen that 90 percent of charges are influenced at global level”.
Globally, Nyondo said food prices such as those for wheat and maize are driving prices up because countries such as China are stocking their strategic grain reserves in anticipation of lockdowns due to Covid-19.
He, however, explained that as demand for fertiliser is increasing, it takes time for manufacturers to increase capacity to meet demand which also takes time; hence, price stabilisation should be expected next year.
Nyondo said Malawi is currently disadvantaged and may not realise decline in fertiliser prices because neighbouring Mozambique, Zambia and Zimbabwe, among other countries, are importing fertilisers and using same Beira and Nacala ports which Malawi depends on.
Nyondo explained that such a development puts pressure on port usage, transportation and facilities that handle fertilisers at the port, among other issues; hence, prices may not come down soon until next year.
The critical thing for government and everyone involved in fertiliser business Nyondo said is to manage logistics in bringing fertiliser into the country say in February, March and April when there is less pressure and manufacturers ship fertiliser; hence, Malawi can procure cheaply and store the quantities, resulting in lower prices.
International Food Policy Research Institute (Ifpri) research fellow Jan Duchoslav in an interview agreed with Nyondo, saying rising fertiliser prices is a problem that is there and they think that there is nothing that can be done about it in the short-term.
He said it remains to be seen whether the government will be able to procure fertiliser at K27 000 as announced because there is yet a comparable data analysis to be done.
“The long-term policy should not be to keep on subsidising but farmers should be raised out of the current status to be able to afford fertiliser over time, but this may not happen in one or two years,” said Duchoslav.
However, director of crop development in the Ministry of Agriculture Godfrey Ching’oma allayed fears from experts on the capping of the fertiliser prices in the AIP, saying government already worked out the costs based on prices offered by companies abroad.
He said for instance, some external suppliers are offering about $670 000 per tonne of fertiliser which may cost K25 000 when shipped into the country but government pegged it at K27 000 average price which informed the decision to cap the price of a 50 kg bag in AIP.
He said: “The private sector will sign contracts with us to buy at K27 000, if they sign the contract, they have to comply with the terms.”
However, Fertiliser Association of Malawi president Dimitri Giannakis said maintaining the prices at K27 000 between now and December will be dependent on the stability of the economy.
Debate on fertiliser prices rages on as government is preparing for the AIP for farmers to benefit in the forth-coming growing season.
Fertiliser is a key component for agricultural production in the country and if not well managed, the majority of farmers would not be able to afford it, resulting in a food deficit for the population.