Fertiliser Association of Malawi has asked government to consider adopting a flexible farmer top up system for the Affordable Inputs Programme (AIP) to shield both itself and suppliers from price volatility and exchange rate risk.
In its analysis of the 2021/22 AIP, the association said government is certain of its expenditure under the system as it is limited in Malawi kwacha per beneficiary.
But it said the system allows suppliers to adjust prices during the supply period to follow global prices of fertiliser and the prevailing exchange rate.
Reads the analysis in part: “It is a well-known fact that globally, fertiliser prices are volatile and this past year has proven this to be true. The current trend shows that the international price of fertilizer is to continue to increase.
“If the government’s contribution remains fixed, the total cost of a 50 kilogramme [kg] bag of fertiliser could exceed the price a supplier is receiving through the two fixed contributions.”
During the year under review, each beneficiary paid K7 500 per 50kg bag of NPK and Urea, with the government’s contribution set at K19 500.
This meant the AIP fertiliser was selling at K27 000 per 50 kg bag regardless of the type or geographical position.
However, commercial market prices of commodity ranged between K35 000 and K38 000 per bag.
This made the proposed government contribution of K19 500 and farmer contribution of K7 500 insufficient to cover the emerging costs of fertiliser, but government did not intervene.
Speaking earlier during the launch of construction works for Marko Irrigation Scheme in Traditional Authority Mwabulambya in Chitipa, Minister of Agriculture Lobin Lowe said rising global prices of inputs, especially fertilisers, will likely see farmers paying more than the K7 500 per bag.
He said his ministry will soon start scrutinising bids for suppliers, but indicated that fertiliser prices will likely rise due to the devaluation of the kwacha and global prices of the commodity.
Said Lowe: “If you consider procurement procedures, you will appreciate that we have tendered and suppliers have submitted their bids. We will be evaluating them [the bids].
“We are also going up and down to make sure that potential suppliers can indicate the pricing.”
Spot-checks in some agro-dealer shops showed that a 50kg bag of Urea and CAN fetched K49 000 and K37 700, respectively.
On the other hand, Super D was selling at K62 700 while Compound D was at K52 700..
Last year’s AIP beneficiaries quadrupled to 3.6 million from 900 000 under its forerunner, with the quantity of fertiliser rising to between 400 000 and 450 000 metric tonnes.
In the 2022/23 National Budget, AIP was allocated K109.5 billion, representing about 85 percent of the agriculture sector budget.
However, the allocation is a K33 billion decline from the previous year’s K142 billion.