Maize shortage hits agro-processing firms

The 12.4 percent maize deficit relative to last year has not only affected households, but also firms that use the staple grain as a raw material for their production purposes.

This year’s deficit has come on the back of another output shortage of about 30 percent last year due to the combined effects of floods and drought the country experienced.

Ministry of Agriculture, Irrigation and Water Development figures show that Malawi produced 2.4 million tonnes of maize this year and because of lower output, 6.5 million Malawians are staring hunger in the face.

As the maize shortage is becoming more evident, some agro processing firms say they are finding it tough to source the grain.

Universal Industries Limited, a local biscuit and confectionery maker, is struggling to source maize, which is one of the key raw materials for its biscuits and other products.

The firm’s food technologist Jean Pankuku, in response to an e-mailed questionnaire, said at the moment, their maize milling section has been affected, with output volume cut by almost half.

“This has negatively affected the business particularly on the Kamba Snacks, which contributes a significant percentage to  our total sales volume,” she said, explaining that currently they are buying maize from other manufactures which is pushing up the cost of buying maize grits for production.

“We normally buy maize from private traders as well as farmers but they have run out of stock from their reserves at the moment,” she said.

Pankuku said Universal Industries has also reduced by half the allocation of flour given to employees and their families, adding that the shortage of maize has also impacted on product pricing.

“This shortage has pushed up cost, but looking at our consumer base, we have had to absorb most of the additional cost which has resulted in loss of profit margins.

“The situation has left us with no choice but to resize the number of our employees to cut costs so that we remain in business. The high cost of production has also pushed down our profits due to failure to supply according to market demand,” she said.

The poultry and animal feed industry has also not been spared from the effects of maize shortage.

Poultry Association of Malawi (PAM) technical adviser Eric Chuma has warned that the price of chicken would likely go up as a consequence of the shortage of maize.

He said poultry producers who rely on grain as a component of feed will have to pass on the increase to consumer.

“The companies that depend on maize as a component in chicken feed will have no choice but to increase their prices to recoup the cost of production,” said Chuma in a questionnaire response.

However, opaque beer brewer Chibuku Products Limited (CPL), a subsidiary of SABMiller, which uses a combination maize and sorghum to manufacture its opaque beer, seemed to have prepared well in advance.

CPL operations director Gerald Bowler said while its production lines have not been directly affected as they had enough stocks in reserve, consumer spending power has been eroded and this has had a direct impact on sales.

“CPL sources maize from local suppliers and this is strategically planned to ensure we hold sufficient stocks for the buying season,” he said, but said their concern is the effect of the deficit this year.

Maize is an important crop to the country’s economy and, as part of food, contributes about 50.1 percent to the consumer price index (CPI), an aggregate basket for computing inflation.

This means that any slight movement in the price of maize either way has a bearing on inflation rate.

Already, due to the shortage of the staple grain on the market, year-on-year inflation rate as measured by CPI has risen by 1.1 percentage points to 22.6 percent in June 2016 from the previous month’s 21.5 percent, according to National Statistical Office (NSO).

NSO statement said food inflation, of which maize has a largest weight, went up to 27.7 percent in June from the previous month’s 25.7 percent.