by Wandile Sihlobo | Jun 11, 2020 | Agricultural Production
This essay first appeared on Business Day, June 9, 2020
Some countries in the Southern and East Africa regions will again need large imports of maize in the 2020/2021 marketing year, which ends in April 2021. However, their saviours won’t be your typical major global producers such as Ukraine, the US or Brazil. Rather it is most likely to be SA and Zambia waiting in the wings.
In Southern Africa, the recent data released by Zimbabwe’s department of lands & agriculture placed its 2019/2020 maize harvest at 907,628 tonnes, up 17% from the previous season. Nevertheless, this is below Zimbabwe’s 10-year average maize production of 1.1-million tonnes and annual domestic consumption needs of between 1.9-million and 2-million tonnes. The 2019/2020 production season corresponds with the 2020/2021 marketing year, which means Zimbabwe will still need to import about 1-million tonnes of maize to fulfil domestic needs in the 2020/2021 marketing year.
Meanwhile, in East Africa, the International Grains Council forecasts Kenya’s 2019/2020 maize harvest at 3.4-million tonnes. This is roughly unchanged from the previous season, though there have been good rains over the past few weeks in the grain-producing regions of the country. With Kenya’s annual maize consumption at about 4.7-million tonnes, the aforementioned production estimate means the country could require imports of about 1.3-million tonnes in the 2020/2021 marketing year.
Unlike the other seasons, where African countries would look outside the continent for maize supplies in seasons of deficiency, SA and Zambia could emerge as key maize suppliers. Both countries are expecting their second-largest maize harvests on record for the 2019/2020 production season. In the case of SA, the expected harvest is 15.6-million tonnes, against domestic consumption of about 11-million tonnes. In the case of Zambia, the 2019/2020 maize harvest is estimated at 3.4-million tonnes against domestic maize consumption of 2.2-million tonnes.
This means SA could have at least 2.7-million tonnes of maize for export markets in the 2020/2021 season, which is 89% up year on year. Meanwhile, Zambia could have 1-million tonnes of maize exports, up from 100,000 tonnes the previous year. This would be the third year on record that Zambia would be able to export as much as 1-million tonnes of maize.
Other key maize producing and consuming countries in the Southern and East Africa regions, such as Malawi and Tanzania, will most likely have balanced supplies for their domestic markets and therefore limited room for exports. Hence our focus is on Kenya and Zimbabwe. Also, worth noting is that SA and Zambia are among the most prominent suppliers of maize to Zimbabwe and Kenya and featured among the top five maize suppliers to both countries in 2019, according to data from Trade Map.
Biosecurity policy is always an important consideration when it comes to African markets. To this end, SA has in the past experienced phytosanitary barriers because of its use of genetically modified maize seeds, which account for about 80% of its output. But this time around things will be different. Zimbabwe lifted its ban on genetically modified maize imports from January 31 as the country tried to improve local supplies after a poor harvest in the 2018/2019 season.
With the harvest of the 2019/2020 season also likely to be relatively low, this policy decision will help ease maize imports into Zimbabwe in the coming months. In the case of Kenya, however, there is still a ban on the importation of genetically modified maize. This might limit SA’s participation in Kenya, while Zambia, which produces non-genetically modified maize, might become a prominent player in the Kenyan market. SA’s importance is likely to be concentrated in the Zimbabwean market, but the bottom line is that SA and Zambia will be key sources of maize imports for the southern and East Africa regions within the 2020/2021 season.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Feb 19, 2020 | Agricultural Production
In his 2020 State of the Nation Address, President Cyril Ramaphosa noted that “this year we will open up and regulate the commercial use of hemp products, providing opportunities for small-scale farmers; and formulate policy on the use of cannabis products for medicinal purposes, to build this industry in line with global trends. The regulatory steps will soon be announced by the relevant ministers.” This is already part of the sectoral master plans that are being developed, specifically the Department of Agriculture, Land Reform and Rural Development, as well as at the Department of Trade, Industry and Competition.
South Africa is not the only African country that is suddenly taking interest in cannabis. A number of Africa countries have in the recent past reformed their cannabis regulations – moving away from it being a prohibited drug to a source of income as an exportable commodity. This is motivated by the promise of riches, with many policymakers viewing the burgeoning cannabis industry as offering prospects for boosting rural economic growth and job creation. This seems to be particularly the case for South Africa, although it is still unclear how much revenue the country can derive from this plant.
Such countries include Lesotho, which was the first African country to issue licences for the cultivation of medical cannabis in 2017. This saw international investment being directed into the country in 2018. Zimbabwe issued its first cannabis licence in March 2019. Zambia is the latest country to legalise medical cannabis, announcing in December 2019 that medical cannabis for export would be permitted in the country. However, the government has stressed that cannabis will remain prohibited for domestic use. Uganda has also taken positive steps towards legalisation of medical cannabis, having issued commercial licences to two operators, and looking to potentially legalise medical cannabis cultivation in 2020.
Other countries, like Eswatini, have also put in place a draft bill regulating cannabis. Similarly, to Zimbabwe, cannabis production in Eswatini is restricted to medicinal purposes and scientific research. Malawi has also moved glacially in putting in place its own licensing regime. Export markets and foreign exchange earnings are the key drivers for cannabis regulatory reforms in this country.
In short, many African countries are gradually considering legalising the cultivation of cannabis for medical and scientific purposes. Those countries where reforms are in motion are using the Canadian code as a guide for developing their licensing regimes. For many of them, the major motivating factors are boosting exports to earn hard currency, reducing unemployment, rural development and increasing agricultural productivity. Broadening their tax base is another important consideration, which in the South African case has been noted by the Finance Minister, Mr Tito Mboweni.
I won’t dwell much on my ideas about how South Africa should explore the virtues of cannabis as I have also covered the subject in one of the chapters in my upcoming book — Finding Common Ground: Land, Equity and Agriculture — which will be published by Pan Macmillan in April 2020 (It will be available nationwide. You can pre-order it here).
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Aug 26, 2019 | Africa Focus
On 25 August 2019, we learned that the Zambian government has placed a price cap of $199 per tonne on maize (approximately R3 023) and has justified its actions by noting its concerns over rising maize prices, which could disadvantage many poor Zambian households.
The maize prices have increased notably over the past couple of months due to a 16% year-on-year decline in Zambia’s 2019 maize production to about 2 million tonnes. While the market has reacted to this decline in harvest, Zambia should have enough maize to meet local demand this year, thanks to large carry-over stocks of almost 500 000 tonnes from the 2018/19 marketing year which has provided a buffer for the 2019/20 marketing year.
Zambia’s annual maize consumption is estimated at 2.1 million tonnes. This means that there will be sufficient supplies for domestic consumption, and also maize for the export market. The U.S. Department of Agriculture estimates that Zambia could have 100 000 tonnes of maize for the export market. The balance is the pipeline requirement or carryover stock for the next season.
Why am I giving this background? It is so you can appreciate that there is no maize shortage crisis in Zambia and if the market could have reliable information about events happening in the country’s maize sector, there wouldn’t be fears that end up driving up prices and leading to government interventions.
I am not even a fan of government interventions to markets, and on the Zambian side, I have made a similar point in LSE blog in 2016 when the government banned exports of maize because of worries of possible shortages.
In brief, I noted that policy uncertainty in Zambia remains a key concern, particularly around agricultural market regulation. The then Zambian Agricultural Secretary, Julius Shawa, had cancelled previously issued maize export permits and further insisted that market participants forget the export market and focus only on meeting domestic demand. This move was in response to concerns that maize exports were driving up domestic staple food prices. I noted then, and I still hold this view, that such government intervention does not encourage maize production and broader agricultural development.
Had the Zambian government invested a lot on market information systems which would enhance the price discovery methods and eliminate the fear of shortages of maize, even when that’s not the case, maize prices wouldn’t increase dramatically when there is a lower harvest.
Moreover, infrastructure is also another area that needs improvement so that when there are maize and other agricultural shortages, commodities could be transported to deficit areas timely and cost-effectively. This would lessen the fear of maize shortages.
Zambia needs to look no further for an example to emulate, South Africa is one such country that has a successful maize production.
For the immediate concern, it always helps to remember that the cure for higher agricultural commodity prices is “higher prices”. This is in the hope that higher prices would encourage production in the following season, which ultimately leads to lower and affordable prices. Whereas, placing a cap of commodities prices would drive away investment from the sector. In this case, why should farmers who are blocked from enjoying a fair value for their products continue to invest and expand their operations?
I’ve written this note for Fin24
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by Wandile Sihlobo | Aug 10, 2018 | General Comments
The United States Department of Agriculture has just released its World Agricultural Supply and Demand Estimates report, which covers most major grains and oilseeds estimates for the 2018/19 production season. The broader global theme remains roughly unchanged from last month. There is less wheat in the world due to drought in parts of the European Union and Black Sea region. Meanwhile, maize, soybeans and rice production estimates are relatively higher than last season due to expectations of large yields in the US, Asia and South America, amongst others – I know I am skipping a lot of important details, will come back to this next week.
From the South African side, the agency left its estimates for 2017/18 season, which is a crop that is currently being harvested, unchanged from last month at 13.8 million tonnes. While higher than the average production of 12.5 million tonnes, this is well below the previous season’s record harvest of 17.6 million tonnes due to a decline in area planted and expectations of average yields in some areas.
The key message from these numbers is that South Africa’s maize market will be well supplied in the 2018/19 marketing year, which ends in April 2019. Total maize supplies could reach 16.7 million tonnes, well above the local demand of 10.8 million tonnes per annum. The maize supplies figure combines opening stocks and expected production. This essentially means that during the 2018/19 marketing year, South Africa’s maize exports could, at the least, amount to 2.5 million tonnes – slightly lower than the volume exported in 2017/18.
Furthermore, the agency placed Zambia’s maize production at 2.4 million tonnes, down by 34 percent from last year’s record crop, and down 20 percent from the 5-year average. This decline is on the back of a reduction in area planted, as well as expected lower yields due to unfavourable weather conditions earlier in the season. Drought prevailed in Zambia’s maize production areas from December 2017 through January 2018. The extent of January’s drought also occurred during the critical pollination stage which adversely affected yields.
Although the expected production is 14 percent lower than the country’s annual maize consumption, Zambia’s maize supplies are still in good shape, thanks to large stocks of over a million tonnes from last year.
This generally means that maize prices in South Africa and Zambia could remain at fairly lower levels in the near term. The key risk is the expected El Niño — chance of another drought in the coming summer season — but we will get more reliable estimates about this in the coming month or so.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
