Will farmers go back to the land this year?
Peter Gambara
THE recent hike in agricultural input prices have left many farmers wondering whether they will be able to go back to the land this year.
Following the monetary policy statement by Reserve Bank of Zimbabwe governor John Mangudya and the fiscal policy statement introducing the two percent transaction tax by Finance Minister Mthuli Ncube, the US dollar to the bond
rate spiked to 1:5, before stabilising at the current 1:3.2.
That initial spike saw the cost of producing one hectare of maize go up to $4 520, before coming down to $3 108.69 today.
A 50kg bag of Compound D basal fertiliser that cost about $32 last season initially skyrocketed to $105 per bag, while a 25kg pocket of a medium maturity maize seed was initially pegged at $290.92. This was before the captains of industry were called to State House, where the President read the riot act and asked the companies to reduce the prices.
A 50kg bag of Compound D fertiliser has now come down to $47, while a bag of Ammonium Nitrate top dressing fertiliser is now pegged at $48, although it is in short supply.
However, the prices of herbicides have gone up by as much as four times in some cases. A litre of Atrazine has gone up to $22 (from $6), a litre of Glyphosate now costs $21.60 (up from $8), a 45 gramme sachet of Nicosulfuron now costs $20 (up from $10) and a 50 gramme sachet of Nicosulfuron now costs $48, up from $5. The only input that has not gone up substantially is diesel, that went up marginally by 5 cents to $1.35 as (lie pump price is controlled by the Z Energy Regulatory Authority.
The cost of hiring agricultural equipment is also expected to go up, in line with the genera levels elsewhere in the economy. It is safe therefore to expect it to at least double. Prices of new agricultural equipment and tractors as well a spare parts are now being quoted in US dollars.
The net effect of all these price increases is that the cost of growing a hectare of maize has gone up from approximately $1 400 per hectare to $3 110. This is in line with how the US dollar has appreciated against the RTGS balances Before the announcements, the US dollar was trading at 1:1.5 and is now trading at 1:3.2 (an increase of 2.1).
Most farmers who fund their own operations will therefore find it increasingly difficult to go back to the farm as they were paid for their maize at the old producer price of $390 per tonne. Only those contracted to programmes like Command Agriculture will be able to go back to the farm easily. Contract fanning arrangements provide all the necessary inputs and only deduct the cost of the inputs at marketing.
However, the increase in the cost of production makes it necessary for government to adjust the producer price of maize in the next marketing season that starts on April 1, 2019. Using the target yield level of five tonnes per hectare as stipulated in the Command Agriculture programme, it means the break-even price is now $622. per tonne and the GMB price has to go up to $810 per tonne.
However, government normally uses a yield level of just three tonnes per hectare to arrive at the GMB producer price and if it adopts the same, the producer price will have to rise to $1 348. The average maize yield level in Zimbabwe is about a tonne per hectare.
© Gambara is an agricultural economist and consultant.