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Mealie-meal cost to go up if FRA hikes maize price, millers warnBy Abraham Kalito on 25 Jul 2018
Any upward adjustment in the maize purchasing price, as suggested by President Edgar Lungu would lead to an increase in mealie-meal prices, the Millers Association of Zambia (MAZ) have warned.
On Sunday, President Lungu directed the Food Reserve Agency (FRA) to review and adjust upwards the price of maize, saying the recently-announced K65 per 50Kg bag, was “unfair to farmers.”
President Lungu, who was speaking during a rally in Chipangali constituency in Easter Province where he went to drum up support for the PF candidate in the Chipangali District Council chairperson election, said government might not have the money, but it had to support farmers to boost the country’s crop production.
Following the pronouncement, Agriculture Minister Michael Katambo on Monday revealed that the FRA would soon announce a revised maize purchasing price.
However, MAZ president Andrew Chintala told News Diggers! in an interview that economic fundamentals would immediately come into play if the maize price is adjusted higher than the announced K65 per 50Kg bag, and that the implication would be an upward adjustment in mealie-meal prices.
“If you have seen our colleagues from ZNFU, they opposed or objected the price offer by the FRA. And in today’s (Monday) paper, the President says, he will ‘engage FRA to see if they could adjust the price upwards.’ Now, what is important to note is that, first of all, let’s appreciate that the country has got sufficient maize stocks. So, meaning we are food secure in that line. Now, the big thing we are discussing pricing here, you see, usually what happens is that at the start of the season the maize marketing season annually is that towards the end, or towards the harvesting period, you run out of maize grain that you were keeping because you have to offload it in order for you to wait for new stocks. What determines the price is the market forces; the K65 cannot be a guarantee. But we predict stability if there won’t be any price movement. So, we expect to see stable maize prices. If there will be movement of the prices of maize then the economic fundamentals have to come at play and then mealie-meal prices would change,” Chintala cautioned.
“So, we have been on the market, even before FRA entered the market. So, there is nothing really wrong with them coming on the market to say this is what they want to buy maize for; it’s their price. So, I have got my own price as a miller, the traders will come with their own price. So, I wouldn’t really say you can see a reduction. Already farmers are saying we need an increment so what does that tell you? So, really, I don’t want to speculate, it’s too early. We have just started the season, but I think what I predict is that we will have a stable supply of the commodity and what usually determines the price is the market forces. So, should there be more demand for the product, then we definitely expect the price to go up, and if the demand will be as it is now, we expect to see stability in the pricing.”
He explained that the FRA’s maize purchase price was merely indicative of what the agency was willing to pay for a 50Kg bag of maize, and should not be taken as a “floor price.”
“And now we are buying grain; the buying of maize that has been taking place in the market is between K55 and K63, or K65. The only thing here is that, FRA has announced and what I have seen in some sections of the media is that they are calling that to be a floor price. We need to appreciate that Zambia is a liberalized economy and one thing that the FRA has done is just to say, ‘for us, if we will enter the market, this is what we are going to offer.’ So, that is their price, it has got nothing to do with the millers. And some farmers may decide to sell to millers of traders at a different price, which could be more than that K65, or it could even be less. What the FRA did is to try and bring their price on the market, which is being used as a discovery price,” he explained.
Chintala, who is also Mpongwe Milling corporate affairs manager, added that millers are closely monitoring the situation, adding that even the K65 per 50Kg bag of maize, as announced by the FRA, would not guarantee any reduction in mealie-meal prices.
“It’s something that we have to monitor and follow closely. It’s quite interesting; the season is on and we hope FRA enters the market as early as possible because for us, who are already on the market, we have started buying. So, we hope that following the announcement by FRA, we hope to see an improvement in terms of the maize supply on the market because most of the farmers were waiting for that price. We were glad that the price was announced because we will see an improvement in the supply of the commodity on the market. But this price cannot be a guarantee that mealie-meal prices would reduce. But for us, we are saying that price is fair,” said Chintala.
The national average prices of mealie-meal have steadily been rising to a nine-month high, with a 25Kg breakfast bag still costing over K79.00 compared to K69.36 last October, according to Central Statistical Office (CSO) data.Related Items
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